Companies Act, 2006

56. Company's right to alter share capital: (1) Subject to the provisions made in the articles, a company may, by passing a special resolution at a general meeting, alter its share capital in the following manner:

(a) by increasing its authorized share capital by creating new shares of such amount as the company deems appropriate,
(b) by consolidating or dividing all or part of the company's share capital into shares of a value greater or less than the face value,
(c) by cancelling shares which have not been taken or agreed to be taken by any person up to the date of the resolution or which have been forfeited under subsection (3) of section 53, and thereby reducing the amount of the company's share capital by the value of such cancelled shares.

(2) If a special resolution to alter capital under subsection (1) is passed, the memorandum and articles of the relevant company shall be deemed to have been amended to that extent removed by the Nepal Acts Amendment Act, 2064..

(3) The record of the resolution passed under subsection (1) and the amendment to the memorandum and articles shall be submitted to the office along with the prescribed fee, and the office shall, within seven days of such submission, record the alteration of capital and the amendment to

(2) Notwithstanding anything contained in subsection (1), a company may purchase its own shares from the accumulated profits distributable as dividend, subject to informing the Office, in the following circumstances:

(a) If the entire amount of the shares issued by the company has been paid up,
(b) If the shares issued by a public company have been registered with the Securities Board,
(c) If the provision to purchase its own shares is included in the articles of association of the concerned company,
(d) If a special resolution has been passed at the general meeting of the concerned company authorizing the purchase of its own shares,
(e) If, after the company purchases its own shares, the amount of debt payable by the company does not exceed double the ratio of the capital and general reserve fund,

Explanation: For the purpose of this clause, "debt amount" shall mean all secured and unsecured debt amounts borrowed by the company.
(f) If the amount of its own shares to be purchased by the company does not exceed twenty percent of the company's total paid-up capital and general reserve fund,
(g) If it is not contrary to the directives issued by the Office from time to time regarding the purchase of its own shares.

(3) The resolution to be presented at the general meeting pursuant to clause (d) of subsection (2) must contain the following details:

(a) The reason and necessity for purchasing its own shares,
(b) Details of the assessment of the potential impact on the financial condition of the concerned company due to the purchase of its own shares,
(c) The type of shares proposed to be purchased and their number,
(d) The maximum or minimum amount required to purchase the shares pursuant to clause (c) and the financial source thereof,
(e) The time period within which its own shares may be purchased,
(f) The method of purchasing the shares,
(g) Other necessary matters as prescribed by the Office and as required to be disclosed pursuant to the prevailing law regarding the purchase of its own shares.

(4) If the special resolution pursuant to subsection (3) is passed by the general meeting, the concerned company may purchase its own shares within twelve months from the date of such passage by any of the following means:

(a) By purchasing through the securities market,
(b) By purchasing shares allocated to the company's employees from the concerned employees,
(c) By purchasing proportionately from the existing shareholders.

(5) If a company purchases its own shares pursuant to subsection (4), it shall inform the Office within thirty days from the date of such purchase of the number of shares purchased, the amount paid therefor, and other necessary details.

(6) When purchasing its own shares pursuant to subsection (4), an amount equal to the face value of the shares purchased shall be set aside in a separate capital redemption reserve fund and deposited in that fund, and the amount of such fund shall be maintained as equivalent to paid-up capital.

(7) If a company purchases its own shares pursuant to subsection (4), it must cancel the purchased shares within one hundred and twenty days from the date of such purchase.

(8) After purchasing shares of any class pursuant to this section, the company shall not issue shares of the same class again for two years from the date of purchasing its own shares, except for issuing bonus shares or discharging its liabilities.

(9) Notwithstanding anything contained elsewhere in this section, a public company shall not purchase its own shares in a manner that reduces the minimum number of shareholders or the minimum paid-up capital required to be maintained by such company.

(10) Other circumstances in which a company may not purchase its own shares and other conditions to be complied with when purchasing its own shares shall be as prescribed.