With the motive to regulate the activities of Investment Companies to be registered pursuant to the Industrial Enterprises Act 2019 (Schedule 8, No. 65), Nepal Government has published guidelines in relation to the operation of Investment Companies (“Guidelines”) in Nepal Gazette on 9 August 2021 (25 Shrawan 2078).
The major provisions of the Investment Companies Guidelines are as follows:
i) Investment Companies are required to specify the sectors of investment the investment company will invest in, at the time of registration of Industry in Nepal.
ii) Investment Companies with FDI should specify that they will only invest in Nepal. Investment Companies with FDI should invest in the sectors that are open for Foreign Investment and industries that are classified in Industrial Enterprises Act 2019.
iii) Investment Companies with FDI are required to specify the Ultimate Beneficiary of the Company.
iv) Investment Companies can only invest in equity (they cannot invest through the bond, debenture, credit facility).
v) Investment Companies with FDI are required to obtain approval for each downstream investment from regulatory authority i.e (DOI).
vi) The minimum investment requirement for Investment Companies is NPR 1,000,000,000 (1 billion).
vii) Investment Companies with FDI are required to specify the currency in which they will be making an investment in Nepal at the time of registration.
viii) Investment Companies cannot work as Cooperatives.
ix) Investment from Shell Company cannot be made; Transaction with Shell bank cannot be undertaken.
x)Investment Companies cannot purchase stock from the secondary market.
xi) Investment Companies cannot make investments in sectors like security brokers, real estate.
xii) Investment Companies cannot avail loans from banks and Financial Institutions (“BFIs”) or avail loans from BFIs based on foreign BFI’s bank guarantee.
To download the pdf of Guidelines Relating to Operation of Investment Companies in Nepal please click here.
Disclaimer: This note shall not be treated as a legal opinion and it is advised to consult a lawyer for legal advice. This note is for general understanding only.
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