Company Incorporation Laws in Nepal: Key Points from the Company Act

Company incorporation Nepal is governed by a clear but highly specific legal framework. For foreign companies, understanding the Companies Act is the first and most important step before entering the Nepali market.

Nepal welcomes foreign investment, but incorporation must follow strict statutory rules. These rules define who can incorporate, what entities are permitted, capital requirements, governance duties, and ongoing compliance obligations. Misinterpreting even one provision can delay approvals or invalidate registrations.

This guide breaks down the key company incorporation laws in Nepal, explained simply and practically for foreign investors. It reflects real-world incorporation experience, not just theory.

What Is the Companies Act of Nepal?

The Companies Act, 2006 (2063) is the principal legislation regulating company incorporation in Nepal. It governs:

• Formation of companies
• Corporate structure and shareholding
• Directors and shareholders
• Capital requirements
• Compliance and reporting
• Dissolution and liquidation

Any company registered with the Office of the Company Registrar (OCR) must comply with this Act.

For foreign companies, the Companies Act works alongside:

• Foreign Investment and Technology Transfer Act (FITTA) 2019
• Industrial Enterprises Act 2020
• Income Tax Act 2002
• Nepal Rastra Bank (NRB) foreign exchange regulations

Types of Companies Allowed Under Nepal Company Law

Under the Companies Act, Nepal recognizes several company structures. Foreign investors must choose carefully.

1. Private Limited Company (Most Common)

This is the most widely used structure for company incorporation Nepal by foreign companies.

Key characteristics:

• Minimum 1 shareholder
• Maximum 101 shareholders
• No public share issuance
• Limited liability

2. Public Limited Company

Suitable for large projects and regulated industries.

Key characteristics:

• Minimum 7 shareholders
• Can issue shares publicly
• Higher compliance burden

3. Not-for-Profit Company

Used for NGOs, foundations, and social enterprises.
Foreign ownership is highly restricted.

Who Can Incorporate a Company in Nepal?

Foreign nationals and foreign companies are allowed to incorporate in Nepal, subject to approvals.

Eligible incorporators include:

• Foreign individuals
• Foreign corporate entities
• Joint ventures with Nepali partners

However, foreign ownership is permitted only in industries approved for FDI under Nepal’s negative list.

Minimum Capital Requirements Under Company Law

The Companies Act itself does not prescribe fixed capital thresholds. However, for foreign-owned companies, minimum capital is set under FDI regulations.

As per current policy:

• Minimum foreign investment: NPR 20 million
• Applies to equity investment
• Must be remitted via NRB-approved banking channels

This capital must be declared at incorporation and verified post-registration.

Step-by-Step Legal Process for Company Incorporation in Nepal

The incorporation process is procedural and sequential.

Step 1: Name Reservation at OCR

The proposed company name must:

• Be unique
• Not resemble existing entities
• Comply with naming guidelines

Step 2: Preparation of Constitutional Documents

Mandatory documents include:

• Memorandum of Association (MOA)
• Articles of Association (AOA)

These define objectives, capital structure, governance, and authority.

Step 3: Filing with Office of Company Registrar

Applications are filed electronically with OCR along with:

• Incorporation forms
• Identity documents
• Shareholder resolutions

Step 4: Company Registration Certificate Issued

Once approved, OCR issues:

• Certificate of Incorporation
• Company Registration Number

This legally creates the company.

Mandatory Legal Documents for Company Incorporation Nepal

Foreign companies must prepare additional documentation.

Required documents include:

• Passport copies of shareholders and directors
• Board resolution approving Nepal incorporation
• Power of Attorney
• Notarized and apostilled documents
• MOA and AOA
• FDI approval letter (where applicable)

Proper legalization is critical. Incorrect notarization is a common cause of rejection.

Directors and Governance Requirements

The Companies Act imposes clear governance obligations.

Director Requirements

• Minimum 1 director for private companies
• Director can be foreign national
• Must act in fiduciary capacity

Statutory Duties Include:

• Acting in good faith
• Compliance with law
• Disclosure of conflicts of interest

Failure to comply can result in personal liability.

Shareholding Rules Under Nepal Company Law

Foreign shareholding is allowed, but regulated.

Key rules:

• Shares must be fully paid
• Share transfers require regulatory approval
• Foreign shareholding must align with FDI approvals

Joint ventures must clearly define rights in the shareholders’ agreement.

Registered Office and Local Compliance

Every company must maintain:

• A registered office address in Nepal
• Statutory registers
• Official company seal

The registered office determines jurisdiction for inspections and notices.

Ongoing Compliance Obligations After Incorporation

Company incorporation Nepal does not end at registration.

Annual Compliance Requirements

• Annual General Meeting (AGM)
• Annual returns filing
• Financial statement submission

Regulatory Compliance

• Tax registration with Inland Revenue Department
• PAN and VAT (if applicable)
• Social Security Fund registration
• NRB reporting for foreign remittances

Non-compliance attracts penalties and can freeze bank operations.

Common Legal Risks Foreign Companies Face

Foreign companies often underestimate local compliance.

Key risks include:

• Invalid FDI approvals
• Improper capital injection
• Director non-compliance
• Missed statutory filings
• Tax misclassification

Professional structuring reduces long-term risk.

Company Incorporation Nepal: Private Limited vs Public Limited

This comparison helps foreign investors select the right structure from day one.

Tax and Regulatory Alignment with Company Law

While governed by the Companies Act, companies must also align with tax law.

Key tax obligations:

• Corporate income tax registration
• Withholding tax compliance
• Transfer pricing (for foreign related parties)

Company law compliance and tax compliance must move together.

EEAT: Legal Authority and Credibility

This guide is based on:

• Companies Act, 2006 (Nepal)
• FITTA 2019
• Office of Company Registrar guidelines
• Nepal Rastra Bank circulars
• Practical incorporation cases for foreign investors

These sources ensure accuracy, trust, and authority.

Frequently Asked Questions (People Also Ask)

1. Can foreigners fully own a company in Nepal?

Yes. Foreigners can own 100 percent equity in approved sectors, subject to FDI approval and minimum capital requirements.

2. How long does company incorporation in Nepal take?

Typically 7 to 14 working days after complete documentation and approvals are submitted.

3. Is a local director required for a Nepali company?

No. Foreign nationals can act as directors. However, local compliance support is recommended.

4. What law governs company incorporation Nepal?

The Companies Act, 2006 governs incorporation, structure, and compliance of companies in Nepal.

5. Is FDI approval required before incorporation?

Yes. For foreign-owned companies, FDI approval is mandatory before capital injection and full operational setup.

Conclusion: Getting Company Incorporation Nepal Right

Company incorporation Nepal is straightforward when approached with the right legal understanding. The Companies Act provides clarity, but foreign investors must align incorporation, FDI approvals, tax registration, and compliance into one cohesive process.

With correct structuring, Nepal offers cost-efficient operations, skilled talent, and strong growth potential.

Call to Action

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