KATHMANDU — In a major blow to powerful financial elites trying to pull strings from both sides of the aisle, the Supreme Court of Nepal has firmly shut the door on dual shareholding practices.
The division bench, consisting of Justices Kumar Regmi and Bal Krishna Dhakal, dismissed a high-profile writ petition on Thursday, May 21, 2026. The top court ruled that individuals who hold both promoter and public shares inside a bank or financial institution cannot contest the board of directors’ elections under the ordinary public category.
By upholding the strict regulatory authority of Nepal Rastra Bank, the central bank, this judicial intervention effectively redraws the corporate boundaries of the domestic banking sector.
The Core Conflict: One Investor, Two Hats
The legal battle began when Ratneshwar Prasad Sharma, a prominent investor in Citizens Bank International, filed a lawsuit after the bank’s election committee disqualified his candidacy for a public director seat. The committee made this decision because Sharma also owned promoter shares in the same institution.
Promoter shares represent the initial capital of a bank and are subject to stringent regulatory restrictions, while public shares are held by ordinary retail investors. Sharma had initially secured a temporary court order last November, which grounded the bank’s scheduled elections to a halt.
However, the final verdict completely cleared the legal air. The Supreme Court explicitly stated that letting an investor with initial promoter backing grab a seat reserved for public representatives creates a severe conflict of interest.
Protecting the Depositor Over the Promoter
The primary argument guiding the bench centred on public trust. Because commercial banks manage billions of Rupees in ordinary public deposits, the court noted that internal corporate governance must remain airtight.
Allowing dual owners to take over public seats dilutes the specific representation that small-scale retail investors deserve. This strategic move by the court prevents powerful groups from establishing shadows of cross-influence across boardrooms.
Key Takeaways:
- Strictly Separated: Investors cannot switch categories to contest public seats if they own promoter shares.
- Central Bank Vindicated: NRB’s corporate governance directives hold total legal power.
- Boardroom Shakeup: Banks must audit their board candidates immediately to avoid election disqualifications.
This decision forces a much-needed cleanup of governance practices. For years, major corporate houses in Nepal have routinely navigated structural loopholes to secure multiple seats on the boards of premier financial institutions, blending promoter control with public positions.
A Clearer Future for Banking Governance
Moving forward, this ruling simplifies board compositions. Promoters can no longer use their split-equity positions to crowd out genuine independent voices or retail-investor advocates.
Legal experts point out that the Supreme Court has sent a crystal-clear message to the corporate community. The corporate veil will not protect those attempting to dominate public institutions through back-door manoeuvres.
As multiple commercial banks prepare for their upcoming annual general meetings, nominating committees will now have to apply strict filters to their candidate lists. This landmark verdict will ultimately boost retail investor confidence, ensuring that the people looking after public wealth are truly representing the public interest.
