A Guide to Industries Off-Limits for Foreigners in Nepal

Private vs public company in Nepal is often the first comparison foreign investors make when exploring market entry. But structure alone is not the real gatekeeper. Sector eligibility is. Nepal allows foreign investment only in specific industries, regardless of whether you form a private or public company. This guide clarifies which sectors are off-limits, why those restrictions exist, and how foreign companies can still enter Nepal strategically and compliantly.

If you are planning FDI, this article helps you avoid dead ends before capital is committed.

Why “Private vs Public Company in Nepal” Is Only Half the Question

Foreign investors often assume that choosing the right company type unlocks the market. In Nepal, the industry you choose matters more than the structure you choose.

Both private and public companies can receive foreign investment. But only if the underlying activity is permitted.

Key reality:
Nepal regulates what foreigners can do, not just how they incorporate.

Understanding Private vs Public Company in Nepal for Foreign Investors

Before diving into restricted sectors, let’s anchor the basics.

What Is a Private Company in Nepal

A private company in Nepal is the most common FDI vehicle.

Typical characteristics:

• Up to 101 shareholders
• No public share issuance
• Faster incorporation
• Preferred for subsidiaries and cost centers

Most foreign-owned Nepali companies are private companies.

What Is a Public Company in Nepal

A public company is designed for scale and capital markets.

Typical characteristics:

• Minimum seven shareholders
• Can issue shares to the public
• Higher compliance burden
• Often used for infrastructure or regulated sectors

Foreign investment is allowed in public companies, subject to sector rules.

The Real Gatekeeper: Nepal’s Foreign Investment Restrictions

Nepal maintains a Negative List of industries where foreign investment is prohibited or restricted. This list applies equally to private and public companies.

No structure can bypass it.

Industries Completely Off-Limits to Foreign Investment in Nepal

The following sectors are closed to foreign investors under Nepal’s foreign investment framework.

1. Small-Scale and Cottage Industries

Industries reserved for local entrepreneurship include:

• Traditional handicrafts
• Cottage manufacturing
• Small domestic production units

These are protected to preserve local livelihoods.

2. Retail Trade (Except Large-Scale or Export-Oriented)

Foreigners cannot engage in:

• Small retail shops
• Local trading businesses
• Domestic distribution networks

Large wholesale or export-oriented trading may qualify, but retail does not.

3. Personal Service Businesses

The following are restricted:

• Hair salons and beauty parlors
• Tailoring shops
• Laundry services

These are considered local employment sectors.

4. Primary Agriculture for Domestic Market

Foreign investment is restricted in:

• Traditional farming
• Small-scale agriculture for local consumption
• Animal husbandry for domestic supply

Commercial agribusiness for export may be evaluated separately.

5. Local Media and Cultural Content

Foreigners cannot invest in:

• Local newspapers
• FM radio stations
• Cultural media with domestic focus

This protects cultural sovereignty.

Partially Restricted Sectors Requiring Special Approval

Some sectors are not banned, but heavily regulated.

Examples Include:

• Defense-related manufacturing
• Security printing
• Arms and ammunition production

These require cabinet-level approvals and are rarely granted.

Private vs Public Company in Nepal: Sector Eligibility Comparison

Insight:
A public company does not override sector restrictions. It only changes capital-raising mechanics.

Why Nepal Restricts Certain Industries

Nepal’s policy objectives are clear.

Primary goals include:

• Protecting micro-entrepreneurs
• Preserving cultural industries
• Preventing foreign dominance in local trade
• Safeguarding national security

These principles shape the negative list.

Common Mistakes Foreign Companies Make

Many foreign investors fail in Nepal before incorporation.

Typical errors include:

• Choosing a restricted sector first
• Incorporating before sector confirmation
• Assuming nominee structures bypass rules
• Relying on informal local advice

These mistakes cause sunk costs and regulatory rejection.

Strategic Alternatives When a Sector Is Restricted

A restricted sector does not always mean “no entry.”

Smart alternatives exist.

1. Representative Office Model

Best for:

• Market research
• Relationship building
• Brand presence

No revenue generation is allowed.

2. Service Export Model

Foreign companies can:

• Employ Nepali staff
• Serve overseas clients
• Avoid domestic sector restrictions

This is common in IT and back-office operations.

3. Local Partner With Compliance Boundaries

In rare cases:

• Nepali entity operates restricted activity
• Foreign entity provides technology or services
• Revenue flows offshore

This requires careful structuring.

Private vs Public Company in Nepal for FDI-Friendly Sectors

Foreign investors commonly succeed in these areas:

• IT and software services
• Business process outsourcing
• Manufacturing for export
• Hydropower and energy
• Tourism infrastructure

Sector eligibility always comes first.

Regulatory Authorities You Must Align With

Foreign investment approval typically involves:

• Department of Industry
• Office of Company Registrar
• Nepal Rastra Bank
• Inland Revenue Department

Each authority reviews sector eligibility independently.

EEAT: What the Law and Policy Say

Nepal’s foreign investment framework is anchored in:

• Foreign Investment and Technology Transfer legislation
• Industrial Enterprises legislation
• Annual negative list notifications
• Central bank foreign exchange directives

These are publicly issued and consistently enforced.

How to Validate Sector Eligibility Before Incorporation

A disciplined approach saves months.

Recommended process:

1. Define your exact activity scope
2. Map activities to the negative list
3. Confirm with regulators in writing
4. Choose private vs public company in Nepal
5. Proceed with incorporation

This sequence matters.

Conclusion: Private vs Public Company in Nepal Is a Secondary Decision

For foreign companies, private vs public company in Nepal is not the strategic starting point. Sector eligibility is.

If your industry is restricted, no structure will work. If your sector is permitted, the right structure amplifies success.

Smart investors validate the sector first, then optimize the vehicle.

Frequently Asked Questions 

Can foreigners open a retail business in Nepal?

Foreigners cannot operate small or local retail businesses. Large wholesale or export-oriented trading may be permitted with approval.

Is agriculture open to foreign investment in Nepal?

Traditional agriculture for domestic markets is restricted. Commercial, export-focused agribusiness may qualify case by case.

Does a public company allow foreign investment in restricted sectors?

No. Public companies follow the same sector restrictions as private companies.

Can foreigners invest through a local partner to bypass restrictions?

Using nominees or informal partners is illegal and risky. Regulators actively screen beneficial ownership.

What is the safest structure for foreign companies entering Nepal?

A private company in a permitted sector is the most common and efficient FDI structure.