KATHMANDU: Nepal’s Institute of Chartered Accountants of Nepal (ICAN) has issued a new directive allowing professional accounting and audit firms to merge under a formal legal framework for the first time, aiming to create larger and more competitive firms.

Until now, firm mergers had taken place only informally. Under the Professional Accounting Firm Merger Directive 2083, firms can either merge through absorption, where one firm acquires another, or through consolidation, where two or more firms combine to form a new entity.

To qualify, firms must be registered with ICAN, have valid practicing certificates, cleared tax liabilities and outstanding dues, and secure approval from partners representing at least two-thirds of the firm’s profit-sharing interests.

ICAN has streamlined the merger process, requiring due diligence and regulatory approval, with new firms to be registered within 15 days after meeting all requirements. The regulator will also offer incentives, including fee concessions, priority training and protection of merged firms’ names, while launching a portal to help firms find merger partners.

Former ICAN President Nil Bahadur Saru Magar said consolidation is essential to build firms capable of handling large corporate, government and donor-funded assignments that are currently dominated by foreign firms.

According to ICAN, Nepal has around 900 chartered accountancy firms, but only about 200 operate as partnerships, highlighting significant room for consolidation.