Highlights of the Industrial Enterprises Act, 2076 (2020)

1.1.  Introduction to Industrial Enterprises Act

The Industrial Enterprises Act, 2076(2020) has mandated the registration of all industries before operation. Industries must apply for registration, with specific provisions for different types of industries including those with foreign investment and academic consultancy services. The Act classifies industries based on capital investment and nature of goods or services produced, with detailed criteria for micro, cottage, small, medium, and large industries.

2.1.  Industry to be Registered for Operation

An Individual isn’t authorized to establish or operate an industry in Nepal without prior registration. If an industry intends to relocate its production facilities to a new location without seeking separate registration as an independent industry, it may establish and operate such relocated facility as a branch unit of the industry. The Industry must adhere to the procedural requirements for establishing a New industry upon establishing it as a branch unit. The branch unit in question is obligated to maintain records of its production and transactions, and promptly transmit such records to the primary office of the industry.

3.1.  Provisions and Procedure for Registration of Industries

Step 1: Submission of Application

Individuals or entities intending to establish certain industries must submit an application to the Department for registration. Industries requiring registration include those listed in Schedule-1 (requiring permission), those with foreign investment, those related to matters in Schedule-5 of the Constitution of Nepal, those falling under the jurisdiction of multiple provinces, and those involved in academic consultancy services on diplomatic affairs.

Step 2: Industries under Provincial or Federal Administration

The Provincial Government is responsible for administering industries not falling under the categories mentioned in Step 1, including registration, renewal, and regulation, except for those requiring permission. The Federation administers industries subject to registration, renewal, and regulation until the Provincial Government enacts laws governing such industries.

Step 3: Digital Submission

Applicants may submit application details and documents electronically (online), with digital signatures for authentication.

Step 4: Processing of Application

Upon receipt of an application, if any required details or documents are missing, the industry registration body notifies the applicant to provide them within ninety days. If the applicant fails to comply or does not meet the Act’s requirements, the registration body may reject the application, providing written reasons within five days.

Step 5: Issuance of Industry Registration Certificate

If the submitted application contains all necessary details and documents, the industry registration body registers the industry and issues a registration certificate within five days. It includes details such as the issuance date, commencement of commercial activities, compliance terms, and any other specified conditions. Micro-industries may apply for registration within one year of operation.

4.1. Permission to be obtained by the Board before Registration

It is imperative to obtain permission from the Board prior to registering major industries under the Industrial Enterprises Act. Individuals intending to register such industries must submit an application to the Board through the industry registration body, adhering to the prescribed format and providing requisite details. Upon review of the application and associated documents, if found complete, the industry registration body is obligated to forward the matter to the Board within seven days, accompanied by its opinion for decision-making.

The Board, in turn, is mandated to make a decision regarding permission for industry registration within thirty days of receiving the application. Subsequently, the Department is tasked with issuing a permit, along with notification of the decision, to the applicant within five days of the Board’s ruling. Upon receipt of the permit, the applicant is required to apply for industry registration within the specified timeframe indicated therein; failure to do so renders the permit null and void.

4.2. Approval Required for Amendment and Changes

Starting with the relocation of an industry, it’s mandated that any such move requires formal approval, particularly when shifting across provincial boundaries. Similarly, any modifications to an industry’s capital, capacity, or objectives necessitate prior approval from the industry registration body. Notably, micro-enterprises and cottage industries with limited capital are exempted from certain approval requirements.

5. Cancellation of Registration of Industry

In instances where an industry becomes inoperable due to any circumstance, a formal application may be submitted to the relevant industry registration authority seeking the cancellation of its registration.

Upon receipt of an application, and subsequent determination that the concerned industry has satisfied its governmental obligations, including tax and other liabilities, the industry registration authority shall proceed to cancel the registration of said industry in accordance with prescribed procedures.

In situations where an industry has undergone insolvency proceedings pursuant to existing legal statutes, the prevailing insolvency laws shall govern. In the event of liquidation, the appointed liquidator is required to notify the relevant industry registration authority accordingly.

6. Classification of Industries in Nepal

Industries are classified in Nepal into several categories based on criteria of Nature of Goods and Services Produced and the amount of capital investment:

  1. Micro-industry:
    • Fixed capital not exceeding two million rupees (excluding house and land).
    • Entrepreneur involved in operation and management.
    • Maximum of nine workers, including the entrepreneur.
    • Annual transaction of less than ten million rupees.
    • Capacity of electric energy, fuel, or other oil engine consumption not exceeding twenty KW.
  2. Cottage industry:
    • Based on traditional skills and technology.
    • Labour-oriented, using specific skills or local raw materials, technology, arts, and culture.
    • Capacity of electric energy consumption up to fifty KW.
    • Includes industries mentioned in Schedule-2.
  3. Small industry:
    • Fixed capital not exceeding one hundred fifty million rupees (other than micro-enterprise and cottage industry).
  4. Medium industry:
    • Fixed capital exceeding one hundred fifty million rupees but not exceeding five hundred million rupees.
  5. Large industry:
    • Fixed capital exceeding five hundred million rupees.

Industries are also classified based on the nature of goods or services produced:

  1. Energy-based industry (Schedule-3).
  2. Manufacturing industry.
  3. Agriculture and forest product-based industry (Schedule-4).
  4. Mining industry.
  5. Infrastructure industry (Schedule-5).
  6. Tourism industry (Schedule-6).
  7. Information technology, communication technology, and information dissemination technology-based industry (Schedule-7).
  8. Service industry (Schedule-8), producing or providing services.

7. Constitution of Industry and Investment Promotion Board

The Members that constitute the Industry and Investment Promotion Board are as follows:

(a) Minister or Minister of State for Industry, Commerce and Supplies – Chairperson

(b) Member, National Planning Commission (responsible for the industry sector) – Member

(c) Governor, Nepal Rastra Bank – Member

(d) Secretary, Ministry (responsible for matters of industries) – Member

(e) Secretary, Ministry of Finance – Member

(f) Secretary, Ministry of Labour, Employment and Social Security – Member

(g) Secretary, Ministry of Land Management, Cooperatives and Poverty Alleviation – Member

(h) Secretary, Ministry of Forest and Environment – Member

(i) Chief Executive Officer, Investment Board of Nepal – Member

(j) Joint Secretary, Industry and Investment Promotion Division, Ministry – Member

(k) Chairperson, Federation of Nepal Chamber of Commerce and Industry – Member

(l) Chairperson, Confederation of Nepalese Industries – Member

(m) Chairperson, Federation of Nepal Cottage and Small Industries – Member

(n) Chairperson, Women Entrepreneurs Federation – Member

(o) Two persons including at least one woman entrepreneur nominated by the Ministry from experts in the industry sector – Member

(p) Director General, Department of Industry – Member secretary

The Functions, Duties and Powers of Industry and Investment Promotion Board are:

  1. Advising the government on policies for industrial promotion, investment protection, and industrialization.
  2. Evaluating and recommending reforms to the industrial framework and operations.
  3. Advising on foreign investment and technology transfer policies within legal parameters.
  4. Recommending policies for industrial pollution control.
  5. Assessing industrial development and proposing necessary steps to the government.
  6. Resolving entrepreneurs’ grievances and providing guidance to relevant bodies.
  7. Advising the government on alterations to industrial levels, classifications, and nature.
  8. Conducting studies and research to enhance domestic and foreign investment.
  9. Creating a competitive industrial environment in coordination with various sectors.

Industrial Enterprises Act has also provisioned for the Provincial Industry and Investment Promotion Board under Provincial Law to promote investment in industries registered and operated in the Province.

8. Conclusion

The Act has established the Industry and Investment Promotion Board with various government and business representatives for developing industrial policies, investment promotion and implementation. The Act has also developed Provincial Industry and Investment Promotion Board for promoting investment at the Provincial Level.

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