Companies Act 2063: What Employers and HR Need to Know

Disclaimer:

Unofficial translation and educational summary. This publication is intended to reflect the relevant Nepali legislation and regulatory framework, including amendments and materials reviewed up to 1 September 2026. It is not a certified consolidated translation. If the English wording, section reference or summary differs from the official Nepali text or Nepal Gazette, the official Nepali text prevails.

At a Glance

The Companies Act, 2063 establishes the legal framework for company governance, including board composition, director appointments, management authority, conflicts of interest and director remuneration.

For HR, these provisions matter when managing senior appointments, executive compensation, approval authority, related-party interests and corporate employment records. They should be read alongside applicable labour, tax, social security and sector-specific legislation.

Why This Matters

HR decisions must be supported by valid corporate authority. An employment contract, remuneration package or senior appointment may require approval from the board or general meeting, depending on the position, the company's articles and the applicable provisions of the Act.

HR should therefore understand who has authority to approve, sign and implement these decisions.

Major Provisions / Issues to Understand

1. Board Composition and Number of Directors (Section 86) 

The appointment and number of board of directors of a private company shall be as provided in its articles of association. Provided that the number of directors shall not exceed 11.

Every Public company shall have a board of directors consisting of a minimum of 3 and a maximum of 11 board members.

In forming the board of directors in a public company, at least 1 independent director, in case of the number of directors not exceeding 7 and at least 2 independent directors, in case of the number of directors exceeding 7, shall be appointed.

2. Appointment of Board of Directors (Sec. 87)

Generally, the directors of a company shall be appointed by the general meeting of the company subject to the provisions contained in the articles of association and section 89 of the act.

3. Board/shareholder reserved matters (Sections 67, 95(2), 95(6))

Section 95(2) prohibits a director of a public company from deriving personal benefit through the company except by a general-meeting decision (a private company may instead fix this in its article of association or consensus agreement); Section 95(6) lists specific powers the board cannot delegate and must exercise only by board resolution. Section 67 governs when a general meeting itself is required. 

HR should check, before finalising an executive pay package or benefit with a personal-benefit element for a director-level hire, whether it needs shareholder approval rather than board approval alone.

4. Appointment of Managing Director and Management of Company (Sec. 96)

Section 96 lets the board appoint a managing director and delegate management functions to that role, within whatever scope the articles or the appointing resolution set. HR should keep the actual scope-of-authority document for the managing director/CEO on file, since it is what defines which employment decisions that individual can make unilaterally versus which still require board sign-off.

5. Delegation of authority (Section 95 (3),(6))

The board can generally delegate its powers (e.g. to a managing director, committee or officer), except for the specific non-delegable matters listed in Section 95(6) (such as calls on unpaid shares, issue debentures, make loans etc), which must be exercised only by board resolution. HR’s hiring-authority matrix (who can approve what level of offer, what compensation, what termination) should trace back to an actual delegation instrument, not informal practice, so that an HR-approved decision is legally attributable to the company.

6. Director Remuneration, Allowances and Rewards (Section 91) 

Section 91 governs remuneration, allowance and reward for directors specifically , distinct from ordinary employee compensation, which is a management/HR matter under the Labour Act (Week 02). HR should not process a director’s remuneration through the standard employee payroll approval chain without confirming it has gone through whatever board/shareholder approval Section 91 and the articles require for that specific director.

7. Matters to be disclosed by the director (Section 92)

Section 92 requires a director to disclose in writing, within 15 days of taking office, any personal interest they or a close relative have in company dealings  explicitly including any interest in the appointment of the managing director, company secretary or other officer. 

HR should flag to the Legal/Company Secretary any hiring decision involving a director’s relative or associate for a senior role, since this is precisely the kind of interest Section 92 requires on record, and the company must also forward that disclosure to the Office of the Company Registrar within 7 days of receiving it.

8. Corporate records supporting employment decisions

Board minute-books, resolutions and (for a private company) Section 149 written resolutions in lieu of a meeting are the underlying legal record for any employment decision that required board or shareholder authority. HR should retain the specific resolution or delegation authorising a given senior appointment, remuneration package or termination alongside the HR file itself the HR paperwork alone does not establish that the company validly authorised the decision if the corporate-governance record is missing.

Employer Should Know

• Verify the company's articles and authority structure before approving senior appointments.

• Obtain the required board or shareholder approval for director remuneration and facilities.

• Maintain written agreements for managing directors.

• Establish a documented delegation-of-authority matrix.

• Monitor director disclosures and conflicts of interest.

• Retain corporate resolutions supporting significant employment decisions.

Employee Should Know

• Employees appointed to senior management positions should understand their contractual authority, reporting responsibilities, remuneration arrangements and approval limits.

• Managing directors and directors with executive responsibilities should also understand the applicable appointment agreements, corporate approvals and disclosure obligations.

International Employer Alert

Foreign investment, multinational ownership and cross-border management arrangements may involve additional corporate approval, foreign investment, tax, labour and immigration requirements.

An overseas appointment or group-level approval should not automatically be treated as sufficient authority for a Nepal-incorporated company. Verify local corporate authority, appointment documentation and applicable regulatory requirements separately.

HR Check — Evidence to Maintain

☐ Current Memorandum and Articles of Association

☐ Board composition and director appointment records

☐ Board and general-meeting resolutions

☐ Managing director appointment agreement

☐ Approved director remuneration and facilities

☐ Delegation-of-authority matrix

☐ Director disclosure and conflict-of-interest records

☐ Company Registrar submissions and acknowledgements

☐ Executive appointment and remuneration records

Common Mistakes

• Treating a senior management appointment as an ordinary HR recruitment decision without checking corporate authority.

• Paying director remuneration without the required approval.

• Failing to execute a written managing director agreement.

• Allowing executives to exercise authority beyond their delegated powers.

• Overlooking director disclosures involving relatives or related parties.

• Maintaining HR records without corresponding corporate resolutions.

Myth vs Law

MYTH: "An employment contract is sufficient evidence that a senior appointment is legally approved."

LAW: Where corporate approval is required, the relevant board or general-meeting resolution and supporting authorization must also be maintained.

Practical Example

A company appoints a new managing director and agrees on monthly remuneration, accommodation and other facilities.

Before processing the arrangement, HR and the Company Secretary verify the board's appointment resolution, the company's articles, the written agreement, the approved remuneration and the applicable appointment period.

The signed agreement and supporting resolutions are retained as corporate and HR records. This helps ensure that the appointment and associated payments are supported by the required corporate authority.

FAQs

1. Who determines directors' remuneration?

Under Section 91, director meeting allowances, monthly remuneration, daily allowances, travel allowances and other facilities are determined by the general meeting, subject to the statutory exceptions.

2. Is a written agreement required for a managing director?

Yes. Section 96 requires a written agreement specifying appointment terms, remuneration and facilities. The agreement cannot exceed four years at a time.

3. Must directors disclose conflicts of interest?

Yes. Section 92 requires written disclosure of specified personal interests and other prescribed information. The applicable disclosure deadline should be confirmed against the authoritative legal text.

4. Can the board delegate its authority to the CEO or another employee?

Yes, subject to the Act, the company's constitutional documents and applicable restrictions. Certain powers under Section 95(6) cannot be delegated.

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