NEPSE restructuring requires dissolution of current board, Cap on shareholding at 5pc per institution: Study committee

KATHMANDU: A high-level study committee formed to restructure the Nepal Stock Exchange (NEPSE) has recommended dissolving the existing board of directors and forming a new, expert-led board as a first and mandatory step toward comprehensive reform of the country’s sole stock exchange.

The recommendation is contained in a restructuring report submitted on Monday to Finance Minister Rameshwar Khanal, according to the Ministry of Finance. The committee has concluded that meaningful reform of NEPSE is not possible without dismantling the current governance structure and replacing it with a professional, technically competent board.

The government had constituted the high-level restructuring study committee on Mangsir 3 to assess NEPSE’s ownership structure, governance framework, and operational efficiency. Ministry spokesperson Tank Prasad Pandey confirmed that the committee has completed its 50-day study and formally handed over the report.

Dissolution of current board seen as essential

The report states that the current NEPSE board must be dissolved to implement the restructuring recommendations. It proposes the formation of a new board comprising experts nominated from shareholder institutions, or alternatively, professionals directly deputed by the Ministry of Finance.

According to the committee, implementation of the reform agenda will require a dedicated team with technical capacity and decision-making authority. Until the restructuring process is completed, the NEPSE board itself could function as that dedicated team, provided it is reconstituted with qualified experts.

“The existing structure is not suitable for executing a complex restructuring process,” a finance ministry source said, quoting the report. “Either the ministry should send experts directly, or shareholder institutions should nominate technically competent professionals.”

Government share sale and ownership cap

A key recommendation of the report relates to government shareholding and ownership diversification. The committee has proposed that no single institution or group should be allowed to hold more than 5 percent of NEPSE shares after restructuring.

Currently, the government holds 58.66 percent of NEPSE shares. The committee has recommended that this stake be sold through an open bidding process, following a full due diligence audit and valuation of NEPSE.

The report offers two options regarding government ownership:

• The government retains 25 percent ownership and sells the remaining shares, or
• The government exits completely by selling 100 percent of its shareholding.

In addition, the committee has suggested allocating 15 to 25 percent of shares to a strategic partner, subject to regulatory safeguards.

Priority to domestic institutions

For domestic institutional investors, the committee has clearly recommended that no local entity should be allowed to own more than 5 percent of NEPSE shares. Among domestic institutions, commercial banks have been given first priority as potential investors.

At present, NEPSE’s shareholding structure includes:

• Government of Nepal: 58.66%
• Nepal Rastra Bank: 9.51%
• Rastriya Banijya Bank: 11.23%
• Employees Provident Fund: 10%
• Laxmi Sunrise Bank: 5%
• Prabhu Bank: 5%
• Securities brokers: 0.6%

The committee has flagged this ownership concentration as one of the structural weaknesses affecting NEPSE’s independence, governance quality, and reform capacity.

The restructuring study committee was chaired by Prakash Jung Thapa, former chairperson of the Nepal Accounting Standards Board. Members included Murahari Parajuli from NEPSE, Subash Chandra Ghimire, Director at Nepal Rastra Bank, and Rupesh KC, Deputy Executive Director at the Securities Board of Nepal. Former SEBON Executive Director Niraj Giri served as an expert member. The committee’s member secretary was Sharad Niraula, Under Secretary at the Ministry of Finance.

The report is expected to shape the government’s next policy decisions on capital market reform, ownership restructuring, and governance overhaul at NEPSE, at a time when investor confidence, market depth, and institutional credibility remain key concerns in Nepal’s capital market.