A Comprehensive Guide to Company Registration in Nepal

Choosing between a private vs public company in Nepal is one of the first strategic decisions foreign companies must make.
The choice affects ownership, capital raising, compliance, control, and long-term scalability.

Nepal has modernized its corporate framework to attract foreign investment.
But the structure you choose determines how smoothly you enter the market.

This guide is written for foreign companies.
It explains the legal, operational, and strategic differences clearly.
No jargon. No guesswork.

By the end, you will know:

• Which structure fits your business goals
• How registration works in practice
• What regulators actually expect

Understanding Company Structures in Nepal

Under Nepalese law, companies are primarily categorized as private companies and public companies.

Both are governed by the Companies Act, 2006 and administered by the Office of the Company Registrar (OCR).

However, their intent is different.

• Private companies are designed for closely held businesses.
• Public companies are built for capital markets and large-scale growth.

This distinction matters for foreign investors.

What Is a Private Company in Nepal?

A private company in Nepal is the most common structure used by foreign investors.

It is suitable for:

• Wholly owned subsidiaries
• Joint ventures
• Back-office and support operations
• Technology and service companies

Key Characteristics of a Private Company

• Minimum shareholders: 1
• Maximum shareholders: 50
• Shares are not publicly traded
• Transfer of shares is restricted
• No minimum paid-up capital requirement (sector-specific rules may apply)

Why Foreign Companies Prefer Private Companies

Private companies offer flexibility.
They also provide stronger control over governance and decision-making.

Most foreign direct investment (FDI) projects in Nepal use this structure.

What Is a Public Company in Nepal?

A public company in Nepal is designed for businesses that intend to raise capital from the public.

It is typically used by:

• Banks and financial institutions
• Insurance companies
• Hydropower and infrastructure projects
• Companies planning future IPOs

Key Characteristics of a Public Company

• Minimum shareholders: 7
• No maximum shareholder limit
• Shares may be offered to the public
• Higher disclosure and compliance standards
• Mandatory minimum paid-up capital

Public companies are heavily regulated.

They are not the default choice for market entry.

Private vs Public Company in Nepal: Core Differences

The table below highlights practical differences foreign companies care about.

Insight:
For 90% of foreign investors, a private company is the right starting point.

When Should a Foreign Company Choose a Private Company?

A private company is ideal if your goal is operational efficiency.

Choose this structure if you plan to:

1. Establish a Nepal subsidiary
2. Run a cost center or back-office
3. Test the Nepal market
4. Maintain tight ownership control

It is also easier to convert a private company into a public company later.
The reverse is not practical.

When Does a Public Company Make Sense?

A public company structure makes sense only when:

• Large capital requirements exist
• Public fundraising is planned
• Sector regulations require it

This is common in:

• Banking
• Insurance
• Energy
• Telecommunications

For most foreign service businesses, it is unnecessary.

Legal Framework Governing Companies in Nepal

Company registration and governance are regulated by:

• Companies Act, 2006
• Foreign Investment and Technology Transfer Act (FITTA), 2019
• Industrial Enterprises Act, 2020
• Income Tax Act, 2002

Foreign investors must also comply with approvals from:

• Department of Industry (DOI)
• Nepal Rastra Bank (NRB)

Understanding this framework strengthens compliance credibility.

Company Registration Process in Nepal (Step-by-Step)

Whether private or public, the registration process follows a structured path.

Step-by-Step Overview

1. Name reservation with OCR
2. Preparation of MOA and AOA
3. FDI approval (for foreign investors)
4. Company registration certificate
5. PAN registration with tax authority
6. Bank account and capital injection

Each step has timelines and documentation requirements.

Private companies usually complete registration faster.

Shareholding and Ownership Rules for Foreign Companies

Foreign ownership is permitted in most sectors.

However:

• Some sectors are restricted
• Minimum capital thresholds may apply
• Repatriation rules must be followed

Private companies allow flexible shareholding structures.
Public companies require broader shareholder participation.

Capital Requirements Explained

One major difference in the private vs public company in Nepal debate is capital.

Private Company Capital

• No statutory minimum (general rule)
• Sector-specific minimums may apply
• Capital can be injected gradually

Public Company Capital

• Mandatory minimum paid-up capital
• Capital must be fully disclosed
• Subject to regulatory scrutiny

For foreign companies, private companies reduce upfront capital pressure.

Governance and Compliance Obligations

Compliance intensity differs significantly.

Private Company Compliance

• Annual filings with OCR
• Board resolutions
• Financial statements
• Tax compliance

Public Company Compliance

• Enhanced disclosures
• Independent directors
• Public reporting obligations
• Regulatory audits

This difference impacts long-term costs.

Taxation Considerations

Both structures are subject to:

• Corporate income tax
• Withholding taxes
• VAT (if applicable)

However, public companies face greater scrutiny.

Private companies allow:

• Easier tax planning
• Simpler audits
• Lower administrative burden

Employment and Operational Flexibility

Private companies offer operational freedom.

They can:

• Hire staff easily
• Set internal policies
• Scale operations quietly

Public companies face transparency obligations that may restrict flexibility.

Strategic Comparison: Which Structure Aligns With Your Goals?

Ask these questions:

• Do you need public capital now?
• Is regulatory exposure a concern?
• How fast do you want to start operations?

For most foreign companies entering Nepal, the answer points to a private company.

Common Mistakes Foreign Investors Make

Avoid these pitfalls:

• Choosing a public company too early
• Underestimating compliance costs
• Ignoring sector-specific rules
• Structuring ownership incorrectly

A proper advisory approach prevents costly restructuring.

Private vs Public Company in Nepal: Summary for Foreign Companies

• Private companies offer flexibility and speed
• Public companies offer scale but add complexity
• Conversion is possible later
• Start simple, then scale

This approach reduces risk.

Conclusion: Making the Right Choice

Choosing between a private vs public company in Nepal is a strategic decision.
It affects control, compliance, and capital efficiency.

For most foreign companies, a private company is the smartest entry vehicle.
It balances regulatory simplicity with future scalability.

Getting the structure right from day one saves time, money, and reputational risk.

Frequently Asked Questions (FAQ)

Is a private company better for foreign investors in Nepal?

Yes. Most foreign investors choose private companies due to lower compliance and greater control.

Can a private company be converted into a public company later?

Yes. Nepalese law allows conversion after meeting regulatory requirements.

What is the minimum capital for company registration in Nepal?

Private companies generally have no fixed minimum. Public companies do.

Are foreign directors allowed in Nepalese companies?

Yes. Foreign nationals can be directors, subject to visa and regulatory compliance.

How long does company registration take in Nepal?

Private company registration typically takes a few weeks, depending on approvals.