M&A in Nepal 2026 — Process and Sectoral Rules

3 months from filing. Application must be submitted within 30 days of the special resolution under the Companies Act 2063 Sec 177.

Sec 16 — any M&A creating over 40% market share of similar goods or services is deemed anti-competitive. Board approval needed. Acquiring 50%+ shares of a competitor with intent to monopolize is barred.

Under Sec 177 of the Companies Act 2063: the general meeting resolution approving the merger, the last balance sheet and auditor report, written creditor consents, asset / liability valuation, employee arrangements, and the scheme of arrangement. The application is filed at OCR Tripureshwor within 30 days of the resolution. OCR has 3 months to decide. Incomplete creditor-consent documentation is the most common rejection reason.

A special resolution — 75% of shareholders present and voting at a properly convened general meeting under the Companies Act 2063. The notice of the meeting must include the merger scheme and the relevant documents. Private companies follow their MoA / AoA or unanimous consensus agreement under their constitutional documents — a lower threshold is permitted where the AoA so provides. Dissenting shareholders have the right to demand valuation and proportionate cash-out.

Dissenting shareholders — those who voted against the merger resolution or abstained — have the statutory right under the Companies Act 2063 to demand independent valuation of their shares and proportionate cash-out at fair value. The merging companies must facilitate the valuation through an independent valuer. Disputes on valuation are typically resolved through arbitration or High Court proceedings. The cash-out right is one of the structural safeguards in the Nepali M&A framework; merger planning must account for the potential dissenting-shareholder cash-out cost.

NRB's consolidated bylaw on bank and financial-institution M&A, replacing the earlier 2068 merger and 2068/2070 acquisition bylaws. Key features: BFIs without public shares can merge/acquire but the post-merger entity must have 30%+ public float; troubled BFIs (below capital adequacy) can only be acquired, not merged; swap ratio formula combines net asset per share and market price; NRB can direct underperforming BFIs to merge. Penalties apply for abandoning M&A after initiation. The Bylaw operationalises BAFIA 2073's sectoral consolidation framework.

Major banking deals in 2022-2023: Global IME Bank + Bank of Kathmandu integrated 9 January 2023; Prabhu Bank + Century Commercial Bank integrated 11 January 2023; Nepal Investment Bank + Mega Bank → Nepal Investment Mega Bank integrated January 2023. Commercial banks reduced from 32 (2012) → 22 (early 2023) → around 20 (FY 2022/23). 12 commercial banks consolidated into 6 surviving entities. Microfinance: 16 MFIs merged into 8 in FY 2022/23. NRB minimum capital requirements were the principal driver.

Listed-company M&A adds SEBON disclosure and trading-halt overlays on top of OCR and sector-specific approvals. Material-information disclosure to SEBON is mandatory at agreement signing under the Securities Act 2063 framework. Trading in the listed shares is typically halted during integration — Global IME shares were halted 15 days from 25 Poush 2079 BS for the BoK merger. Post-integration, the surviving entity re-lists or continues listing depending on structure. Insider-trading rules apply throughout; M&A teams implement information-barrier protocols.

Where a foreign investor acquires shares of a Nepali company, or cross-border entities merge with Nepali presence, FITTA 2075 governs. Approval thresholds: Department of Industry (DoI) for projects under NPR 6 billion; Investment Board Nepal (IBN) for projects over NPR 6 billion. Foreign equity must come in convertible currency through the banking channel. Foreign-investor share transfers need DoI / IBN consent before OCR filing. Repatriation follows standard NRB approval. The cross-border layer adds 3-6 months to the deal timeline.

Section 57 of the Income Tax Act 2058 treats a change in ownership of more than 50% within a 3-income-year window as a "deemed disposal" of the company's assets — triggering capital-gains tax on the appreciated value of the assets. The rule catches both merger restructurings and aggressive secondary-share-transfer deals. Tax structuring around the deemed-disposal threshold is a major M&A planning consideration; experienced tax advisers analyse the deal structure to optimise the timing and avoid unintended triggering of the rule.

Small private-company deal — 4-6 months from term sheet to closing. Listed / regulated-sector deal — 9-18 months. Banking-sector NRB deal — 12-24 months (LOI → due diligence → swap ratio → MoU → joint application to NRB → NRB Letter of Intent → integration → OCR registration). Cross-border FITTA deal — add 3-6 months for DoI / IBN approval. Competition Board approval where the 40% market-share test is engaged — add 2-4 months. Complex deals stacking multiple regulators commonly run 18-30 months.

Due diligence covers four streams. Legal — corporate records, MoA / AoA, share register, board minutes, material contracts, IP, litigation, regulatory standing. Financial — audited statements, working capital, contingent liabilities, tax compliance, related-party transactions. Tax — IRD assessments, deemed-disposal exposure, TDS compliance, VAT, transfer pricing. Labour / HR — employment contracts, Labour Act 2074 compliance, SSF status, pending claims. Sector-specific — banking (loan portfolio, NPL ratio), insurance (reserves, claims). DD typically runs 4-8 weeks.

In a merger, one company absorbs the other(s) and continues as the surviving entity; the merged company is dissolved with its assets and liabilities deemed transferred to the survivor (Companies Act 2063 Sec 178). In a consolidation, all merging companies dissolve and form a new entity. Cross-form merger — under the Companies Act, where a public company and a private company merge, the surviving entity remains public; the private company is dissolved into the public one. The surviving-entity choice affects post-merger governance, listing, and regulatory profile.

Yes — written consent of creditors is required for the OCR merger filing under Sec 177 of the Companies Act 2063. The consent confirms creditors do not object to the merger and the consequent transfer of obligations to the surviving entity. In practice, the consent is sought through structured creditor outreach during due diligence; large creditor bases (banks, vendors, customers, employees with claims) require careful sequencing. Where a creditor objects, the merging companies must either resolve the objection, secure the claim through escrow / guarantee, or restructure the deal. Missing creditor consents is the most common OCR rejection reason.

Hostile takeovers are rare in Nepal given the closely-held ownership of most large companies. SEBON's takeover code under the Securities Act 2063 sets disclosure thresholds for acquisition of significant shareholdings in listed companies, but the framework is less developed than in mature markets. The 50% intent-to-monopolize bar under the Competition Act, the 40% market-share threshold, the NRB pre-approval rule for BFI deals, and the cross-shareholding patterns among Nepali business families all reduce the practical likelihood of pure hostile takeovers. Most "hostile" outcomes are converted to negotiated transactions.

The Competition Promotion and Market Protection Board, established under the Competition Promotion and Market Protection Act 2063, is the statutory regulator of competition law in Nepal. The Board reviews M&A transactions reaching the 40% market-share threshold or the 50% acquisition bar, investigates anti-competitive practices (cartel, abuse of dominance, predatory pricing), and recommends remedial action. The Board's approval is a pre-condition to OCR registration of mergers meeting the threshold. The Board's effective resourcing has been limited; enforcement is selective rather than systematic, and clients should plan timelines conservatively.

The merger application to OCR under Sec 177 must include the employee arrangement scheme. Best practice — and required under Labour Act 2074 sectoral provisions — is to preserve employment continuity in the surviving entity, with no break in service for SSF, severance, or annual leave accrual. Where redundancies are planned, the Labour Act 2074 termination framework applies (notice period, severance pay, retrenchment formula). Trade-union consultation may be needed where the workforce is unionised. Employee buyout offers as part of M&A are increasingly common for retention.

The Office of the Company Registrar (OCR) at Tripureshwor is the principal filing authority for Companies Act 2063 mergers. OCR reviews the application against the Sec 177 documentation requirements, verifies the special resolution, checks creditor consent completeness, confirms anti-trust clearance (where Competition Act threshold is engaged), and decides within 3 months. On approval, OCR records the merger in the company file, deems all assets and liabilities transferred, and issues the merger certificate. OCR rejects mergers creating a monopoly or contrary to public interest. The OCR record is the conclusive evidence of merger completion under Nepali law.

From term sheet onwards. M&A is regulatory-intensive and document-heavy — the lawyer drafts and negotiates the SPA / merger deed, runs due diligence, manages OCR / NRB / SEBON / Competition Board / DoI / IBN filings, navigates the deemed-disposal tax exposure, and handles the dissenting-shareholder cash-out. For banking, NRB engagement at LOI stage is essential. For cross-border, DoI / IBN engagement at structuring stage matters. Pre-deal regulatory mapping is the cheapest investment in deal certainty and timeline accuracy.