Banking Discipline Tightened: SC Rules Large Shareholders Accountable for Unpaid Loans.
The Supreme Court of Nepal has upheld a crucial Nepal Rastra Bank (NRB) regulation allowing the blacklisting of shareholders holding 15% or more stake in a company that defaults on bank loans. The constitutional bench ruled that large shareholders are decision-makers, not just passive investors, and cannot use the "Limited Liability" shield to escape accountability for unpaid debts.
The Constitutional Bench of the Supreme Court, presided over by Chief Justice Prakashman Singh Raut, has issued a definitive ruling upholding Nepal Rastra Bank’s (NRB) regulatory authority to blacklist shareholders holding a 15% or greater equity stake in defaulting corporate entities. In dismissing the writ petition, the Court clarified that such shareholders possess substantial "controlling interest" and are instrumental in a company's strategic decision-making and governance. The judgment reinforces the legal doctrine of "Piercing the Corporate Veil," ensuring that the principle of limited liability is not exploited to facilitate strategic defaults or jeopardize the stability of the financial system. By aligning domestic regulations with international standards seen in jurisdictions like the UK and India, the verdict establishes a more transparent and accountable framework for corporate debt recovery in Nepal.