Nepal Rastra Bank’s (NRB) recent study showed the about 200 companies that get involved in foreign exchanges including money changers, money transfer agencies, hotels, travel agency and cargo companies did not have paid up capital in form.

As per the Company Act, a company is registered only after the concerned company demonstrates the paid up capital. This is applicable to both the public and private company. The reason behind demonstrating the paid up capital is that the company is able to the pay liabilities the company will face while doing business. If any company liquidates, the liabilities of the company are paid even from the paid up capital. Both the private and public limited companies have to go through liquidation process to close down the firm as per the Company Act.

Paid up capital of the concerned company is also one of the main bases that the central bank considers to give license for foreign exchange transactions. All the companies including the banks and financial institutions should take separate license from the central bank to start foreign exchange transactions.

“We were surprised to see so many companies had capital paid up capital neither in the form of working capital, nor fixed deposit and other ways of uses,” said a senior NRB official. However, those companies had shown the paid capital from Rs 1 million to Rs 500 million.

“It is against the corporate culture and we must ensure stop this tendency,’ said the NRB official. The finding also signals that many companies registered with Office of Company Registrar (OCR) might have had no paid up capital in reality.

The OCR does not monitor whether any company had actual paid up capital in some forms. “We are not the agency to monitor on the companies’ capital,” said Laxman Thakur, officiating registrar. “We also don’t have human resources and other resources to monitor 90,000 companies registered with us.”

OCR has not got any report about missing paid up capital of any company. “It is the job of auditors to show if any the company had no paid up capital in the audit reports of concerned company,” Thakur said. Every company should submit a copy of audit report to the OCR within six months of the ending of the fiscal year.