Company Act Nepal: Summary and Highlights for 2026

The Company Act Nepal is the backbone of corporate law for anyone doing business in Nepal.
If you are a foreign company planning market entry, incorporation, or expansion in 2026, this Act defines your rights, duties, and risks from day one.

It governs how companies are formed, managed, audited, restructured, and closed.
It also determines how directors are appointed, how shares are issued, and how compliance is enforced.

In short, you cannot operate legally in Nepal without understanding the Company Act Nepal.

This guide is written specifically for foreign founders, CFOs, legal teams, and investors.
It is practical, current, and focused on what actually matters in 2026.

What Is the Company Act Nepal?

The Company Act Nepal (Companies Act, 2006) is the primary legislation regulating companies in Nepal.
It applies to both domestic and foreign-owned companies incorporated in Nepal.

The Act is administered by the Office of the Company Registrar (OCR) under the Ministry of Industry.

Objectives of the Company Act Nepal

The Act aims to:

• Promote transparent corporate governance

• Protect shareholders and creditors

• Standardise company formation and reporting

• Encourage foreign investment with legal certainty

For foreign companies, it provides a predictable legal framework aligned with international corporate norms.

Types of Companies Recognised Under the Company Act Nepal

Understanding company types is critical before entry.

1. Private Limited Company

This is the most common structure for foreign companies.

Key features:

• Limited liability

• Shareholders capped (currently up to 101)

• No public share issuance

• Suitable for subsidiaries and joint ventures

2. Public Limited Company

Typically used for large enterprises.

Characteristics include:

• Minimum seven shareholders

• Mandatory compliance with capital thresholds

• Ability to issue shares publicly

• Higher disclosure obligations

3. Not-for-Profit Company

Used for NGOs and social enterprises.

Important points:

• No dividend distribution

• Surplus must be reinvested

• Often combined with sector-specific approvals

Company Incorporation Process Under the Company Act Nepal

The Act sets a clear, step-by-step incorporation process.

Step-by-Step Incorporation (Numbered List)

1. Name reservation with the Office of the Company Registrar

2. Preparation of Memorandum and Articles of Association

3. Submission of incorporation application

4. Payment of registration fees

5. Issuance of incorporation certificate

Once incorporated, the company becomes a separate legal person.

Memorandum and Articles of Association Explained

These two documents define the company’s DNA.

Memorandum of Association (MOA)

The MOA outlines:

• Company name

• Registered office address

• Objectives and permitted activities

• Share capital structure

Foreign companies must ensure objectives align with approved FDI activities.

Articles of Association (AOA)

The AOA governs internal management, including:

• Board powers

• Share transfers

• Meeting procedures

• Voting rights

A poorly drafted AOA often leads to shareholder disputes later.

Directors and Corporate Governance Under the Company Act Nepal

Governance obligations are taken seriously in Nepal.

Director Appointment Rules

• Minimum one director for private companies

• Directors can be foreign nationals

• Appointment must be filed with OCR

Directors’ Duties (Bulleted List)

Under the Company Act Nepal, directors must:

• Act in good faith

• Avoid conflict of interest

• Protect company assets

• Comply with laws and filings

• Act within granted authority

Failure can lead to personal liability.

Share Capital, Shareholders, and Ownership Rules

The Act clearly regulates ownership.

Share Capital Flexibility

• No minimum capital for most sectors

• Capital must match business scale

• FDI sectors may impose thresholds

Shareholder Rights

Shareholders are entitled to:

• Dividend declarations

• Voting rights

• Access to financial statements

• Legal remedies against mismanagement

Foreign shareholders enjoy equal rights with Nepali shareholders, subject to FDI laws.

Compliance and Annual Filing Obligations

Compliance is not optional.

Mandatory Annual Requirements

Every company must:

• Hold an Annual General Meeting (AGM)

• Approve audited financial statements

• File annual returns with OCR

• Update changes in directors or shareholding

Late filing attracts daily penalties and potential suspension.

Audits and Financial Reporting Requirements

The Company Act Nepal mandates transparency.

Audit Rules

• Annual audit by a licensed Nepali auditor

• Financials prepared as per Nepal Accounting Standards

• Auditor appointment approved by shareholders

Foreign companies often underestimate audit timelines in Nepal.

Restructuring, Mergers, and Share Transfers

The Act supports corporate restructuring.

Permitted Transactions

• Share transfers

• Capital increases or reductions

• Mergers and amalgamations

• Conversion between company types

All structural changes require OCR approval.

Company Act Nepal vs FITTA: Key Differences for Foreign Investors

This distinction is critical.

Foreign companies must comply with both laws simultaneously.

Penalties and Non-Compliance Risks

Non-compliance carries real consequences.

Common Penalties

• Daily fines for late filings

• Director disqualification

• Suspension of company status

• Court-ordered liquidation

These risks directly affect foreign parent companies.

2026 Highlights and Practical Insights for Foreign Companies

In 2026, enforcement is stricter than ever.

What Has Changed in Practice

• OCR is fully digital

• Cross-checks with tax authorities are routine

• Banking KYC relies on OCR records

• Directors are held personally accountable

Professional compliance support is no longer optional.

Strategic Advantages of Understanding the Company Act Nepal

Foreign companies that master the Act benefit from:

• Faster incorporation

• Cleaner audits

• Easier banking relationships

• Lower legal risk

• Stronger investor confidence

This is often the difference between success and exit.

Common Mistakes Foreign Companies Make

Avoid these recurring issues:

• Copy-pasting foreign Articles of Association

• Ignoring AGM timelines

• Appointing nominee directors without clarity

• Misaligning company objectives with FDI approval

Each mistake is preventable with proper guidance.

How Foreign Companies Should Approach Compliance in Nepal

A best-practice approach includes:

• Legal structuring before incorporation

• Clear shareholder agreements

• Annual compliance calendars

• Local accounting and secretarial support

This protects both local operations and parent entities.

Frequently Asked Questions (People Also Ask)

Is the Company Act Nepal applicable to foreign companies?

Yes. Any company incorporated in Nepal, including foreign-owned entities, must fully comply with the Company Act Nepal.

Can a foreigner be a director under the Company Act Nepal?

Yes. Foreign nationals can be directors, subject to proper appointment and filing with the Company Registrar.

Is minimum capital required under the Company Act Nepal?

Generally no. However, sector-specific FDI rules may impose minimum capital thresholds.

What happens if annual filings are missed?

Penalties apply daily. Prolonged non-compliance can lead to suspension or liquidation.

Does the Company Act Nepal allow 100% foreign ownership?

Yes, where permitted under Nepal’s foreign investment laws and approved sectors.

Conclusion: Why the Company Act Nepal Should Shape Your 2026 Strategy

The Company Act Nepal is not just a legal requirement.
It is a strategic framework that determines how safely and efficiently you can operate in Nepal.

Foreign companies that treat it seriously gain speed, credibility, and long-term stability.
Those who ignore it face delays, penalties, and reputational risk.

Understanding the Act is the first step toward sustainable expansion in Nepal.

Call to Action

If you are planning to incorporate, invest, or expand in Nepal in 2026, now is the time to act.

👉 Book a compliance consultation to review your structure under the Company Act Nepal and avoid costly mistakes before they happen.