“BFIs must have 51% promoter shares”, says Nepal Rastra Bank; New circular allows BFIs to convert excess shares into ordinary

Nepal Rastra Bank has recently issued a circular regarding the promoter share conversion and expansion of work area. In the circular, Rastra Bank has clearly stated that the banks and financial institutions must maintain 51% promoter shares.

Similarly, Rastra Bank has also mentioned that the institutions with more than 51% promoter shareholding can convert the excess shares into ordinary shares fulfilling the pre-requisites stated by the Rastra Bank.

Nepal Rastra Bank has issued the new circular amending its previous directive.

The pre-requisites to be met for converting the promoter shares into ordinary shares are as follows:

1. The bank and financial institutions must have completed 10 years of operation
2. The promoter shares must be at least 51% of the total shareholding even after the conversion
3. The excess promoter shares can be converted into ordinary shares on a pro-rata basis.
4. For converting the promoter shares into ordinary shares, application with the approval of BOD should be submitted to the Rastra Bank. After receiving approval from Nepal Rastra Bank, the shares can be converted after making amendments in the MoA and AoA.
5. The shares once converted cannot be converted again.
6. If an individual or a company wishing to convert its promoter shares into ordinary shares falls under Blacklist, will be able to sell the shares only for the purpose of payment of loan
7. At a time, up to 10% of the shares can be converted into ordinary shares and such conversion can only be made twice