Regulatory Compliance Checklist for Public and Private Companies in Bhutan

Tandin Wangchuk

Introduction

This regulatory compliance checklist is designed in accordance with the Companies Act of Bhutan, 2016. It aims to assist both start-ups and established companies in maintaining legal compliance. The document provides comprehensive checklists covering key aspects of company operations, including incorporation, governance, financial reporting, and shareholder relations.

The checklist is divided into two sections, addressing the specific requirements of private and public companies. While this document serves as a guideline, it is recommended to consult a legal professional for specific advice. This checklist is not a substitute for legal counsel, and no responsibility is assumed for its misuse.

How to Use This Checklist

  • Private Company Checklist: Outlines the legal obligations that must be fulfilled by private companies under the Companies Act of Bhutan, 2016.
  • Public Company Checklist: Provides detailed requirements for public companies, including additional governance and disclosure obligations.

Each section operates independently, allowing users to navigate to the relevant topic without interdependence on other sections. Where applicable, references to specific sections of the Companies Act are provided to facilitate further exploration of legal provisions.

Part I: Regulatory Compliance Checklist for Private Companies

A. Incorporation

  • Minimum of two directors required
  • Articles of Incorporation must be adopted and submitted for regulatory approval
  • Application for incorporation submitted to the Registrar, accompanied by the consent of initial directors
  • Payment of prescribed registration fees
  • Company name must end with “Private Limited” (Pvt. Ltd)

B. Shares

  • Shares cannot be issued to minors or individuals declared of unsound mind
  • Share certificates must be issued within one month of allotment
  • Register of shareholders and debenture holders must be maintained
  • Transfers of shares upon the death of a shareholder must be completed within one month

C. Directors

  • Directors must not hold directorship in more than three public companies
  • Written consent of directors must be filed with the Registrar
  • Directors must disclose any conflicts of interest during board meetings
  • Loans to directors or transactions involving personal interests must receive board approval

D. Board Meetings

  • At least two board meetings must be held annually
  • Meeting minutes must be recorded and signed by the chairperson
  • Quorum for meetings requires two-thirds of directors

E. General Meetings

  • Annual general meetings must be conducted within six months following the end of the fiscal year
  • Shareholders must receive advance notice of meetings
  • Meeting minutes must be formally recorded and retained

F. Dividends

  • Dividends can only be distributed from distributable profits
  • Dividends must be paid within 30 days of declaration

G. Management and Administration

  • Chief Executive Officer (CEO) must be appointed for a term not exceeding five years
  • Companies with paid-up capital exceeding Nu. 100 million must appoint a company secretary
  • All official documents and publications must display the registered name and office address

H. Financial Statements and Audit

  • Financial statements must conform to the Accounting and Auditing Standards Board of Bhutan
  • Financial statements must be approved by the Board and authenticated by directors
  • Annual financial reports must be filed with the Registrar

Part II: Regulatory Compliance Checklist for Public Companies

A. Incorporation

  • Minimum of three directors and appointment of a company secretary
  • Submission of Articles of Incorporation for regulatory approval
  • Share capital must meet the minimum threshold prescribed by the Regulatory Authority

B. Shares

  • Shares must be offered to the public in dematerialized form
  • Public listing of securities must be conducted through the Securities Exchange
  • A prospectus must be approved by the Regulatory Authority prior to issuing shares

C. Directors

  • One-third of the board must consist of independent directors
  • Directors must not have outstanding insolvency or criminal convictions
  • Directors must declare conflicts of interest and abstain from related decisions

D. Board Meetings

  • Board meetings must occur at least four times annually
  • Directors must be notified in writing prior to meetings
  • Minutes must document director attendance and dissenting opinions

E. General Meetings

  • Public companies must hold annual general meetings by April 30th
  • Notices for general meetings must be issued 21 days in advance

F. Dividends

  • Dividends must not compromise the company’s net assets or capital reserves

G. Management and Administration

  • CEO appointments must be confirmed by shareholders at a general meeting
  • Public companies must maintain a comprehensive register of shareholders, debenture holders, and directors
  • All statutory registers must be accessible for shareholder inspection

H. Financial Statements and Audit

  • Public companies must submit audited financial statements to the Registrar by December 31st
  • Financial statements must be declared at the annual general meeting and signed by the chairperson
  • Annual returns must be filed with the Registrar by May 31st

Conclusion

This checklist serves as a valuable tool for ensuring legal compliance under the Companies Act of Bhutan, 2016. By adhering to these guidelines, companies can safeguard their operations, enhance governance, and foster shareholder confidence. For complex issues, professional legal consultation at our firm is strongly advised.