Choosing the right company structure is one of the most important decisions for foreign investors entering Nepal. The debate around private vs public company Nepal often comes down to capital structure, ownership flexibility, compliance burden, and future fundraising plans.
Within the first few months of market entry, this decision affects how much capital you can raise, who can invest, and how easily you can scale. This guide explains the capital structure of private and public companies in Nepal in plain language, with legal accuracy and practical insight for foreign companies.
Capital structure refers to how a company finances its operations.
It includes:
Authorized share capital
Issued and paid-up capital
Shareholding composition
Rights attached to shares
In Nepal, capital structure is governed primarily by the Companies Act, 2006, alongside foreign investment laws and sector-specific regulations.
At a high level, the difference lies in who can invest and how capital can be raised.
Private company: Closed ownership, limited shareholders, simpler compliance
Public company: Open ownership, capital raised from the public, higher regulation
This distinction becomes critical when foreign investors plan phased investments or future exits.
A private company in Nepal must have:
Minimum 1 shareholder
Maximum 50 shareholders (excluding employees)
No public invitation for shares
There is no statutory minimum capital under general law, unless the sector regulator specifies one.
Private companies are designed to remain closely held.
Key characteristics:
Share transfers are restricted by the Articles of Association
New shareholders require approval from existing members
Foreign shareholding is allowed, subject to FDI approval
This structure suits foreign parent companies retaining control.
Private companies cannot:
Issue shares to the public
List on the stock exchange
Issue debentures to retail investors
Capital usually comes from:
Foreign direct investment
Promoter equity
Intercompany funding
A public company must have:
Minimum 7 shareholders
No maximum limit
Mandatory minimum paid-up capital (sector-dependent)
Public companies can invite capital from the public through regulated processes.
Public companies may:
Issue shares via IPO
List on the Nepal Stock Exchange
Issue debentures and bonds
This structure supports large-scale capital mobilization.
While public companies can raise more capital, control becomes diluted.
Foreign investors must:
Accept minority shareholders
Comply with disclosure and governance norms
Balance capital access with control
| Factor | Private Company | Public Company |
|---|---|---|
| Shareholders | 1–50 | Minimum 7, unlimited |
| Public share issue | Not allowed | Allowed |
| Capital raising | Promoters, FDI | IPO, rights issue, debentures |
| Control | High | Diluted |
| Compliance cost | Low | High |
| Ideal for | Market entry, subsidiaries | Expansion, public funding |
Foreign investors often underestimate how capital rules affect operations.
A well-designed capital structure helps:
Control ownership risk
Plan future funding rounds
Comply with FDI and tax laws
Enable smoother exits
Choosing wrong can delay approvals or force restructuring later.
Want full operational control
Are entering Nepal for the first time
Plan phased capital injection
Prefer lower compliance overhead
Need large-scale local funding
Plan public participation
Operate in regulated sectors
Have long-term Nepal expansion plans
Most foreign companies start private and convert later.
Certain sectors impose minimum capital thresholds regardless of structure.
Examples include:
Banking and finance
Insurance
Hydropower
Aviation
Foreign investors must align capital planning with sector regulators.
Over-capitalizing at incorporation
Ignoring future dilution risk
Structuring equity without exit planning
Misaligning capital with FDI approval conditions
These mistakes can be costly and time-consuming to fix.
FDI approval obtained
Company incorporated
Bank account opened
Capital remitted through banking channels
Share issuance recorded
Regulatory reporting completed
Each step must align with the approved capital structure.
Capital structure directly affects compliance.
Maintain share registers
File annual returns
Report capital changes
Publish audited financials
Disclose material changes
Follow securities regulations
Capital structure impacts:
Dividend distribution
Withholding tax
Profit repatriation
A clean structure reduces tax leakage and audit risk.
Capital structure is not just a legal choice.
It is a strategic decision.
Foreign companies should consider:
Five-year funding roadmap
Exit strategy
Local partnership plans
Regulatory tolerance
Starting simple often delivers better outcomes.
No general minimum applies. However, regulated sectors may impose thresholds.
Yes, 100% foreign ownership is allowed in permitted sectors with FDI approval.
Yes. Conversion is permitted after meeting legal and capital conditions.
No. Large investments can still use private companies if legally permitted.
Private companies are significantly faster and simpler to register.
The private vs public company Nepal decision defines how you raise capital, retain control, and scale your business. For most foreign companies, a private company offers flexibility, speed, and lower risk at entry. Public companies suit mature operations seeking large-scale funding.
The right capital structure saves time, protects ownership, and supports long-term growth.