Chapter 9
Liquidation of Company 

The appropriate department, in case it so deems proper, may order the liquidation of the company in the following circumstances :

(a) In case an application is submitted to the appropriate department for liquidation of the company after the general meeting of the company, by means of a special resolution, decides to liquidate it, or

(b) In case the preliminary meeting is not convened within the time-limit prescribed in Section 54 or in case no report is submitted to the appropriate department under Sub-Section (3) of Section 55, or

(c) In case the company does not commence business within a year of its registration or discontinues its business for one full year, or

(d) In case one or more creditors to whom at least half of the loans outstanding against the company is due submit an application to the appropriate department demanding that since the company has failed to repay loans even after the expiry of the time stipulated for repayment, it should be dissolved and amounts due to them should be realised according to law.

(e) In case the appropriate department prepares a memorandum deciding to dissolve the company on any reasonable ground.

(f) In case a loan has been advanced to the company against the guarantee of His Majesty's Government, and the company does not repay such loan according to the stipulated terms, or violates any other term or condition relating to the guarantee.

117. Procedure of Liquidation

(1) The company itself or its creditors may submit on application to the appropriate department for liquidation of the company in the circumstances mentioned in Section 116.

(2) The creditors, in their application for liquidation of the company, shall explain why this should be done and shall also furnish all available evidence in support of their application.

(3) Except in cases where the company submits an application for voluntary liquidation, in case the appropriate department feels that an order should be issued to liquidate the company, it shall, before issuing such order, ask the company to explain within fifteen days excluding the time required for the journey, why it should not be liquidated.

(4) In case the appropriate department or the company or the creditors applying for the dissolution of the company so desire, a meeting shall be held under the chairmanship of an employee of the appropriate department before issuing an order for the dissolution of the company, and the directors of the company and the applications shall be allowed to stabe their case verbally at such meeting.

(5) Unless otherwise provided for in this act, no action pertaining to the business of the company shall be taken after the issuance of an order for its liquidation. All the powers of the directors shall ipso facto lapse with effect from the date of the issuance of such order.

(6) Appointment and Remuneration of Liquidator and Auditor

(1) For the purpose of liquidating any company after issuing an order to this effect, the appropriate department shall appoint a liquidator, hereinafter called the Government liquidator. His remuneration shall be as prescribed by the department. The appropriate department may demand a security from the Government Liquidator.

120. Government Liquidator to Take Custody of Company's Assets

The Government Liquidator shall, as early as possible, take custody of all the account-books and records, as well as the entire assets owned by the company or in which evidence of its title is available and keep them under his control.

121. Powers of the Government Liquidator :

(1) Unless the appropriate department imposes any restrictions or limitations, the Government Liquidator shall exercise the following powers :

(a) To file any case or take any other legal action or defend any case in the name of the company.

(b) To perform such part of the business of the company as may be necessary to insure that the company is liquidated in a profitable manner as far as possible.

(c) To auction or sell all movable and immovable assets of the company.

(d) To execute all kinds of documents or issue receipts on behalf of the company, make calls on partly paid-up shares and settle all debts and liabilities.

(e) To issue, approve or endorse promissory notes, and bills of exchange on behalf of and in the name of the company.

(f) To raise funds to meet the expenses incurred in course of liquidation, or for any other purpose, if necessary, by mortgaging or selling the assets of the company.

(g) To make payments to creditors or to make compromise with persons claiming to be creditor or make any other arrangement.

(h) To a point necessary employees, etc. for assisting him.

(i) To perform all other functions which may be necessary to liquidate the company.

(2) Any creditor may submit an application to the appropriate department in connection with the exercise of the above mentioned powers by the Government Liquidator.

(3) The Government Liquidator may submit a report to the appropriate department for sanction in respect to any matter arising in course of the liquidation proceedings.

(4) The Government Liquidator may, if necessary, summon any employee of the company to furnish any information in respect to the establishment, business and assets of the company or any other matter.

122. Powers of Government Liquidator to Summon Creditors

(1) The Government Liquidator may convene a meeting of creditors and hold discussions with them in order to ascertain their views.

(2) The Government Liquidator may prescribe a time-limit to creditors to prove their respective claims and prevent any creditor from receiving any payment until their claims are proved.

123. Government Liquidator to Maintain Accurate Records

The Government Liquidator shall maintain accurate minutes or records of meeting or meetings convened by him an other prescribed matters. In case any creditor of the concerned company so desires, the Government Liquidator shall allow him to inspect such minutes or records.

124. Government Liquidator to Submit Accounts

The Government Liquidator shall submit to the appropriate department accounts of income and expenditure made by him in his capacity of liquidator at least twice a year, and the appropriate department shall have such accounts audited.

125. Order of Priority in Settlement of Liabilities

(1) The liabilities of a company which is under liquidation shall be settled in the following order of priority :

(a) Expenses incurred in liquidating the company,

(b) Loans taken with the assets of the company as collaterally if any,

(c) Salaries and wages of the staff and workers, not exceeding Rs 500 each,

(d) Land and other taxes of fees payable to the Government or any local self-government body,

(e) Loans obtained against the company's assets which had been requested three months prior to the issuance of order of liquidating the company.

(f) Other Loans.

(2) Except in case where the time-limit prescribed in Sub-Section (2) of Section 122 has expired, debts or liabilities next in the order of priority shall not be paid off unless the Government Liquidator is satisfied that those higher in the order of priority can be paid off.

(3) In case any assets remain in the possession of the company after all liabilities are settled, these shall be divided among the holders in proportion to the shares held by them. Provided that while dividing such assets, priority shall be given to preference shareholders. Only the balance last after making payments from out of such assets to preference shareholders shall be divided among shareholders on a proportionate basic.

126. Notice to be Given of Fraud Against Company Creditor

In case the Government Liquidator finds that may director or employee of the company has committed any fraud against the company or its creditors, he shall immediately notify the appropriate department, giving particulars of the unlawful acts committed it this regard. In case the department, after receiving such information, so deems proper, it may order the Government Liquidator to take legal action against persons committing such fraud.

127. Submission of Final Accounts

After completing the liquidation proceedings of the company, the government Liquidator shall submit the final accounts in respect thereto to the appropriate department, and in case such accounts are deemed correct after being audited, the appropriate department shall issue an order of dissolution and the company shall then be deemed to have been dissolved with effect from the date of such order.

128. Voluntary Liquidation

(1) The company may be voluntarily liquidated by a resolution of the general meeting in the following circumstances :

(a) In case the period prescribed in the articles for running the company, if any, has expired, or

(b) In case the company decides to liquidate itself voluntarily in consideration of its liabilities, or for any other reason.

(2) In case the general meeting passes a resolution for voluntary liquidation of the company under Sub-Section (1), it shall appoint one or more liquidators for the purpose. The remuneration of liquidator so appointed shall be as prescribed by the general meeting. Provisions of Sections 123 and 126 pertaining to the Government Liquidator shall be applicable also to the liquidator appointed under this Sub-Section.

(3) The general meeting shall also appoint one or more auditors for the purpose of auditing the accounts prepared by the liquidator. The remuneration of the auditor so appointed shall be as prescribed by the general meeting.

129. Department to be Notified of the Passage of Resolution for Voluntary Liquidatior

In case the company passage resolution for its voluntary liquidation, it shall forthwith notify the appropriate department accordingly and shall also publish a notification in this regard in the landing newspapers of Nepal within 15 days.

130. Business to be Discontinued After Voluntary Liquidation

Unless otherwise provided for elsewhere in this act, after a resolution passed for its voluntary liquidation, the company shall discontinue its business, except when it is necessary to continue such business to insure its liquidation in a profitable manner.

131. Powers of the Liquidator

Except when any restrictioner limitation is imposed by the general meeting, the liquidator shall exercise all such powers as are exercised by the department Liquidator under Section 120 and Sub-Section (1) or Section 121.

132. Payment of Company Loans or Liabilities

(1) In case the liquidator feels that the company may not be able to pay in full debts incurred by it even within twelve months from the date when the company goes into liquidation he shall be forthwith convened meeting of the creditors of such company and present therein all particulars relating to its asset and liabilities.

(2) In case it is not possible to determine whether the debts incurred by the company can be paid off fully or not payment shall be made according to the order of priority mentioned in Section 125.

133. Petition to be Submitted to Appropriate Department for Deciding any Question

The liquidator or any creditor may submit a petition to the appropriate department for deciding any question arising in course of the liquidation recordings. In case such a petition is received, the appropriate department shall make a decision thereon within one months and communicate its decision to the petitioner within three days thereafter. In case the petitioner is not satisfied with such decision, he may file an appeal with the Supreme Court within thirty-five days from the date of being notified of such decision.

134. Voluntary Liquiation Not to Affect Powers of the Department

The mere provision of voluntary liquidation shall not affect the powers of the appropriate department to issue such orders as it may deem necessary in respect to the liquidation of the company under Section 128-133 on receipt of application from creditors or otherwise.

135. General Meeting to be Convened is the Event of Liquidation Proceedings

In case it takes more than one year to complete the liquidation proceedings, the liquidator shall convene a general meeting of the company at the end of the first year of the commencement of such work, or within three months after the expiry of every year thereafter. At such meeting, he shall submit all particulars of the liquidation proceedings taken during the previous year as well as the accounts audited by the auditor.

136. Report to be Submitted to the General Meeting on Completion of Liquidation Proceedings

Subject to the provisions contained in Section 135, after completing the liquidation proceedings, the liquidator shall prepare a report thereon explicitly stating how the liquidation was effected and the liabilities of the company settled. He shall have the accounts properly audited and then convened a general meeting of the company for the purpose of submitting such report and accounts.

137. Dissolution of the Company

On completion of the liquidation proceedings, the liquidator shall forthwith submit a report to this effect to the appropriate department. On receipt of such report, the appropriate department shall publish a notification dissolving the company.

137A. Incorporation of Government Companies 

(1) Notwithstanding anything contained in other Section of this act, His Majestry's Government may incorporate any company in such a manner that its shares are sold only to His Majestry's Government or to corporate bodies owned by His Majestry's Government. 

(2) Notwithstanding anything contained in other Sections of this act, the companies mentioned in Sub-Section (1) and those in which more than 51 percent of the shares are purchased by His Majestry's Government shall be incorporated as public companies and the provisions contained in Section 3 and Section 4 relating to the number of promoters of company shall not be applicable in respect to such companies. 

(3) In respect to the companies mention in Sub-Section (1), His Majestry's Government may, by notification in the Nepal Rajapatra, provide for the non-application of any provision of this act other than the provision of this Chapter, or for their application in a revised form or with conditions attached as mentioned in such notification. 

137B. Government Companies to Comply With Orders and Directives of His Majestry's Government 

Every government company shall comply with the orders and directives issued by the appropriate department.