Liquidating a company is never an easy decision. Whether due to financial distress, strategic restructuring, or voluntary closure, the process of winding up a business in Nepal requires careful legal compliance, documentation, and coordination with government authorities.

In this comprehensive guide, we’ll walk you through the liquidation of companies in Nepal, including legal grounds, procedures, timelines, and practical tips for business owners, directors, and legal professionals.

What Is Company Liquidation?

Liquidation refers to the formal process of closing a company and distributing its assets to creditors and shareholders. In Nepal, liquidation is governed by the Companies Act, 2063 (2006) and related provisions under the Insolvency Act, 2063.

Once a company is liquidated:

• It ceases all operations

• Its legal existence is terminated

• Assets are sold to pay off debts

• Remaining funds (if any) are returned to shareholders

Legal Grounds for Liquidation in Nepal

A company may be liquidated under the following circumstances:

1. Voluntary Liquidation

Initiated by shareholders or board of directors when:

• Business goals are fulfilled

• Company is no longer viable

• Owners wish to exit the market

2. Compulsory Liquidation

Ordered by the court due to:

• Insolvency or inability to pay debts

• Fraud or illegal activities

• Failure to comply with statutory obligations.

Step-by-Step Process of Company Liquidation in Nepal

Step 1: Board Resolution

• Directors must pass a resolution to initiate liquidation

• Shareholders must approve the decision in a general meeting

Step 2: Appointment of Liquidator

• A licensed liquidator is appointed to manage the process

• Must be registered under the Insolvency Practitioners’ list

Step 3: Notification to OCR

• Submit liquidation notice to the Office of Company Registrar

• Include board resolution, shareholder approval, and liquidator details

Step 4: Public Notice

• Publish liquidation notice in a national newspaper

• Invite claims from creditors within 30 days

Step 5: Asset Valuation & Sale

• Liquidator assesses company assets

• Assets are sold to pay off liabilities

Step 6: Debt Settlement

• Creditors are paid in order of priority:

  1. Secured creditors

  2. Employees (salary, benefits)

  3. Tax dues

  4. Unsecured creditors

Step 7: Distribution to Shareholders

• Remaining funds (if any) are distributed to shareholders

Step 8: Final Report & Deregistration

• Liquidator submits final report to OCR

• Company is officially deregistered.

Required Documents for Liquidation

• Board resolution and shareholder approval

• Appointment letter of liquidator

• Updated financial statements

• Tax clearance certificate

• Employee settlement records

• Public notice copy

• Final liquidation report

Timeline for Liquidation

Total Estimated Time: 2–6 months (depending on complexity)

Role of Liquidator

A liquidator is a licensed professional responsible for:

• Managing company assets

• Settling debts and liabilities

• Communicating with creditors

• Preparing final reports

• Ensuring legal compliance

In Nepal, liquidators must be registered with the Insolvency Practitioners’ Board and approved by OCR or the court.

Common Challenges in Liquidation

• Disputes among shareholders or creditors

• Incomplete financial records

• Tax liabilities or penalties

• Asset valuation disagreements

• Legal delays in court-ordered liquidation

Strategic Tips for Business Owners

• Hire a qualified legal advisor early

• Maintain clean financial records

• Clear tax dues before initiating liquidation

• Communicate transparently with employees and creditors

• Submit all documents promptly to OCR.

Liquidation vs. Insolvency

Final Thoughts

Liquidation is a serious legal and financial process—but when done correctly, it allows business owners to exit responsibly, protect stakeholder interests, and comply with Nepalese law.

Whether you're winding down a startup, closing a dormant company, or navigating insolvency, understanding the liquidation of companies in Nepal is essential for a smooth and lawful transition