Understanding Merger and Acquisition Processes in Nepal

Merger means two business entities join together to create a completely new entity, or one survives by absorbing the other. In this process, one company's identity merges into another, or several companies create a new entity and transfer their identity and assets accordingly. Shareholders of the merging company receive shares in exchange for their existing shares. Acquisition, on the other hand, involves one company purchasing all or a majority of another company’s shares—also known as a takeover—and is defined under the BAFIA as an act when a bank or financial institution acquires another after settling assets and liabilities.

Statutory Framework Governing M&A in Nepal

Merger and acquisition activities in Nepal are governed by several laws and bylaws:

• Company Act, 2063

• Merger Bylaws, 2068

• Acquisition Bylaws, 2068

• Merger and Acquisition Bylaws, 2073

These regulations establish the legal steps and conditions required for different types of mergers and acquisitions under Nepalese law.

Types of Mergers and Acquisitions In Nepal

Mergers

• Horizontal Mergers: Between companies in the same industry segment

• Vertical Mergers: Between companies at different stages of the production/supply chain

• Conglomerate Mergers: Between companies in unrelated industries

Acquisitions

• Asset acquisitions: Acquiring specific assets and liabilities of a target company

• Stock Acquisitions: Acquiring ownership by purchasing shares of the target company

Merger of Public Companies In Nepal: Step-by-Step

1. Adoption of a Special Resolution
   A minimum of 75% of shareholders must approve the merger terms in a general meeting, as required under the Company Act 2063.

2. Submission of Application to OCR
   Within 30 days of adopting the special resolution, companies must submit the merger proposal, scheme of arrangement, board and general meeting resolutions, audited financials, and a merger agreement to the OCR.

3. Review and Evaluation by OCR
   OCR examines legality, compliance with corporate governance, impact on stakeholders, and may consult other regulatory bodies. Approval or requests for clarification must be issued within three months.

4. Transfer of Assets and Liabilities
   Once approved, the surviving or new entity formally takes over all assets, liabilities, rights, and obligations. Legal documentation and asset/liability transfer agreements support this transition. Shareholders have the right to a fair share valuation and compensation.

Critical Documents for the Merger of Public Companies

Brief Overview of the Acquisition Process

In a stock acquisition, the acquiring company buys most or all of the outstanding shares of the target company, gaining full control. Asset acquisition involves the purchase of certain assets and liabilities, without taking over the entire corporate structure. Both require regulatory filings under the acquisition bylaws, with additional steps for takeover offers or financial inspections, depending on the sector and shareholding percentage.

Merger and Acquisition: Strategic Tools for Growth

M&A represents strategic actions for companies to expand operations, restructure for efficiency, or gain market share. Horizontal mergers help reduce competition, vertical mergers strengthen supply chains, and conglomerate mergers diversify business. Acquisitions allow rapid market entry or asset acquisition. In Nepal, these tools are increasingly relevant as businesses adapt to economic changes, foreign investment trends, and sectoral consolidation.

Navigating M&A in Nepal

Understanding merger and acquisition mechanisms and following the Company Act 2063 and related bylaws is essential for businesses and investors. From special resolutions to legal documentation and regulatory approval, the m&a process emphasizes transparency, stakeholder protection, and legal compliance. When executed thoughtfully, m&a can be a driving force for innovation, competitiveness, and long-term success in Nepal’s dynamic market environment.