The government has decided to issue three ordinances aimed at incorporating provisions to promote investment and stimulate economic growth.
In a late-night cabinet meeting on Friday, the government resolved to forward ordinances related to the Nepal Act, land, and investment to the president for endorsement. In response to criticism over its perceived inaction on ongoing economic challenges, the government has outlined a 17-point plan to address these issues, divided into three main segments.
One key provision focuses on empowering startups by allowing them to issue up to 40% of sweat equity shares to individuals contributing innovative ideas and fostering business growth. This measure seeks to protect the interests of founders and key contributors, who in many cases have been sidelined from their ventures over time. By officially recognizing startups as a legitimate form of investment, the government aims to safeguard the rights of such individuals while encouraging more entrepreneurship in the country.
Sweat equity shares are a form of compensation granted to employees or directors in exchange for their contributions to a company. Holders of sweat equity shares gain ownership stakes, voting rights at shareholder meetings, and entitlements to dividends and other benefits.
To implement these changes, the government is amending the existing Company Act of 2006 to include provisions on sweat equity. Individuals involved in intellectual property development, value addition, service generation, goodwill promotion, technical knowledge transfer, and other contributions will be eligible to receive sweat equity. The revised act caps the issuance of sweat shares at 20% for general enterprises and 40% for startups.
In addition to promoting startups, the ordinances introduce measures to streamline business operations and attract investors. The government plans to simplify procedures for private companies, including share transfers and business closures. For instance, private companies with assets exceeding liabilities can issue primary shares at premium prices with direct approval from their general meeting, bypassing the requirement to submit three years of audited financial reports.
Private companies converting into public limited entities will no longer need separate approval from the Office of the Company Registrar. To reduce obstacles for companies shutting down, the government proposes waiving accrued fines and liabilities.
Further reforms include allowing Nepali IT companies to invest abroad and establish branches in foreign countries. These companies will also be permitted to repatriate revenue earned in international markets, providing additional incentives for global expansion.
Home Minister Ramesh Lekhak emphasized that these ordinances are designed to foster economic development, ensure administrative reforms, and promote good governance. Speaking at a program on Saturday, he stated, “The ordinances will help ease business processes, attract investments, and advance economic progress in the country.”
