This article explains how a foreigner can open a branch office in Nepal.
A branch office is a suitable business strategy for foreign enterprises looking to establish a presence in Nepal. The branch office is an extension of the parent company’s operation and functions similarly. A foreign corporation can only open a branch office in Nepal for specified business purposes.
Representatives of international companies must acquire authorisation from the Department of Industry and Nepal Rastra Bank before establishing a business in Nepal as a branch office. Foreign investment in goods and industries is authorized in Nepal, as are branch offices of such enterprises.
What exactly is a Branch Office?
Manufacturing companies formed outside of Nepal may open Branch Offices with previous approval from the Government Authority and OCR. In general, the Branch Office should be involved in the operations of the Parent Company.
The parent company’s assets can be utilized to cover the branch office’s debts. The full expenditures of the BO (Branch Office) in Nepal must be met by monies received from the Head Office through conventional banking channels or revenue produced on the ground.
The Benefits of a Branch Office
Because of the branch office, the primary company has more control. A branch office is a dependent business, which means that the parent corporation makes all operational decisions. The parent firm’s brand value is protected because the branch office in Nepal will use the same name as the parent company.
What does Subsidiary Company mean?
A subsidiary company is one in which the majority of the stock is owned by a holding company or another entity. In Nepal, a subsidiary is an organization founded and registered under the Companies Act. It exists as a separate legal entity from its shareholders and Parent Company.
The parent company’s liability is restricted by the percentage of the subsidiary that it owns. There are no attachments against the foreign company’s assets. All revenue produced by business operations.
The Advantages of Having a Wholly Owned Nepali Subsidiary
The following are some of the advantages of having a totally owned subsidiary:
- The Nepali subsidiary operates independently of the parent corporation.
- The shareholders or owners of a firm have limited obligation to the company.
- The Parent Company (which could be located anywhere in the world) has complete authority over its Nepali equivalent.
- The parent firm can provide the necessary financial resources as well as experience to start new enterprises and products.
What is the distinction between a branch office and a liaison office?
- (Wholly Owned Subsidiary) Regional Office
- The Branch is solely responsible.
- The debts owed by the branch offices can be used to reimburse them.
- The liability of the parent firm is limited to a particular percentage.
- The main firm’s assets, a subsidiary of the corporation,
- The BO wields the same power as the CEO.
- the main office
The subsidiary firm, on the other hand, may or may not engage in the same commercial operations as the parent company.
- Accounts can be managed collectively or individually by branches separately.
- WOS (Wholly Owned Subsidiaries) retain their own financial records.
- Total BO expenses in Nepal must be paid for with cash received from the Head Office through normal banking procedures or revenue earned in Nepal.
- The Wholly Owned Subsidiary generates all commercial revenue.
How do I open a foreign branch in Nepal?
Foreign firms can also open a branch office in Nepal to conduct business. Only if the foreign investor is registered as a company in their home country will this option be available.
The requirement to form a corporation is specified in Section 154 of Nepal’s Companies Act 2006 (“Companies Act”). To create a branch office in Nepal, first register it.
Companies that have invested in Nepal and are registered and own a share capital, or companies that supply debt to a Nepalese entity or engage in its management (for example, through management services). Such instances are not need to be registered with Nepal.
The following table depicts the step-by-step procedure of registering a branch office:
Step-1
Obtain permission from the right government agency or reach an agreement.
Step-2
Register with the OCR to open a branch office.
Step 3
For tax purposes, you must register with the IRO.
Step-4
Open a Bank Account
The funds must be transferred to the Branch Office.
What are the conditions for establishing a foreign branch office in Nepal?
A foreign business must have opened a branch in Nepal. For a duration of one month or longer, you must have regularly conducted business in Nepal from an office or location created or used for that purpose.
If any person is designated as a regular contact in the said office, or if his services are hired, the company is regarded to have conducted business in Nepal or established an office there.
What is the distinction between a branch office and a liaison office?
In Nepal, a branch office can perform business. A foreign firm registered as a contact office, on the other hand, is prohibited from performing any work that earns revenue in the country.
Foreign firms wishing to establish an office in Nepal should provide the following information in their application:
The documents listed below must be presented to the office.
- (a) Permission from the appropriate authorities to conduct business or deal in Nepal,
- (b) Photocopies of the certificate of incorporation, certificate, memorandum of association, and articles of association of the company, as well as Nepali translations of these papers.
- (c) the company’s full name, registered office and major place of business address, date of establishment, paid-up capital details, and primary purpose
- (d) The name, address, and citizenship of the director, manager, company secretary, or chief officer.
- the name and address of the person residing in Nepal who has been authorized by the company to accept the terms, notices, and other information of the firm,
- the main site in Nepal where the company does business or transactions, as well as the complete address of the company’s office there.
- Details regarding the proposed investment and business, including whether the company will operate or do business in Nepal.
- the proposed commencement date for the company’s Nepal activities,
- Section 157 of the Companies Act of 2006 requires a letter of authorization.
Should you have any questions regarding creation of foreign branch office in Nepal , then please do not hesitate to contact us at +977-9849517735 or by email info@primelegal.com.np
