Majority of companies fail to submit financial reports on time

KATHMANDU:

Less than half of the companies registered in the country file their audited financial reports and other required documents on time, in a sign that many of the firms are fictitious.

Of around 117,000 companies registered with the Office of Company Registrar, only 53,177, or 45 per cent, have submitted necessary documents by deadline of January 15, show the OCR’s latest statistics.

All private companies must submit a copy of audited annual financial statements within the first six months of stepping into the next financial year, says the Companies Act. In the case of public companies, information such as number of shareholders present at the annual general meeting, a copy of the annual financial statement, director’s report, auditor’s report and resolution adopted by the AGM must be provided within 30 days of the completion of the AGM.

“Although a number of companies are still submitting these documents even after the expiry of the deadline, the flow is petering out,” OCR IT head Sansar Jung Dewan said.

“This maybe because many of the companies registered only exist on paper and may not be engaged in business activities,”

Dewan further said, but quickly added, “However, we cannot say this for sure as we are still mining the available data.”

As per the Companies Act, companies that submit required documents within three months of the deadline can be fined up to Rs 5,000 based on the paid up capital of the company.

Companies that file returns within six months of the deadline can be fined up to Rs 7,000 and companies that submit required documents within 12 months of the deadline can be fined up to Rs 10,000. But those that file returns after 12 months of the deadline can be penalised up to Rs 20,000 for every year of delay.

“And in case the company that has not filed required documents is not distributing profits, the director or officers of the company shall be liable to the fine,” says the Act.

Despite these legal provisions, many have not filed the required documents since the establishment of the company as they are unaware of such fines, Dewan informed. “This has led us to assume that many companies registered at the OCR are fictitious,” Dewan said, adding, “One reason behind opening of paper companies could be to obtain foreign visas for which applicants must show property they own.”

Source: THT