chhatramani/Nepal-Legal-Text-Corpus-44laws huggingface dataset:
Bank and Financial Institution Act 2073

Chapter-3 Provisions Concerning Transactions of Securities

Section 9: Allotment of Shares
1) The bank or financial institution shall set aside at least thirty percent share of its total issued capital for subscription by the general public.
Explanation
: For the purpose of this section, “general public” means natural person.
2) The shares allotted to the general public pursuant to sub-section (1) shall be sold to the general public within the stipulated time. The shares that could not be sold in such a manner may be sold to other firms, companies or institutions.
3) The bank or financial institution may allot 0.5% shares, except that of the limit referred to in sub-section (1), to its employees.
4) The bank or financial institution may, if it desires, convert the shares to ordinary shares, having fulfilled the process specified by the Rastra Bank subject not to the share ownership of the promoter shares group less than 51 percent.
Explanation
: For the purpose of this Chapter,-
(a) “Promoter shares group” means the promoter shares group as prescribed by the Rastra Bank.
(b) “Ordinary shares group” means the shares groups other than the promoter shares group.
5) Notwithstanding anything contained in sub-section (1), the ratio of share ownership is not necessary in the case of the bank or financial institution and infrastructure development bank to be incorporated under significant ownership of the Government of Nepal.
6) The bank or financial institution to be incorporated in a joint venture with a foreign bank or financial institution or other foreign institution or infrastructure development bank shall have to allot the shares to the general public as specified by the Rastra Bank.
7) While calling upon application from the general public for the subscription of its shares, every bank or financial institution shall demand payment of a hundred percent amount of the face value of its shares along with the application.

Bank and Financial Institution Act 2073

Chapter-3 Provisions Concerning Transactions of Securities

Section 10: Transactions of Securities
(1) The bank or financial institution shall, while issuing its securities for subscription to the general public, carry out the acts of sale, allotment and the act of exchange in accordance with the prevailing laws
relating to securities.
(2) The bank or financial institution shall submit a copy of an agreement entered into by it on the dealing of securities through any institution dealing in securities before the Rastra Bank within seven days after the date of entering into such agreement.
(3) The bank or financial institution shall, while issuing any type of debenture or financial instrument, have to obtain prior approval from the Rastra Bank.
(4) The Rastra Bank ma, while approving pursuant to sub-section (3), specifies required terms and conditions, and it shall be the duty of the concerned bank or financial institution to abide by such terms and conditions.
Bank and Financial Institution Act 2073

Chapter-3 Provisions Concerning Transactions of Securities

Section 11: Provision on sale or pleading of Securities
1) The promoter of the bank or financial institution shall not be entitled to sell or pledge any share registered under his/her ownership for at least five years from the date of commencement of financial transactions.
2) Notwithstanding anything contained in sub-section (1), in case of arising a special circumstance due to the emergence of any obstruction or hindrance in the operation of the bank or financial institution or the promoter shareholder is included in the blocklist owing to transactions with another bank or financial institution, shares may be sold or brought amongst promoters by obtaining approval from the Rastra Bank.
Explanation:
For the purpose of this Section, “special circumstance” means failure to hold a meeting of the Board of Directors due to lack of quorum for a consecutive period of three times or a situation of indecision because of disputes amongst Directors.
3) If the promoter of the bank or financial institution wishes to sell or pledge the shares held in his/her name after five years from the date of commencement of financial transactions by the bank or financial institution, his/her may sell or pledge such shares by obtaining approval from the Rastra Bank subject to belong such share under the promoter’s group.
Provided that approval of the Rastra Bank shall not be required while selling or pledging the shares by the promoter having subscribed the shares of less than two percent of the paid-up capital.
4) Notwithstanding anything contained in sub-section (1) and sub-section (2) of Section 9, after completion of a period of ten years of transactions of bank or financial institution, the promoter shares may be converted into ordinary shares with the approval of the Rastra Bank by giving due consideration to impact it causes on the capital market, banking and overall financial sector.
5) In case any company or body corporate has subscribed promoter shares, prior approval of the Rastra Bank shall be obtained before the alteration of shareholders or sale or transfer of the ownership of shares among the shareholders having substantial ownership of such company or body corporate.
Provided that approval of the Rastra Bank shall not be required while selling or mortgaging the shares by a company or body corporate having subscribed the shares of less than two percent of the paid-up capital of the bank or financial institution.
Bank and Financial Institution Act 2073

Chapter-3 Provisions Concerning Transactions of Securities

Section 12: Prohibition on transaction of Securities
1) The Director, Chief Executive, Auditor, Company Secretary of the bank or financial institution or the person directly involved in the management and account of a bank or financial institution shall not buy or sell, mortgage or cause to be mortgaged, transfer or transact or give or accept as a donation the securities of the concerned bank or financial institution or of its subsidiary company in his/her name or in name of member of his/her family or a firm, company or institution under the control of such person or to any other person until he/she is in such position or until one year from the date of retirement from such position.
Provided that this Sub-Section is not deemed to have hindered to buy and sell securities among Directors to Directors or Directors to Promoters with the approval of the Rastra Bank while issuing bonus shares, rights shares or the shares allotted for employee or issuing new shares, or while implementing a directive of the Rastra Bank or while selling entire share having in any bank or financial institution under own ownership by any Director or any corporate body having power to appoint Director or while merging or amalgamating bank or financial institutions in each other according to provisions made in Chapter-10 or while acquiring all assets or liabilities of one bank or financial institution by another bank or financial institution or while carrying out purchase or sale of securities among promoter directors or directors to directors with the approval of the Rastra Bank in case of emergence of any hurdle in operation of the bank or financial institution or while carrying out purchase or sale or transfer of shares during the process of reformative or settlement process of a problematic bank.
2) In case anyone commits any act in contrary with sub-section (1), the concerned bank or financial institution shall have to forfeit such securities and sell them according to the process as prescribed by the Rastra Bank.
Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 14: Formation of Board of Directors
1) A bank or financial institution shall have a Board of Directors comprising at least five Directors and not exceeding seven Directors.
2) Subject to this Act and the Articles of Association, the General Meeting of the bank or financial institution shall appoint Directors.
Provided that,-
(a) Until the First Annual General Meeting of the bank or financial institution is held, promoters shall appoint the Directors.
(b) In case the position of any Director falls vacant before the holding of the Annual General Meeting, the Board of Directors may appoint a Director until the next General Meeting is held.
(c) In case any corporate body has subscribed shares, it may appoint a Director to the proportion of the number of shares it has subscribed, and while nominating in such a manner, the same person shall not be nominated to more than one bank or financial institution.
(d) Notwithstanding anything contained in Part (c), there shall be no obstruction to appoint a person who is a Director in any bank or financial institution as Director of an Infrastructure Development
Bank.
3) The Board of Directors shall appoint at least one Professional Director from among the persons possessing qualifications and experience pursuant to Section 17, and information thereof shall be furnished to the First General Meeting to be held after such appointment.
Provided that the promoter, Director or shareholder possessing more than 0.1 percent share of the bank and financial institution and his/her member of family shall not be allowed to become a Professional Director.
4) Notwithstanding anything contained in sub-sections (1) and (3), no more than one member of a family may become the Director of any bank or financial institution at the same time.
5) A Director chosen by the Directors from among themselves by majority decision shall be the Chairperson of the Board of Directors.
6) The company, corporate body, foreign bank or financial institution which has subscribed shares of a bank or financial institution may, while appointing a director to proportionate to the shares as it has subscribed, appoint an Alternate Director to work in the absence of the Director.

Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 15: Term of Office of the Director
1) The term of office of a Director shall be four years in maximum as provided for in the Articles of Association, and he/she may be reappointed or re-nominated.
Provided that the Independent Director may be appointed for only a single tenure of office.
2) Notwithstanding anything contained in sub-section (1), the Executive Chairperson or Managing Director appointed after the commencement of this Act shall remain in the office only for two consecutive terms
Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 16: Qualifications of Director
1) The person to be appointed to the office of Director shall have to possess the following qualifications:-
(a) Having had work experience of five years as a Director or office bearer level of a foreign or local bank or financial institution or of body corporate of related sector or in officer level of Government of Nepal, or
(b) Having attained a bachelor’s degree and had work experience of at least three years as a Director or office bearer level of a foreign or local bank or financial institution or of body corporate of related sector or at least in officer level of Government of Nepal, or
(c) Having attained a master’s degree in the related subject as prescribed.
2) Notwithstanding anything contained in sub-section (1), the academic qualifications and experiences of the Director of a financial institution of class “D” shall be as prescribed by the Rastra Bank from time to time.
Provided that the qualification of independent Director shall be as mentioned in Section 17.

Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 17: Qualifications of Independent Director
While appointing an Independent Director of the bank or financial institution, appointment shall be made from amongst the persons having met the following qualifications and experience:-
(a) In the case of class “A” bank or national level class “B” development bank, having obtained at least a master’s degree in the subject as prescribed by the Rastra Bank and experiences as prescribed by the Rastra Bank,
(b) In the case of class “B” development bank and financial institution of class “C”, except the class “B” development bank of national level, having obtained at least a bachelor’s degree in the subject prescribed by the Rastra Bank and work experiences as prescribed by the Rastra Bank,
(c) In the case of microfinance institution of class” “D”, the person possessing the qualifications and experiences prescribed by the Rastra Bank.
Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 18: Disqualification of Directors
1) The following persons shall not be eligible to become a Director of the bank or financial institution:-
(a) Having not attained the age of 25 years,
(b) Having an unsound mind or insane,
(c) Having declared bankrupt in Nepal or abroad for being unable to pay debt,
(d) Having blocked or declared defaulter in connection with any transaction with any bank or financial institution in Nepal or in abroad, and a period of at least three years has not been completed after removal of his\her name from the blocklist or list of defaulter,
(e) The incumbent Director or an employee of any corporate body carrying out transactions of bank or financial institution or any institution collecting any type of deposits or carrying out transactions relating to insurance,
(f) Borrower or incumbent auditor or advisor of concerned bank or financial institution or the person, firm or company who/which is the partner in any kind of contract with the concerned bank or financial institution or having personal interests,
(g) Who has acquired membership of the Stock Exchange to act as a securities broker of merchant banker,
(h) Incumbent Director of the bank or financial institution,
(i) The person who has not subscribed to the minimum number of shares required to be subscribed to be eligible for appointment as a Director pursuant to the Articles of Association of the bank or
financial institution,
(j) Incumbent employee of the Government of Nepal, or an organisation having ownership of Government of Nepal, or Rastra Bank or of a bank or financial institution,
Provided that this provision shall not be deemed to have made obstruction to nominate a Director in micro-finance or infrastructure development bank, of which share has been purchased by the Government of Nepal or the institution having under the ownership of Government of Nepal or Rastra Bank or bank or financial institution.
(k) Who, having a liability to pay tax pursuant to the laws in force, has failed to pay the same
(l) Having not completed a period of ten years after replenishment of punishment upon being convicted of an offence of theft, cheating, forgery, fraud, corruption, any offence involving moral turpitude or a banking offence from a court of Nepal or of a foreign country,
(m)Having been taken action by a regulatory agency as per law for committing an act against the law and not having completed a period of five years after being taken such action,
(n) In case of an independent director, promoter or shareholder holding ownership of more than 0.1 % share of the concerned bank or financial institution,
(o) Having remained to clear imprisonment and dues of fine as imposed by the court or having defaulted to pay government due.
2) Notwithstanding anything contained in Part (e) of Sub-Section (1), an official or employee of a bank or financial institution may work as a Director of the subsidiary company of the same bank or financial institution.
Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 19: Circumstances for ineligibility to remain in office of Director
1) No person shall remain in the office of the Director of the bank or financial institution in any of the following circumstances:-
(a) If having no qualifications as referred to in Section 16 or 17 or is ineligible pursuant to Section 18,
(b) In case the motion to remove from the office of a Director is passed by a majority of the general meeting at the recommendation of the group from which he/she is appointed to the office of Director that is passed by the shareholders having representation of at least 51 percent of the shares of the same group,
Explanation
: For the purpose of this Section, “group” means a group of promoters and shareholders from the general public.
(c) In case the resignation tendered by a Director from his/her position is approved,
(d) In case of commission of any act that is not supposed to be committed under this Act or directives of Rastra Bank,
(e) In case the Rastra Bank directs to remove from the office stating that since a Director has committed acts against rights and interests of the bank or financial institution or of the depositors and since he/she is not competent to carry out works as in the office of a Director of the bank or financial institution.
2) In case a bank or financial institution deems that any of its directors is ineligible to remain in the office of the Director according to this Act or the Rastra Bank Act or is no more in the office, written information thereof shall be given to the Rastra Bank within fifteen days.
3) The Rastra Bank may if it has received in written form with regard to a Director that he/she is ineligible to remain in the office as stated in sub-section (2), issue appropriate direction after carrying out the necessary enquiry.

Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 20: As to an incumbent Constitutional Position Holder
No person who holds a constitutional position shall, so long as he/she is holding such position, be eligible in the Board of Directors or as the Chief Executive of any bank or financial institution.
Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 21: Meetings of Board of Directors
1) Meetings of the Board of Directors shall have to be held at least 12 times in a year.
Provided that the gap between the two meetings shall not be more than sixty days.
2) The Chairperson shall convene a meeting of the Board of Directors at any time when at least one-third of the Directors request in writing to convene the meeting by mentioning the agenda to be discussed in the meeting.
3) Meetings of the Board of Directors shall be presided over by the Chairperson. In the absence of the Chairperson, the meeting shall be presided over by a Director selected by a majority of the Directors from amongst themselves.
4) No meeting of the Board of Directors shall be held unless it is attended by at least fifty-one percent of the total number of Directors.
5) The decision of a majority in the meeting of the Board of Directors shall be binding, and the Chairperson may exercise the casting vote only in the event of a tie.
6) Minutes regarding the names of Directors attended in the meeting of the Board of Directors, the agenda discussed, and the decisions taken thereon shall be recorded in a separate book, and such minutes shall be signed by all Directors attended in the meeting.
Provided that, if any Director puts forward any dissenting opinion in the decision of the Board of Directors, he/she may mention such dissenting opinion in the minutes by putting his/her signature.
Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 22: Functions, Duties and Powers of Board of Directors
1) All functions, duties and powers to be exercised by the bank or financial institution, except those functions to be performed by the General Meeting, shall be vested in the Board of Directors subject to this Act, prevailing laws and the Memorandum of Association and Articles of Association.
2) It shall be the duty of the Board of Directors to operate a bank in the interests of depositors, customers, and general shareholders having taken overall risks management of the bank or financial institution and to make assurance not to intervene in the daily conduct of business such as deposit collection, lending, investing, managing personnel, making expenses from budget having maintained appropriate corporate governance in the bank or financial institution.
3) Other functions, duties and powers of the Board of Directors shall be as follows:-
(a) To frame necessary Byelaws, directives, and procedures and to enforce them subject to this Act, the prevailing laws and directives of the Rastra Bank in order to carry on the functions of bank or financial institution in good order,
(b) To prepare an internal control system and risk management norms for avoiding the emergence of risk or risk-prone situations in transactions of bank or financial institutions and to carry on banking and financial transactions carefully according to its policies and strategies,
(c) To make necessary policy management for carrying out functions of a bank or financial institution and to operate the bank or financial institution in an order and rational manner by carrying out regular monitoring of such functions,
(d) To prepare a clear organisational structure of the bank or financial institution and frame policies and implement it accordingly,
(e) To submit an audit report, including the annual progress report of the bank or financial institution, before the General Meeting,
(f) To carry out other functions as specified by the Rastra Bank from time to time.

Bank and Financial Institution Act 2073

Chapter- 4 Provisions on Board of Directors and Chief Executive

Section 23: Accountability and Responsibility of Director
1) A Director shall not commit or cause to be committed any act for personal benefit through a bank or financial institution or in the course of business of a bank or financial institution.
2) A Director shall be personally liable for any act carried out exceeding his/her authority as in the capacity of a Director of the bank or financial institution.
3) A Director of a bank or financial institution shall have to assume responsibility with regard to risk management and internal control by following sound business strategies of the institution.
4) A Director shall not have to intervene in the daily functions and activities of the management of the bank or financial institution.
5) A Director shall have to fully comply with the directives issued by the Rastra Bank from time to time.