Hire Purchase Company in Nepal: Procedure for Registration

1. Introduction of Hire-Purchase Company

Hire Purchase Companies offer installments as payment plans for purchasing larger goods where the purchasing individual pays a particular deposit upfront and makes regular installment payments for Fixed Period.

The Ownership is vested upon the Hire Purchase Company until the Final Payment after which the Ownership transfers to the Buyer. Hire Purchase Companies are specialized Companies that require particular authorization after its establishment.

2. Requirements for Registration of Hire Purchase Company

The Company to be considered having the ability to prepare Hire-Purchase Contracts must have obtained approval from the Office of Company Registrar and consequently the Nepal Rastra Bank for the issuance of Loans. Further, Such Companies can tie up with Private Banks and Financial Institutions for the issuance of Hire-Purchase Contracts. However, a minimum Paid Up Capital required for the hire-purchase company is to exceed NPR 30,00,00,000/-

3. Procedure for Registration of Hire-Purchase Company in Nepal

Step 1: Registration of Company

Prior to establishing a company, individuals must verify the availability of their desired company name at the Office of Company Registrar (OCR) through their website. Once validated, necessary paperwork must be submitted for registration, including a prepared Memorandum of Association and Articles of Association in compliance with the Company Act 2063.

The OCR then conducts a review of submitted documents, contacting individuals to rectify any significant mistakes. Upon successful examination, the OCR issues a Company Registration Certificate, and further registration for PAN/VAT is required at the Inland Revenue Office.

Step 2: Obtain Authorization from Nepal Rastra Bank

Upon the registration of the Company from the Office of Company Registrar, an authorization is required from the Nepal Rastra Bank for reimbursing funds for the purposes of Loans done through Hire-Purchase Contracts.

Step 3: Issuance of Hire-Purchase Contracts

A Hire-Purchase Contract shall be deemed to be concluded if:

  1. The hirer has the right to possess and use the goods provided by the owner, contingent upon paying rent installments periodically.
  2. The hirer is granted the option to purchase the goods according to the terms outlined in the contract.
  3. Ownership of the goods will be transferred to the hirer upon completion of payment of the final installment.
  4. The hirer retains the right to terminate the contract at any time before ownership is transferred.

4. Documents Required for Hire-Purchase Company Registration

The Documents deemed necessary for Hire-Purchase Companies to be authorized by the Nepal Rastra Bank are:

  1. Documents for Company Registration such as Memorandum and Articles of Association, Company Registration Certificate, and PAN number.
  2. Details about the office space, whether owned or rented, including rental agreement if applicable.
  3. Hire-Purchase Policy of the Company
  4. Documentation proving the minimum paid-up capital.
  5. Insurance and security arrangements.
  6. Board of Directors’ committee decision and power of attorney for hire purchase loan transactions, subject to approval by Nepal Rastra Bank.
  7. Evidence of the company and its shareholders not being blacklisted.
  8. Tax Clearance Details from IRD
  9. Additional Documents as required.

5. Hire-Purchase Contracts in Nepal

The hire-purchase contract includes inherent terms and conditions, regardless of what is explicitly stated in the contract:

  1. The hirer has the right to possess and use the goods without interruption.
  2. The goods must be free from any charges or claims when transferred to the hirer.
  3. The hirer should have the opportunity to compare the goods with a sample.
  4. The owner must have the right to sell the goods when transferring them to the hirer.
  5. The goods should be of satisfactory quality at the time of transfer.
  6. If the hirer specifies a particular purpose for hiring the goods, the owner guarantees that the goods or their quality will be suitable for that purpose.

6. Matters to be Specified in Hire-Purchase Contract

The Specified Matters that must be included in a Hire-Purchase Contract are:

  1. Description of the goods being hired.
  2. Hire-purchase price and cash price of the goods.
  3. Start date of the contract.
  4. Amount and number of installments to be paid by the hirer.
  5. Due dates for installment payments and payment methods.
  6. Details of where payments are to be made.

Additionally, if installment payments can be made through methods other than cash, this should be briefly described in the contract. Failure to specify any of these terms may allow the hirer to seek rescission of the contract, and if the court deems the absence of such terms detrimental to the hirer, it may rescind the contract or issue other appropriate orders.

7. Conclusion

Hire Purchase Companies offer installment plans for purchasing larger goods, with ownership transferring to the buyer after final payment. The Registration Process of Hire-Purchase Companies requires verifying the company name, submitting necessary paperwork, obtaining authorization from Nepal Rastra Bank, and issuing hire-purchase contracts. Hire-purchase contracts guarantee the hirer’s right to possess and use the goods, with specified terms such as description of goods, prices, installment details, and payment methods.

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