2026 Outlook: Trends in Foreign Investment in Nepal

If you are evaluating a private vs public company in Nepal, you are already thinking strategically.

The structure you choose will shape your tax exposure, governance burden, capital strategy, and even your exit options. For foreign companies entering Nepal in 2026, this decision is not administrative. It is foundational.

Nepal is experiencing renewed foreign investment interest. Policy reforms, sector liberalization, SEZ incentives, and digital infrastructure growth are accelerating cross-border capital flows. Yet many foreign investors still ask the same question:

Should we incorporate a private limited company or go public?

This guide provides a comprehensive answer grounded in Nepalese law, regulatory practice, and real investor behavior.

Nepal’s 2026 Foreign Investment Landscape: Why Structure Matters

Foreign investment in Nepal is primarily governed by:

• The Companies Act, 2006
• The Foreign Investment and Technology Transfer Act (FITTA), 2019
• The Industrial Enterprises Act, 2020
• The Income Tax Act, 2002
• Directives of Nepal Rastra Bank (NRB)

According to Nepal’s Department of Industry data, foreign investment commitments have consistently flowed into:

• Hydropower and energy
• Information technology
• Tourism and hospitality
• Manufacturing and SEZ industries
• Services and outsourcing

However, over 90% of foreign-backed entities register as private limited companies, not public companies.

Why?

Because structure determines:

1. Capital flexibility
2. Regulatory intensity
3. Shareholding restrictions
4. Disclosure obligations
5. Long-term scalability

Understanding the difference is critical before filing with the Office of Company Registrar.

Private vs Public Company in Nepal – Legal Framework Explained

Let us start with definitions under the Companies Act, 2006.

What Is a Private Limited Company in Nepal?

A private limited company:

• Restricts share transfer
• Limits number of shareholders (maximum 101)
• Cannot invite the public to subscribe to shares
• Requires minimum 1 director
• Has simplified compliance compared to public entities

It is the most common structure for foreign direct investment.

What Is a Public Limited Company in Nepal?

A public company:

• Can offer shares to the public
• Requires minimum 7 shareholders
• Requires minimum 3 directors
• Must comply with Securities Board of Nepal (SEBON) if listed
• Has stricter disclosure requirements

Public companies are often used for large infrastructure or capital-intensive sectors.

Core Differences at a Glance

Below is a practical comparison tailored to foreign investors.

For most foreign companies entering Nepal in 2026, a private limited company is operationally efficient and risk-controlled.

Why 2026 Favors Private Structures for Foreign Companies

Several macro trends support private company registration:

1. Controlled Market Entry

Foreign investors prefer to:

• Ring-fence liability
• Avoid unnecessary disclosure
• Maintain shareholder control

Private companies offer that control.

2. Compliance Cost Management

Public companies face:

• Mandatory prospectus requirements
• Annual general meeting strict timelines
• SEBON oversight if listed
• Greater auditing scrutiny

For early-stage foreign market entry, this can create avoidable overhead.

3. Sectoral Reality

Nepal’s growth sectors in 2026 include:

• IT outsourcing
• Cross-border service centers
• Hydropower development
• SEZ export manufacturing
• Digital fintech services

Most of these begin as privately structured entities.

When a Public Company Makes Strategic Sense

Despite higher compliance, public companies are ideal for:

• Large hydropower projects
• Infrastructure concessions
• Banking and financial institutions
• Insurance companies
• Large-scale industrial groups

Public listing allows access to Nepal’s capital market and retail investors.

If your investment exceeds NPR multi-billion levels and requires local capital mobilization, a public company may be necessary.

Compliance Comparison: What Foreign Investors Must Budget For

Private Company Compliance

• Annual return filing with OCR
• Tax filing under Income Tax Act 2002
• VAT registration if applicable
• Social Security Fund registration
• Board resolutions and statutory meetings

Public Company Compliance

Includes everything above, plus:

• Minimum capital requirements
• Prospectus approval
• Share allotment reporting
• SEBON filings (if listed)
• Public disclosure obligations

Compliance intensity is significantly higher.

Capital and Repatriation Considerations

Under FITTA 2019, foreign investors may repatriate:

• Dividends
• Loan interest
• Technology transfer royalties
• Sale proceeds

Both private and public companies can facilitate repatriation.

However, private companies often have cleaner dividend declaration structures due to simpler shareholding.

Public companies may face additional disclosure and minority shareholder complexities.

Taxation Perspective

Corporate tax rates under the Income Tax Act, 2002 generally stand at:

• 25% standard corporate tax
• Reduced rates for certain industries (e.g., hydropower incentives)
• SEZ tax holidays available under Industrial Enterprises Act

Tax treatment does not fundamentally differ between private and public companies.

But operational complexity often increases effective compliance cost for public entities.

Decision Framework for Foreign Companies

Here is a simplified decision checklist:

Choose a Private Company If:

• You want full ownership control
• Your shareholder base is small
• You are testing the Nepal market
• You do not need public capital
• You want lower compliance overhead

Choose a Public Company If:

• You need large-scale capital
• You plan to list shares
• You are entering regulated sectors
• You require local investor participation

2026 Sector Trends Influencing Structure Choice

IT and Outsourcing

Private companies dominate.

Foreign tech firms use Nepal as a delivery center with controlled shareholding.

Hydropower

Often structured as public companies due to capital intensity.

Manufacturing and SEZ

Usually private initially.

May convert to public once scaling.

Banking and Insurance

Public structure required.

Conversion Possibility: Private to Public

The Companies Act allows conversion from private to public company.

Foreign investors often:

1. Enter Nepal as a private entity
2. Stabilize operations
3. Raise capital
4. Convert to public
5. Pursue IPO

This staged approach minimizes early risk.

Risk Architecture: What Most Investors Overlook

Many foreign companies underestimate:

• Share transfer restrictions
• Director liability exposure
• Minority shareholder risk
• Compliance penalties
• Regulatory delays

A private structure allows tighter governance architecture.

Public companies increase scrutiny and transparency requirements.

For first-time market entry, strategic risk containment is crucial.

Cost Comparison Overview

While exact costs vary, the relative comparison is clear:

In early years, private structures are more capital efficient.

2026 Forecast: Will Public Companies Increase?

Nepal’s capital market is growing.

If hydropower, green energy, and infrastructure investments surge, public registrations may rise.

However, SME-driven FDI will continue favoring private limited companies.

The structural reality of Nepal’s market supports private entry, public scaling.

Frequently Asked Questions

1. Can a foreigner own 100% of a private company in Nepal?

Yes. Under FITTA 2019, 100% foreign ownership is permitted in most sectors, except restricted industries.

2. Is there a minimum capital requirement?

There is no strict statutory minimum for private companies, but practical FDI thresholds apply depending on sector.

3. Can a private company later issue shares publicly?

Yes. It must convert into a public company first under the Companies Act.

4. Are tax rates different for public companies?

Generally no. Corporate tax applies equally, unless sector incentives differ.

5. Which structure is faster to register?

Private limited companies are significantly faster and simpler to incorporate.