Limits of Authority: Supreme Court Curtails OCR’s Power Over Company General Meetings

Published in New Business Age

Can the Office of the Company Registrar (OCR) invalidate a company's general meeting? Must a general meeting be convened solely at the behest of a company’s board of directors? And to what extent can the OCR interfere in the internal affairs of a company?

These questions have long sparked debate. A recent landmark ruling by the Supreme Court of Nepal in the case of Hotel Jungle Camp vs. Office of Company Registrar has provided much-needed clarity. The Court held that the OCR lacks the authority to invalidate a general meeting of shareholders, provided that all legal procedures for convening the meeting have been followed.

In the case at hand, the majority shareholders had repeatedly requested the board of directors to call an extraordinary general meeting. The agenda included both routine business matters and a motion to remove directors for cause. However, the board—dominated by minority shareholders—refused to convene the meeting. The chairman, representing the minority shareholders, declined to act out of concern that he would be removed from his position.

Unable to gain traction through the board, the majority shareholders approached the OCR, requesting that it instruct the company to hold the extraordinary general meeting. The OCR did so, but the chairman, holding sway over the board, continued to block the meeting. Ultimately, the majority shareholders convened the meeting themselves, issuing formal notice to all shareholders, including the chairman.

At the meeting, resolutions were passed—most notably, the removal of the chairman and managing director for alleged misappropriation of company funds. The removed officials subsequently petitioned the OCR, seeking to nullify the decisions of the extraordinary general meeting. The OCR sided with them, arguing that shareholders had no authority to call the meeting themselves.

Challenging this decision, the majority shareholders filed a writ petition at the Supreme Court. The Court ruled decisively in their favor, affirming that shareholders who have properly requisitioned a general meeting retain the right to convene it if the company fails to act. Furthermore, the Court emphasized that the legality of a general meeting cannot be questioned if procedural requirements have been met. It noted that any concerns shareholders may have should be raised within the meeting itself, not afterward.

Regarding the right (locus standi) of shareholders to file a writ petition on company-related matters, the Court clearly affirmed that shareholders do hold standing, especially when their direct economic interests are at stake and when denial of their claims could lead to irreparable harm.

Ultimately, the Court reaffirmed a fundamental legal principle: the OCR is an administrative body tasked with registering companies, maintaining records, and ensuring compliance with the Companies Act. It does not possess judicial authority. Matters involving company law disputes fall within the exclusive jurisdiction of the Commercial Bench of the High Court.

This ruling serves as a significant precedent, reinforcing the autonomy of shareholders and establishing boundaries for administrative overreach in corporate governance.