Company Act Nepal is the cornerstone of doing business in Nepal for locals and foreign investors alike. If you're a foreign company eyeing Nepal, understanding the legal requirements for establishing a private limited company is crucial. This expert guide breaks down Nepal’s Companies Act 2006 (2063) – the law governing company formation – and explains how to register and run a private limited company in compliance with local regulations. We’ll cover everything from incorporation steps to ongoing compliance, comparisons with branch or liaison offices, and answer frequently asked questions. By the end, you’ll know exactly what it takes to launch a company in Nepal and how to leverage our support to make the process seamless.
Nepal’s primary company law is the Companies Act 2006 (2063), administered by the Office of the Company Registrar (OCR). This Act outlines how companies are formed, their governance, shareholder rights, and reporting obligations. Under the Act, businesses can be registered as different entities – the most common being private limited companies (abbreviated Pvt. Ltd.), especially for foreign investors The OCR, located in Kathmandu, is the government authority where all companies must be registered and corporate filings made.
A private limited company in Nepal enjoys limited liability (owners are only liable up to their share capital) and a separate legal personality. Foreign investors favor this structure because it allows 100% foreign ownership in most sectors, barring a few restricted industries. Notably, Nepal’s Foreign Investment and Technology Transfer Act (FITTA) works alongside the Company Act to regulate foreign investments. FITTA ensures overseas investors can repatriate profits and dividends, and it specifies a minimum foreign investment threshold of NPR 20 million (around USD 150,000) for most industries. It’s important to verify that your business is not in a “negative list” sector (e.g. retail trade, small domestic services, arms production, etc., which are off-limits to foreign investment). Assuming your sector is open to FDI, Nepal’s laws generally allow you to fully own and control a private company.
In summary, the Company Act provides the framework for incorporation and operation, while FITTA and related regulations handle foreign investment approvals. By complying with Company Act Nepal and other regulations, foreign companies can tap into Nepal’s market with confidence.
For foreign companies expanding to Nepal, establishing a private limited company is often the best approach. Here’s why this structure is preferred over other forms:
Limited Liability & Separate Entity: A private limited company is a distinct legal entity. Shareholders’ personal assets are protected – they are liable only up to their share contributions. This offers peace of mind and clear separation between the business and personal finances.
100% Foreign Ownership Permitted: Nepal allows up to 100% foreign shareholding in a private company (in permitted sectors). You do not need a local partner to meet ownership requirements. This means a foreign investor or firm can retain full control of the company’s equity and decisions.
Flexibility & Control: Private limited companies can commence business immediately upon incorporation. Unlike public companies, you don’t need to issue a public prospectus or meet high capital minimums before starting operations. Additionally, private companies in Nepal can have as few as one shareholder, enabling a single foreign entrepreneur to form a fully lawful company.
Simplified Compliance: Ongoing compliance for private companies is generally simpler than for public companies. For instance, Nepal’s law allows private companies to dispense with annual general meetings (AGMs) if all shareholders agree in a consensus agreement. Decisions can be made via written resolutions, which is practical for closely held companies. (In contrast, public firms must hold AGMs and meet strict reporting and audit committee requirements.)
Local Presence & Credibility: Operating as a Nepal-registered private limited gives your business local credibility. It can enter contracts, lease property, hire employees, and conduct trade in Nepal under its own name. Many clients and government tenders in Nepal prefer dealing with a locally incorporated entity rather than a foreign branch.
While private limited companies are generally ideal, foreign investors should be aware of alternative structures like branch offices and liaison offices. Below we briefly compare these options to illustrate why a private subsidiary often makes the most sense for long-term operations.
Foreign companies have two other ways to establish a presence in Nepal: registering a branch office or a liaison (representative) office. Each option has different legal implications. The table below compares key features to help you decide:
| Criteria | Private Limited Company | Branch Office | Liaison Office |
|---|---|---|---|
| Legal Status & Liability | Separate Nepali legal entity (limited liability company). Liabilities are confined to the company’s assets. | Extension of the foreign parent company (not a separate entity). The foreign parent bears ultimate liability for branch obligations. | Not a separate entity – purely an arm of the foreign company. No limited liability; parent is responsible for all liaision activities. |
| Ownership & Control | 1 to 101 shareholders (can be 100% foreign-owned) control the company. Governed by its own Board of Directors as per local law. | Wholly owned by the foreign parent. Control remains with the parent company, which operates in Nepal through the branch manager. | Wholly owned by parent. Acts only as per parent company’s instructions. No independent management beyond a local representative. |
| Business Activities | Full commercial operations allowed (in any permitted industry). Can generate revenue, sign contracts, and engage in profit-making activities freely. | Can only conduct activities identical to the parent’s business. Allowed to earn revenue in Nepal, but scope is limited to parent company’s services/products. | No income-generating activities allowed. Can only act as a communication or coordination channel (e.g. market research, networking, after-sales support) for the parent – but cannot undertake actual trading or service delivery for profit. |
| Capital & Investment | No minimum paid-up capital required by law for locals. However, foreign-invested companies must bring ≥ NPR 20 million in capital (FITTA requirement). Capital is in the form of equity shares (par value usually NPR 100 each) | No separate capital requirement (the branch’s funding comes directly from the foreign parent). The parent must allocate sufficient funds to run branch operations, but there’s no legal minimum investment threshold for a branch. | No capital requirement. Since a liaison office cannot earn money, the parent covers all expenses. Only minimal funds are remitted just to support the liaison’s activities (e.g. office rent, staff costs). |
| Registration & Approvals | Register with OCR as a new company. FDI approval from Department of Industry or Investment Board Nepal is required prior to incorporation if foreign-owned (generally a simple process for most sectors). Must obtain industry-specific licenses if applicable (e.g. banking, telecom). | Register the branch with OCR under Section 154 of the Company Act (as a “foreign company” registration). Additional approval needed: either a sector ministry’s permission or a government agreement specific to the branch’s operations. Branch registration is mandated if a foreign company does business in Nepal for over 30 days continuously. | Register with OCR (also under foreign company provisions). No prior government approval required solely for a liaison office. The liaison must declare its scope is non-commercial. Registration is simpler, though the office must confine itself to allowed liaison activities. |
| Ongoing Compliance | Annual financial statements and tax filings in Nepal. Must hold at least board meetings and statutory filings; AGMs can be waived by unanimous consent. Audit by a Nepal-certified auditor is required yearly. Compliance is moderate and tailored for private companies. | Must submit annual reports of the foreign parent company and other prescribed documents to OCR. Also must file local tax returns for any Nepal-sourced income. Compliance involves both Nepali requirements and maintaining parent company reporting. | Minimal operations mean minimal compliance – no income tax filing (since no revenue). However, liaison offices typically still report basic information to OCR annually and ensure the office operates within its non-commercial mandate. |
In summary: A private limited company offers the most operational freedom and local legitimacy for foreign investors, whereas a branch binds you to the parent company’s scope and a liaison is only suitable for non-commercial representation. Most foreign businesses aiming for long-term, revenue-generating operations in Nepal choose to incorporate a private limited company due to the liability protection and flexibility it provides.
Setting up a private limited company in Nepal involves a series of legal steps. Below is a step-by-step guide to the incorporation process:
Name Reservation: Choose a unique company name and reserve it with the Office of the Company Registrar. Nepal uses an online application portal for name reservation. The name must not duplicate an existing company’s name and should meet Nepal’s naming guidelines (for example, it must end with “Private Limited” or “Pvt. Ltd.”). Once you submit a name reservation request online, the OCR usually approves it within 1-2 working days if the name is acceptable.
Prepare Incorporation Documents: After name approval, prepare the constitutional documents and forms required for registration. The key documents include:
Memorandum of Association (MOA) – defines the company’s objectives and business scope.
Articles of Association (AOA) – outlines the company’s internal governance rules and share structure.
Incorporation Application Form – a standard form provided by OCR.
Identification Documents of Promoters: Passport copies (for foreign individual shareholders) or incorporation certificate and board resolution (if the shareholder is a foreign company) must be notarized and submitted. Nepali promoters must provide a notarized citizenship certificate.
Prior Approvals, if any: If your sector requires special licenses (e.g. banking, telecom), or if you’re a foreign investor needing an FDI approval certificate from the Department of Industry, obtain these before submission.
Tip: Nepal’s law provides a model Articles of Association for single-shareholder companies, so if you are the sole owner, you can adopt the prescribed one-page AOA format and skip a custom AOA document.
Submission to OCR and Fees: Submit the signed MOA, AOA, and all forms to the Office of the Company Registrar for registration. This step currently requires a physical submission at the OCR office in Kathmandu (though the government is moving towards more online filings). Along with the documents, you must pay a government registration fee which varies based on your company’s authorized capital. The fee is on a sliding scale – for instance, NPR 1,000 for authorized capital up to NPR 100,000, NPR 16,000 for capital up to NPR 10 million, and so on. For most typical mid-sized companies the fee is only a few thousand rupees (tens of dollars). You will receive a payment receipt upon paying the fee.
Verification and Approval: The Registrar will review your application. They will check that all documents are in order, the forms are correctly filled, and the proposed company complies with the law. If everything is satisfactory and all Company Act provisions are met, the Registrar issues the Certificate of Incorporation within 15 days. In practice, the process can take a couple of weeks (sometimes up to 2–3 weeks) depending on the volume of applications and if any corrections are needed. The certificate, once issued, is conclusive proof that your company has been legally incorporated.
Post-Incorporation Tasks: After incorporation, there are a few immediate tasks:
Permanent Account Number (PAN) Registration: Register your company with the Inland Revenue Department and obtain a PAN (tax ID) to operate and pay taxes. This is required before the company can commence business activities like opening a bank account or invoicing clients.
Meetings and Auditor Appointment: Hold a Board of Directors meeting (even if you’re the sole director) to formally adopt internal regulations, appoint an auditor, and complete any initial resolutions (e.g. opening bank accounts). Nepal’s law mandates that every company appoint a qualified auditor registered in Nepal. Auditors are usually appointed in the first shareholders’ meeting or by the board.
FDI Inflow and Shares Allotment: If your company has foreign investment, you will need to bring in the pledged capital through the banking system (to satisfy Nepal Rastra Bank regulations) and have the Board allot shares to the foreign investor. The initial capital must typically be injected within a year of incorporation as per FDI approval conditions.
Obtain Additional Licenses: Depending on your business, you may need other licenses (for example, industry registration, local municipal trade license, or sector-specific permits). Ensure to acquire these before commencing operations.
By following these steps diligently, you can legally establish your private limited company in Nepal. It’s highly advisable to engage a local legal advisor or service (like our firm) to navigate documentation and liaison with OCR, especially if you’re new to Nepal’s regulatory environment. Our team can handle end-to-end incorporation support, making the process faster and hassle-free.
Registering your company is just the beginning. To remain in good standing, a Nepal private limited company must comply with ongoing requirements set by Company Act Nepal and associated regulations. Key compliance obligations include:
Annual General Meeting (AGM) or Alternatives: Under the Companies Act, every company should conduct an AGM within 6 months of fiscal year-end to approve financial statements and make key decisions. However, as noted, private companies can opt out of holding AGMs if all shareholders agree in writing. If you choose to waive the AGM, ensure you document decisions (like approving accounts, dividends, etc.) via written resolutions signed by all shareholders, as allowed for private companies.
Financial Statements and Audit: Companies must prepare annual financial statements (balance sheet, profit/loss, cash flow) according to Nepali accounting standards. An independent auditor (Chartered Accountant) must audit the books every fiscal year and provide an audit report The audited financial statements need to be submitted to the OCR and tax office annually. Staying on top of bookkeeping and annual audits is critical, as non-compliance can result in fines or credibility loss.
Annual Return Filing: A company is required to file an annual return with the OCR, typically after the AGM (or resolution in lieu of AGM). This return confirms the company’s shareholders, directors, and any changes in the past year. It ensures the public record is up to date. The Companies Act imposes fines if annual returns are not filed on time.
Tax Compliance: Private companies are subject to corporate income tax on profits (the standard rate is currently 25%, and 30% for certain industries; banks/insurance have higher rates, while special industries have lower). You must file an annual corporate tax return with the Inland Revenue Department. If your company’s turnover exceeds thresholds, you’ll need to register for VAT (Value Added Tax) and file monthly/quarterly VAT returns. Likewise, remit any applicable withholding taxes on payments to vendors or salaries. Timely tax payment and filing is important to avoid penalties and to obtain tax clearance certificates required for various approvals.
Maintaining Statutory Registers: As per law, every company should maintain up-to-date statutory registers, including the Register of Shareholders, Register of Directors, and Minutes Book of board and shareholder meetings. These records might be inspected by shareholders or regulatory officials. Be sure to update these whenever changes occur (e.g., share transfers, new director appointments).
Changes and Reporting: If your company undergoes changes such as a change of registered office, an increase in authorized capital, addition of new shareholders, or a change in directors, you must officially update the OCR through prescribed forms. Most changes require board and/or shareholder approval and then filing of a notice to the OCR within a set timeframe (typically 30 days of the change).
Foreign Investment Compliance: For foreign-owned companies, compliance extends to foreign exchange regulations. The company must report to Nepal Rastra Bank for any foreign equity inflows or outflows. Repatriation of dividends or investment requires proper documentation and tax clearance as per central bank rules. Fortunately, FITTA guarantees that approved foreign investors can repatriate their profits in full, in convertible currency – just ensure you follow the reporting process. Additionally, if your foreign investor changes (transfer of shares to another foreign party or to a Nepali), that typically needs prior approval from the Department of Industry.
Licenses Renewal and Other Laws: Some industries (e.g., hospitality, healthcare, banking) require annual or periodic renewal of licenses. Ensure you renew any sector-specific licenses on time. Comply with labor laws (register employees with social security, etc.), environmental regulations, and any other laws relevant to your line of business.
Staying compliant with these requirements ensures your company runs smoothly without legal hiccups. Our legal team provides ongoing regulatory compliance services – from handling your annual filings and audits to advising on any legal changes – so you can focus on your core business.
Establishing and operating a company in Nepal might seem complex, but with the right guidance, it’s absolutely manageable. By understanding the legal requirements of Company Act Nepal and leveraging local expertise, foreign investors can successfully navigate incorporation and compliance. Nepal offers a welcoming environment for foreign direct investment, and a private limited company is your ticket to participate fully in this growing market with confidence.
If you’re ready to take the next step, we’re here to help. Book a free consultation with our Nepal incorporation experts to discuss your business needs and get personalized advice. Our firm provides end-to-end support – from securing approvals and registering your company to ongoing legal compliance and advisory. Contact our legal team today, and let’s turn your Nepal venture into a reality!
Can a foreigner own 100% of a private limited company in Nepal?
Yes. Nepal allows up to 100% foreign ownership in a private limited company, as long as the business is in a sector open to foreign investment. You do not need a local shareholder or partner by law. However, you must obtain approval for foreign investment (under FITTA) and meet the minimum investment amount (currently NPR 20 million for most sectors) as required by the government.
What is the minimum capital required to start a company in Nepal?
Legally, there is no minimum paid-up capital for incorporating a normal private company in Nepal. You could register with even NPR 100 or 1,000 as capital. But if you are a foreign investor, you must bring in at least NPR 20 million (approximately USD 150,000) per current FDI regulations. Certain industries like banking or insurance mandate higher minimum capital by their specific laws.
How many people are required to register a private limited company in Nepal?
Just one person is enough – Nepal permits single-shareholder companies. A private limited company can be formed with a minimum of one shareholder and can have up to 101 shareholders maximum. Likewise, you need at least one director (which can be the same person as the shareholder). This flexibility allows even solo entrepreneurs to set up a company.
How long does it take to register a company in Nepal?
On average, it takes about 2 to 3 weeks to fully register a company. Name reservation is quick (1-2 days), and after submitting documents the Certificate of Incorporation is usually issued within 7 to 15 days if all paperwork is in order. Delays can happen if documents are incomplete or if there’s a high volume of applications. Engaging professionals and ensuring all documents are correct helps speed up approval.
Do I need a local partner or director to register a company in Nepal?
No, Nepal’s laws do not require a local partner or local director for company registration. Foreign individuals or companies can be the sole shareholders, and directors need not be Nepali citizens. In practice, many foreign investors appoint a local contact person or hire local directors for ease of doing business and compliance, but it’s not a legal mandate. You can fully own and control the company as a foreign national, with local advisors assisting only as needed.