Note on Types of Company in Nepal

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Statutory Company

Statutory Company

A company which is established under a special act passed by the parliament is known as a statutory company. The scope, objectives, power, rights and functions are defined by the act under which it is established. All the activities of the company are governed by the act. Such company is established by the government for promoting a special sector of the economy which is of national importance. It is also known as a public enterprise.

Limited Company

dcfdsA company which is established in Nepal under 'Nepal Company act, 2053' is known as a limited company. It is also known as a registered company. It is incorporated and operated under the provision of the company act. In a limited company, the liability of the shareholders is limited to the face value of the shares held by them. The private properties of the shareholders cannot be claimed by the creditors of the company to recover their debts. A limited company can be classified into two types:

  1. Public limited company: A public limited company is one which requires at least 7 members for its incorporation. There is no limitation for the maximum number of shareholders. It can invite people by issuing a prospectus to subscribe to its shares. Its shares are freely transferable. It requires at least three directors for the management of the company. It has to hold statutory meeting. It has to obtain a certificate of commencement of business to start its business.
  2. Private limited company: A private limited company is one which can be established by a single member. Its maximum number is limited to 50. It cannot invite people by issuing a prospectus to subscribe its shares. It restricts the rights of its members to transfer its shares. It does not require to hold statutory meeting.

Differences between Public and Private Limited Companies

Bases of difference Public company Private company
The number of shareholders It required at least 7 members for its incorporation, but its maximum number is unlimited. It can be established by a single member and its maximum number is limited to 50.
Transfer of share It does not restrict the transfer of its share. It restricts the transfer of its share.
Prospectus It issues a prospectus for inviting people to subscribe to its share. It can not issue a prospectus for inviting people to subscribe to its share.
Commencement of business It required the certificate of incorporation and the certificate of commencement of business to start its business. It required only the certificate of incorporation to start its business.
Use of words It uses Ltd. It uses Pvt Ltd.
Publication It requires publish its annual financial statement. It doesn't require to publish it's annual financial statement.
Statutory meeting It requires statutory meeting. It does not require statutory meeting.

  • The advantages of Joint Stock Company are huge capital, effective management, limited liability, public faith and perpetual succession.
  • Complexity formation, lack of control, double taxation, lack of secrecy, lack of personal interest and credit limitations are the disadvantages of Joint Stock Company.
  • There are two types of company in Nepal. They are the statutory company and limited company(public and private limited company).
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Very Short Questions

Bases of difference Public company Private company
The number of shareholders It required at least 7 members for its incorporation, but its maximum number is unlimited. It can be established by a single member and its maximum number is limited to 50.
Transfer of share It does not restrict the transfer of its share. It restricts the transfer of its share.
Prospectus It issues a prospectus for inviting people to subscribe to its share. It can not issue a prospectus for inviting people to subscribe to its share.
Commencement of business It required the certificate of incorporation and the certificate of commencement of business to start its business. It required only the certificate of incorporation to start its business.
Use of words It uses Ltd. It uses Pvt Ltd.
Publication It requires publish its annual financial statement. It doesnot require to publish it's annual its annual financial statement.
Statutory meeting It requires statutory meeting. It does not require statutory meeting.

A company which is established under a special act passed by the parliament is known as a statutory company. The scope, objectives, power, rights and functions are defined by the act under which it is established. All the activities of the company are governed by the act. Such company is established by the government for promoting a special sector of the economy which is of national importance. It is also known as a public enterprise.

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  • A company which is established in Nepal under 'Nepal Company act, 2053' is called known as ______.

    a limited company


    an unlimited company


    a statutory company


    an ordinary company


  • A company which is established under a special act passed by the parliament is known as ______.

    a limited company


    registered company


    a statutory company


    an unlimited company


  • A limited company is a company which is established in 'Nepal under Nepal Company act, ______'.

    2053


    2056


    2063


    2050


  • A statutory company is also known as ______.

    a public enterprise


    an ordinary company


    a registered company


    an unlimited company


  • A limited company is also known as ______.

    a registered company


    an ordinary company


    a public enterprise


    an unlimited company


  • A public limited company is one which requires at least ______ members for its incorporation.

    eleven


    seven


    twelve


    fifty


  • A limited company can be classified into ______ types.

    two


    five


    no


    three


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