Directors, Officers and Board Duties
Who may sit on a Nepali board, what the statutory duty of care requires, and where personal liability attaches to directors and officers.
Private and public boards
The Companies Act 2063 (2006) governs private and public company boards very differently. A reader who takes the public company rules as the general position will badly over-engineer a private joint venture.
For a private company the rule is one sentence long. The appointment and number of directors shall be as provided in its articles of association. No minimum, no maximum, no independent director, no committee. A one-shareholder private company may have one director, and frequently does.
A public company board is fixed at between three and eleven directors. At least one independent director is required where the board does not exceed seven, and at least two where it does. The chair is selected by the directors from among themselves rather than appointed by a shareholder, and the independent directors must be drawn from people with knowledge prescribed in the articles and experience of the company’s business.
Everything downstream — meetings, disclosure, related-party control, liability — applies to both, with the sharper edges reserved for public companies.
Who is disqualified
The Act lists the circumstances in which a person may not be appointed as, or continue to be, a director. The principal heads are:
- being under twenty-one, in the case of a public company;
- unsoundness of mind or mental incapacity;
- insolvency, until five years have passed since discharge;
- conviction for corruption or another offence involving moral turpitude;
- conviction for theft, fraud, embezzlement or misappropriation;
- having a personal interest in the company’s business, contracts or dealings;
- holding office as a director of another company with similar or competing objectives.
The last two catch foreign group structures. Until 2025 they made it awkward for a parent to place its own executives on a Nepali subsidiary board and on the boards of comparable operations elsewhere in the group. The omnibus amendment authenticated on 31 March 2025 added an exception. A representative of a parent company may serve as a director of its subsidiary, and directorships may be held across public companies with similar objectives. Banking, financial and insurance companies are excluded.
The Act sets no residence or nationality requirement for directors of a private company. That is a negative finding rather than a positive permission. The real constraints lie elsewhere. A director who never enters Nepal cannot sign what needs signing, and the company still needs a registered office and a person the Registrar and the tax authority can reach.
Directors’ duties
Section 99 is short and, unusually for a 2006 statute in the region, states a recognisable duty of care rather than a bare list of prohibitions.
A director may not do anything to derive personal benefit through the company or in the course of its business. The remedy is the interesting part. The company recovers the amount from the director as if it were a loan, converting a fiduciary claim into a debt claim and with it a much simpler evidential path.
The general standard follows. Every director and officer must, in discharging their duties, act honestly and in good faith having regard to the interest and benefit of the company, and exercise such care, caution, wisdom, diligence and efficiency as a reasonable and prudent person exercises. Where a director acts with ulterior motive and causes loss, the company may recover damages.
A director of a public company must take an oath of secrecy and honesty before assuming office. And every director must comply with the Act, the memorandum, the articles and the consensus agreement. That last limb promotes a private shareholders’ arrangement into a matter of statutory directors’ duty, provided it is a consensus agreement within the meaning of the Act.
“Officer” is defined widely: director, chief executive, manager, company secretary, liquidator and any employee carrying departmental responsibility. The standard reaches all of them.
Related-party transactions
Section 93 governs transactions between a public company and a director or a connected person. A “material transaction” is one exceeding the lower of NPR 100,000 or 5% of the company’s total assets. Employment arrangements are caught at NPR 120,000 a year or more. Material transactions require general meeting approval. Gains from a prohibited transaction must be returned to the company, and losses compensated by the person who benefited.
Two exceptions carry the practical load: transactions between a wholly-owned subsidiary and its parent, and dealings at market rates in the ordinary course of business on arm’s-length terms.
The NPR 100,000 figure has not moved since 2006. Because the test takes the lower of the two limbs, the percentage limb is inoperative in any company with assets above NPR 2 million. In substance the statute says a public company may not deal with its directors above NPR 100,000 without a shareholder vote. That is not a workable rule and is not treated as one. What holds the line is the arm’s-length exception, and that puts the burden on documentation: contemporaneous evidence that the price was a market price.
Around it sit the disclosure obligations. Directors must disclose their interests and their dealings in the company’s securities. Loans to officers or shareholders are prohibited. The company keeps a register of its directors and company secretary.
Board powers and limits
The Act sets out the powers and duties of the board, provides for the appointment of a managing director, and governs board meetings and notice. Directors may attend by video conference, and the company’s general meeting return has to record which of them did.
Three provisions define the edge of the board’s authority. Directors’ authority is restricted; the company is bound by acts done within that authority; and acts already done stand where an appointment later turns out to be defective. Separately, officers are prohibited from giving false statements. That prohibition is what most often converts a governance failure into personal criminal exposure, alongside the Act’s general penalty of a fine up to NPR 50,000, imprisonment up to two years, or both.
Personal liability
Three things, consistently.
The first is that liability attaches to the individual and is not displaced by a group indemnity or a parent company guarantee. Nepal has no statutory relief provision equivalent to the “acting reasonably and honestly” defences found in some common law jurisdictions.
The second is that the sectoral regimes are stricter than the Companies Act. Banks and financial institutions, insurers and securities intermediaries answer to their regulators’ governance requirements: fit-and-proper screening, board composition rules, tenure limits and reporting. Those sit on top of the Companies Act rather than in place of it. A director appointed to a Nepali bank board is subject to Nepal Rastra Bank’s requirements as well as to the general duty.
The third is that resignation does not close the file. The recovery provisions are exercisable by the company, and the trigger is the conduct rather than the tenure.
The draft Companies Act
The draft Companies Act published for consultation in 2026 would keep the independent director structure, one for boards of seven or fewer and two above, and add a requirement that a public company with female shareholders designate at least one female director. It would also raise the paid-up capital threshold at which a private company must appoint a company secretary from NPR 10 million to NPR 500 million, removing that requirement from the overwhelming majority of Nepali private companies. It remains a draft.
Sources
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Government of Nepal (English translation) · In force, as amended · Tier 6 — Professional or news source
Supports: That a private company's board composition is governed by its articles, the 3 to 11 range for public companies, the independent director requirements, and the selection of the chair.
Accessed 26 August 2026
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Government of Nepal (English translation) · In force, as amended · Tier 6 — Professional or news source
Supports: The prohibition on personal benefit, recovery as if a loan, the oath of secrecy and honesty for public company directors, the good faith and prudence standard, damages for acts done with ulterior motive, and the duty to comply with the consensus agreement.
Accessed 26 August 2026
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Government of Nepal (English translation) · In force, as amended · Tier 6 — Professional or news source
Supports: The principal disqualification heads: minimum age of 21 for a public company, unsound mind, insolvency within five years, conviction for corruption or an offence of moral turpitude, conviction for theft, fraud or misappropriation, personal interest in the company's business, and directorship of a competing company.
Accessed 26 August 2026
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Government of Nepal (English translation) · In force, as amended · Tier 6 — Professional or news source
Supports: The material transaction thresholds of NPR 100,000 or 5% of assets, the NPR 120,000 employment figure, the requirement for general meeting approval, restitution of gains and compensation of losses, and the wholly-owned subsidiary and arm's-length exceptions.
Accessed 26 August 2026
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Companies Act, 2063 (2006) — sections 95 to 107 [unofficial reproduction, actnepal.com]
Government of Nepal (English translation) · In force, as amended · Tier 6 — Professional or news source
Supports: Powers and duties of the board, appointment of managing directors, board meetings and notice, disclosure about securities, the prohibition on loans to officers or shareholders, the prohibition on false statements by officers, restrictions on directors' authority, and the register of directors and company secretary.
Accessed 26 August 2026
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Everything Businesses Need to Know About Nepal's New Company Act Draft
Nepalnews · 2026 · Tier 6 — Professional or news source
Supports: The draft Companies Act proposals on independent directors, a female director requirement for public companies with female shareholders, and raising the company secretary threshold to NPR 500 million of paid-up capital for private companies from NPR 10 million.
Accessed 26 August 2026
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Pradhan, Ghimire & Associates · 2025 · Tier 6 — Professional or news source
Supports: That the 31 March 2025 amendment permits a parent company representative to serve as a director of a subsidiary and relaxes the bar on holding directorships in companies with similar objectives, excluding banking, financial and insurance companies.
Accessed 26 August 2026
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