iil sinter ws toad of specie provisions of The Companies Act, 2063 are mentioned in this chapter, M ‘requited to have understanding of these matters to ensure that compliance with The Companies Act. _ The Provisions relating to books of accounts and company auditor are already mentioned in Chapter 1, therefore not mentioned in this chapter again. . Ti) The paid up capital Of a public company shall be @ minimum of ten million, rupees, except as otherwise provided in the prevailing law or in » notification by the Government of Nepal in the Nepal Gazette that the paid up capital of any particular company shall be in excess of the said required minimum. (2). Notwithstanding anything contained in subsection (1), 4 public which does not have the paid up capital as mentioned in that subsection at the time of commencement of this Act shall maintain the capital referred to in subsection (1) no later than Ashwin 2065 (8 December 2008). (a) The face value of shares of a private company shall be as specified in its articles of association. (2) The face value of shares of a public company shall be fifty rupees per share or shall be equivalent to such amount exceeding fifty rupees os is divisible by the figure ten as provided in the memorandum of association ‘and articles of association. (3). In inviting an application by public company for the subscription ofits shares, no amount exceeding fifty per cent of the face value of each share shall be demanded with the application. Provided, however, that in raising capital by a company which has been in operation since at least three years ago by publishing its audited fiscal statements for its last three years, at the time of publication of its prospectus, this provision shall not be applicable. (4) A person who intends to subscribe the shares of a public company has to make an application in the format as prescribed. (@) Where a public company invites the general public to apply for the subscription of its shares it shall allot the shares and give the shareholders @ notice in the format as prescribed, within @ maximum period of three months after the date of closure of share issue. Provided, however, that in cases where at least fifty percent of the total shares issued publicly cannot be sold failing a guarantee/underwriting agreement on the subscription of at least fifty percent of the publicly issued shares, no shares shall be allotted. PE bes CA. Sunil Josh (2) If the company makes an application, explaining the reasons for failure to allot shares within the time-limit set forth in Sub-section(1), owing to the circumstance mentioned in the proviso to that Sub-section within seven days after the expiration of that time-limit, the Office may extend the time limit for up to three months for the allotment of shares. Wf the shares cannot be allotted even within such extended time limit, the ‘company may allot such shares through negotiations or any other methods. Page | 210 Scanned with CamScannerthe purwuant A ‘discriminatory oF with intent to cause any loss oF damage to any investor {rary Me a pettion,seting out the reasons for the same, in the court on matter {sustained any loss or damage by reason of the deliberate violation Section by any officer of the company oF permission given by such officer to anyone to commit such violation, the court may Issue an order for ‘Fealization from such officer personally of compensation for such loss or (6) eld seperate etd on Q) Any public company who can do public Issue of securities under prevalent ‘securities laws can issue share at premium as per the conditions and provisions - mentioned in the prevalent securities laws. But private company of other public ‘company for which there is no provision of public issue of securities in the Prevalent securities laws can issue share at premium after getting approval from ‘the general meeting if the company’s assets exceeds its liabilities, Se ‘Where the shares are sold at a premium pursuant to Subsection (1), a sum in ‘excess of the face value, out of the proceeds thereof, shall be deposited in a Bremium account to be opened to that effect. ‘The company may use the moneys in the account as referred to in Sub-section (2) in the following acts: 2 ‘Separate Account | (1) ‘Use of Premium 2) Paying up unissued share capital to be issued to the shareholders as fully paid bonus shares, Providing for the premium payable on redemption of any redeemable preference shares, Writing off the preliminary expenses made by the company, d. Bearing or reimbursing the expenses of, the commission paid or discount allowed on, any issue of shares of the ‘company. In making @ request for approval of the Office to issue shares at a premium pursuant to Sub-section (1), the audited financial statements for three years shall be provided to the Office. ime Page | 21. ; sigal Sie 4 3. Scanned with CamScanner‘share capital at the time of winding up of the company: ‘Except as provided in the articles of associat ‘Sub-section (1) shall be converted into ordinary shares shares . Percentage of dividends receivable by preference shareholders; 2 ireneranadends qe cumulated every yer femultv) or rots re distributed only in a year wherein profit is made(non-cummulative); d. Whether preference Is given while paying amount of share in the event of liquidation of company: e. Whether voting right is attached there to; and if voting right is attached, whether such right is available only in the case of preference share or also in other matte Whether voting right is available also in other matters pursuant to Clause (e) , the proportion to which such right is exercisable; Whether preference shares can be converted into ordinary shares; Whether the amount of preference shares can be redeemed (redeemable ) or cannot be redeemed (irredeemable) after 3 certain period; i. Whether, in redeeming preference shares, premium is payable on redemption. (Students are advised to refer the provisions of Companies Act, covered by the syllabus of " Corporate Laws") ‘Ashare certificate is a certificate issued by a company certifying that on the date the certificate is issued a certain person is the registered owner of shares in the ‘company (i) A share certificate in the prescribed format shall be issued to every shareholder in respect of each share subscribed by him/her, Y within two months after the allotment of shares; Y the share certificate shall bear the signature of any two out of a director or chief executive of the company or the company secretary, in the case of a public company, and the signature of the person as mentioned in the articles of association ‘or consensus agreement, in the case of a private company, and also: bear the seal of the company, if an s Page | 212 CA. Suni Joshi 2 Scanned with CamScanner‘While issuing a share certificate in respect of any shares held jointly by two OF more persons, the share certificate may be issued to any one of them, by "mentioning their names in the certificate, Provided, however, that, the names of all shareholders shall be mentioned in the (3) Ia share certificate is lost or destroyed becouse of @ divine act or ‘otherwise, the shareholder shall give information thereof to the registered office the company immediately when he/she knows that the share certificate has been so lost or destroyed because of the divine act or otherwise, If any application made pursuant to Sub-section (3), the company shall, if the matter contained in the application seems to be reasonable after Inquiring into all necessary matters relating thereto, issue another share Certificate to the applicant, by collecting the duplicate fees for duplicate ‘copy as prescribed in the articles of association; and this matter shall also be recorded in the shareholder register A certificate issued by @ company, signed by its competent officer and under the seal of the company, if any, to be used by it, specifying the ‘umber of shares or debentures held by any shareholder or debent: holder shall be prima facie evidence of his/her title to such shares or Share transfer means transfer of ownership of shares. Transfer may be due to purchase, sale, gift or inheritance. Share Transfer Audit is done to ensure that the procedure for the registration of transferee is correctly done so that the company can avoid any future contradictions relating to the dispute of ownership or similar matters that may lead to fines and penalties. ‘Study the AOA and MOA for the procedure to be followed with regard to the transfer of shares, Y Ensure that the requirements mentioned in AOA and MOA are properly followed. Examine the application made for the transfer of the shares, Ascertain whether the notices were sent to the joint owners and if any ‘objection were raised, such objections were properly taken into consideration ‘Ascertain whether the transfer fee as prescribed by the AOA has been received and accounted for in the books of accounts. Y Examine whether the transfer deed was properly stamped. Y Check the members register for the transfers Y Verify the signature of the transferor with the signature on the v7 iy Scanned with CamScanner‘Scanned with CamScannerTelusion In Audit Report | ‘sec. 66 (3) Bank and Financial j | the formats prescribed by Nepal instit thelr financial statements as per 1 Rastra Bank and get them audited within four !onths from the end of Finan 'n addition to the matters clearly mention the followin a b. Prescribed by the laws in force, the auditor shall Whether or not replies to the queries asked by him or her were given; fore hana ee es haegconynesente ee erm mce ce enna Whether or not credits have been written off as prescribed; Other matters, which, in his or her opinion, should be made known i}Qualified Adverse Opinion Opinion > Except... > FS do not give FS give True & fair| | True & Fair View view tis also known as dean opinion (clean report). = © tis given when the auditor determines that the financial statements: Y cofhply with applicable FRF ~ comply with laws and regulations ¥ _are-complete in all respects materially ¥ arefree from material misstatements Wordings used in report (extract: opinion paragraph) Opinion ‘ In our opinion, the financial statements present fairly, in all respects, (or give a true and fair view of) the financial Company as at 31°" Asad 20XX, and (of) its financial and its cash flows for the year then ended in accordance Financial Reporting Standards © If the auditor has identified material misstatement im financial statement, but the nature of misstatement is. that it would not affect overall position (not pervasive) financial statement in a material manner, then issues qualified opinion. For e.g. Only the balance of one debtor is financial statements are foicly presented in all other respects, 2 However, the report will include an highlights the reason why the audit report is! © Simply, when the misstatement is material but ‘the qualified opinion Is issued. Scanned with CamScannerWordings used in report (extract: opinion paragraph) {In our opinion, except for the effects of the matter described in-the ‘Bosis for Qualified Opinion paraaraph,** the financial statements resent foirly, in all material respects, (or give a true and fair view of) the financial position of ABC Company as at ...., and (of) its {financial performance and its cash flows for the year then ended in ‘accordance with Nepal Financial Reporting Standords. ** The Basis for Qualified Opinion paragraph Is placed below the _| opinion paragraph to describe why the qualified opinion is given. An adverse opinion is expressed when the auditor, having ‘obtained sufficient appropriate audit evidence, concludes that ‘misstatements, individually or in the aggregate, are both affecting the overall performance) Wordings used in report (extract: opinion paragraph) Opinion ‘Adverse Opinion In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion** paragraph, the consolidated financial statements i fair_view off the financial position of ABC Company and its ‘subsidiaries a8 at ..., and (of) their financial performance and their ‘eash flows for the year then ended in accordance with Nepal Financial Reporting Standards. ** The Basis for Adverse Opinion paragraph is placed just below the opinion paragraph to describe why the adverse opinion is being given. ‘© A disclaimer of opinion is expressed when the appointed ‘auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion (that is, a limitation in scope), and The auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both ‘material and pervasive. ‘Wordings used in report (extract: opinion paragraph) Opinion Disclaimer of Opinion Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordinaly, we do not express an opinion on the financial statements. ** The Basis for Disclaimer opinion paragraph is placed just below the opinion paragraph to describe why the disclaimer of opinion is being given. Wote: For better understanding, students are advised to refer the format of audit reports presented in this chapter. Page | 217