Investors expanding into South Asia often face a key choice: Nepal or India for company incorporation. This decision hinges on understanding the Company Act Nepal and India’s Companies Act in detail. Nepal’s Company Act 2063 (2006 A.D.) and India’s Companies Act 2013 both define how businesses are formed and run, but their rules on ownership, capital, compliance, and process can differ greatly. This guide offers a clear, practical comparison of both laws for foreign businesses. We’ll cover incorporation steps, foreign investment rules, tax implications, and governance under each Act. By the end, you’ll know which jurisdiction fits your company’s needs.
Nepal’s Company Act 2063 (2006 A.D.) is the primary law governing companies in Nepal. It replaced the older 1997 law to align with modern business practices. The Act lays out how to register a company in Nepal, defines company types (Private, Public, Non-Profit, etc.), and establishes corporate governance and reporting rules. Key objectives include encouraging investment, simplifying registration, protecting shareholders’ rights, and promoting transparency.
India’s Companies Act 2013 is the main corporate law in India. It consolidated and updated the previous 1956 Act. The 2013 Act introduced features like mandatory CSR, One Person Companies (OPC), stronger director duties, and corporate governance improvements. It also established new bodies (e.g. National Company Law Tribunal and NFRA) for dispute resolution and audit oversight. The Act is expansive, covering company formation, management, audits, mergers, and closures.
Both Acts create a separate legal identity for registered companies (limited liability, perpetual succession) and set out rules for directors, shares, meetings and disclosures. However, they differ in many details – from how quickly you can incorporate, to how much capital is needed, to the rules on foreign ownership.
Under Nepal’s Company Act 2063, the following points stand out:
Company types: Recognizes Private Limited, Public Limited, and Non-Profit companies, plus Single-Shareholder companies. Private firms have a limited number of shareholders and cannot trade shares publicly, while Public companies can raise capital via a prospectus. Non-Profit companies (e.g. for social or charitable purposes) must reinvest profits.
Registration process: Companies register with Nepal’s Office of the Company Registrar (OCR). This grants the business a legal identity separate from its owners. The Act defines required documents (memorandum/articles, director/shareholder details) and steps to incorporate.
Governance: The Act specifies minimum board sizes (e.g. 1-3 directors for private, 7 for public) and duties of directors and shareholders. It details meeting procedures, decision-making processes, and protections for minority shareholders.
Share capital: Rules cover issuing shares (face value, allotment, share certificates), maintaining shareholder registers, and dividend distribution. Notably, a Public company needs at least NPR 10 million (approx. USD 80,000) in paid-up capital to register. Private companies have no prescribed minimum capital.
Auditing and compliance: All companies must keep proper accounts and conduct annual audits by licensed Chartered Accountants. They must file annual financial statements and reports with the OCR. Non-compliance (e.g. late filings or false reports) can incur fines or penalties.
Mergers and liquidation: The Act provides legal processes for mergers, acquisitions, and winding up companies (voluntary or compulsory). It also protects creditors and minority shareholders during these processes.
Enforcement: The OCR oversees compliance. It can cancel registrations of dormant companies, penalize fraud or neglect (fines up to NPR 50,000 and/or up to two years’ imprisonment), and handle shareholder complaints through courts.
In summary, the Company Act Nepal sets up a standard corporate framework focusing on ease of registration, investor protection, and alignment with global norms. Its key provisions encourage entrepreneurship while also safeguarding transparency.
India’s Companies Act 2013 modernized Indian company law with advanced compliance and governance features. Some highlights:
Unified Act: Consolidated various amendments and ordinances, repealing the old 1956 Act. Nearly all sections have been notified and implemented. The law is comprehensive (470+ sections in 29 chapters), covering incorporation, management, audits, mergers, and many special cases (e.g. producer companies, OPCs).
Company types: India allows Private Ltd, Public Ltd, One Person Company (OPC with one owner), Section 8 NGOs (non-profit companies), and Producer Companies for farmers. (Originally, OPCs were limited to Indian citizens, but now even non-resident Indians may form OPCs).
Governance: The Act mandates codified director duties and tougher penalties for fraud. It introduced mandatory CSR spending (2% of profits for large companies) and required NFRA oversight on auditors. A full-time company secretary is mandatory for listed companies and those above certain capital thresholds.
Ease of doing business: India has invested in e-governance. The MCA21 online portal handles name approval and company registration digitally. Recent reforms aimed to speed incorporation: eKYC for directors, reduced paperwork, and defined timelines for approvals. World Bank statistics showed India improving on “Starting a Business” (e.g. moving from 100th to 77th place in 2018).
Capital and funding: The concept of mandatory “authorized capital” was removed in 2015, so there is essentially no minimum share capital requirement for either private or public companies (except sector-specific rules). India also has a well-developed securities market for IPOs and public share sales.
Reporting: Similar to Nepal, Indian companies must prepare annual financial statements and get them audited. The Act also enables class action suits and shareholder remedies for fraud. Consolidated audits for holdings/subsidiaries and stricter audit rotation rules may apply.
India’s Act is considered more stringent and detailed, reflecting its larger economy and emphasis on investor protection. The setup is highly digitalized, but compliance (filings, board rules, CSR, etc.) can be more complex for new businesses.
For foreign companies, key questions are: Can I 100% own a company? What approvals are needed? How long will it take? Here’s how Nepal and India compare:
Ownership:
Nepal: Under the Foreign Investment and Technology Transfer Act (FITTA 2019), most sectors allow up to 100% foreign equity. Investors bring capital and expertise under FITTA’s protection. Certain sensitive areas (e.g. primary agriculture, local services like driving, and a few reserved industries) are restricted. But by and large, foreign firms can fully own companies, subject to approval.
India: India also permits up to 100% FDI in many industries (through the automatic route). Some sectors (defense, telecom, media, etc.) have caps or require government clearance. Overall, India’s mix of automatic and government-approved routes is similar in intent to Nepal’s system.
Approval process:
Nepal: Foreign investors must first apply to Nepal’s Department of Industry (DoI) for investment approval. Investments under ~NPR 6 billion are handled by DoI, while larger projects go to the Investment Board Nepal. Once approved, the company can be registered with the OCR (Office of Company Registrar). The FITTA aims for quick approval (document checking in 7 days), followed by OCR registration (target 30 days). Additional steps include tax registration (PAN), local business license, and notifying the Nepal Rastra Bank for repatriation of funds.
India: Foreign investors typically just register the company via the MCA online portal (MCA21). No separate pre-approval is needed for most investments – India’s “automatic route” covers many sectors. After incorporation, if funding comes from abroad, approval under the Foreign Exchange Management Act (FEMA) via the RBI is needed. Overall, India’s process is highly digital: a new company can often get a certificate of incorporation within a week or two, much faster than the step-by-step process in Nepal.
Minimum capital:
Nepal: Public companies must have at least NPR 10 million (≈USD 80K) paid-up capital to register. Private companies have no specified minimum.
India: No minimum capital requirement exists anymore for either private or public companies. Earlier rules (e.g. ₹100,000 for private) were abolished in 2015【38†】.
Timeline:
Nepal: Incorporation takes longer. After DoI approval, OCR aims to register a company within ~30 days of a valid application. In practice, the entire process (including approvals) can take 4–8 weeks.
India: If all documents are in order, a company can be registered online in 2–4 weeks (often just a few days). The government has streamlined processes to reduce delays.
Investment threshold and schedule:
Nepal: The FITTA requires staged capital infusion: 25% of approved investment must be brought in within 1 year, further amounts by certain triggers (e.g. business start), and full funding within 2 years. These rules (called “investment schedule”) ensure funds come in over time.
India: Funds can be brought in as needed; there are no fixed staging rules beyond mandatory RBI reporting.
Repatriation of profits:
Nepal: Remittance of capital and dividends is allowed with notification to Nepal Rastra Bank. FITTA clarifies that foreign investors can repatriate after fulfilling obligations.
India: Repatriation is permitted under FEMA regulations, subject to certain forms and withholding taxes.
Local presence requirement:
Nepal: A foreign company (without a local subsidiary) can either register a branch office or liaison office under Sec. 154 of the Act. Branches can do business in Nepal, while liaison offices cannot earn income (only coordinate activities).
India: Foreign firms can set up 100% owned subsidiaries or branch offices. Branch offices require RBI permission (automatic for some industries), liaison offices need RBI permission too.
Verdict: India generally offers a faster and more streamlined incorporation process thanks to online services, with minimal pre-approvals. Nepal involves an extra investment approval step, which can take weeks. On the other hand, Nepal’s FITTA provides clear protection for foreign investors and allows full ownership in most fields. If your business is capital-sensitive or needs quick setup, India may edge out. If your plan is long-term (and you can wait on approvals), Nepal can be attractive thanks to its lower corporate tax base and niche opportunities.
Both jurisdictions welcome foreign capital, but rules vary:
Nepal: FITTA 2019 is designed to attract investors while safeguarding key sectors. It allows foreigners to invest in most industries (manufacturing, tech, tourism, hydropower, etc.) with full equity. However, it explicitly prohibits FDI in sensitive areas like basic agriculture (poultry, dairy, fruits), and personal services (haircutting, driving, tailoring). Approval from the Department of Industry (and often Nepal Rastra Bank) is required before committing funds. Once approved, investors must register the company, incorporate a business license, and comply with the FITTA capital injection schedule. Nepal has also signed double-tax treaties (including one with India) to encourage cross-border investment.
India: The FDI regime is generally liberal. More than 90% of industries allow 100% foreign ownership via the automatic route (no government nod needed). Some sectors (defense, media, retail, etc.) have partial restrictions or require government permits. Even in those, recent liberalizations have raised the FDI cap (e.g. single-brand retail now 100% under conditions). Registering a foreign-owned company in India just means incorporating a Private Ltd (no LOC required unless setting up a branch/liaison). RBI reporting is required when bringing in foreign funds, but detailed pre-approvals are mostly gone. India’s treaty network (DTAA) also facilitates fund flows.
Key takeaway: Both Nepal and India allow full foreign ownership in most economic sectors. Nepal’s FITTA is more formal but provides legal clarity; India’s automatic regime is faster. You should check the specific sector rules in FITTA and FDI policies for any restrictions in your industry.
Taxes and compliance costs are important for foreign companies:
Corporate Tax: Nepal’s standard corporate tax rate is 25%. (General industries pay 20–25%, while banks, telecom, tobacco, etc. pay 30%). India’s corporate tax is 22% for new domestic companies (with conditions) and 30% for others. Thus Nepal’s base rate is comparable or slightly higher than India’s lower bracket. However, Nepal offers tax holidays and lower rates for Special Economic Zone (SEZ) businesses or certain exports. India likewise has GST (5–28%) instead of VAT (Nepal VAT is 13%) and broad tax treaty benefits.
Double Taxation: Both countries have an extensive DTAA network (Nepal: 11 treaties including with India; India: 90+ countries). This helps avoid double taxation on repatriated income or dividends.
Other taxes: Nepal requires social security and VAT registration (currently 13%), while India has Goods and Services Tax (GST). Deductibles and allowances differ between the two tax codes, so effective tax rates may vary by business type.
Registration fees: In Nepal, government fees depend on authorized capital (see table below). For example, incorporating a public company with NPR 1 crore capital costs NPR 15,000 in fees. In India, fees are usually nominal (around ₹5,000–10,000) for a ₹1 lakh (₹100,000) paid-up capital company. India also has stamp duties (state-level) on share capital.
Audit requirements: Both countries require annual audit by qualified accountants and submission of accounts. In India, large companies must have an Audit Committee and adhere to detailed board meeting norms. Nepalese companies must similarly hold annual general meetings and file annual returns with the OCR.
Other compliance: Nepal requires minutes of meetings, maintenance of statutory books, and timely filings. The OCR can de-register companies that fail to operate or file returns. India has stricter deadlines (e.g. CSR spending, board meetings every quarter, etc.) and modern compliance (online MCA filings, DIN/KYC for directors). Non-compliance penalties exist in both (e.g. Nepal: up to NPR 50,000 fine; India: levies, prosecutions, and potential imprisonment for fraud).
Note: If your business will trade across borders, consider that Nepal’s transactions are overseen by the Nepal Rastra Bank (foreign exchange authority). India’s RBI/FEMA is more mature and offers easier repatriation through authorized dealers, which might be smoother for some investors.
When choosing between Nepal and India, consider these practical factors:
Market size and access: India’s market is huge (1.4 billion people) and well-integrated globally. Nepal’s market is small (~30 million) but strategically located between India and China, and has emerging sectors (hydropower, tourism, agri-processing, IT outsourcing).
Costs and labor: Nepal generally has lower labor and operational costs. Salaries for skilled workers (IT, finance) are 20–40% lower than in Indian metros. English proficiency in Nepal is strong, aiding services exports. India has more expensive labor but world-class talent pools in cities.
Infrastructure and logistics: India’s infrastructure is more developed, but dealing with bureaucracy (permits, red tape) can be frustrating. Nepal has improving infrastructure (especially Kathmandu) but still faces power and transport challenges in rural areas.
Land and real estate: Foreign companies in Nepal cannot buy land; they must lease (up to 50-75 years). In India, foreign firms can own land in most sectors (with conditions). If land ownership is crucial, India may be better; if you only need office/industrial space, Nepal’s rents are much lower.
Economic incentives: Nepal offers tax holidays for exports and investment in SEZs. There are also grants and subsidies in priority sectors like energy and tourism. India offers a broad range of incentives too (e.g. lower tax rates for new manufacturers, subsidies in SEZs). Compare the specific incentives relevant to your sector.
Ultimately, the right choice depends on your business model. If you seek a lean, cost-effective operation (especially in services, outsourcing, or niche manufacturing) and can wait for approvals, Nepal’s Company Act framework might serve you well. If you need rapid incorporation, large-scale domestic market access, and broad global connectivity, India’s Companies Act and economy likely offer more advantages.
Nepal:
Obtain foreign investment approval from the Department of Industry (if required by scale).
Reserve your company name and incorporate through the Office of the Company Registrar (OCR).
Register for PAN/VAT with the Inland Revenue Office.
Register with local municipal authorities (ward office) as a business.
Deposit the required capital as per FITTA schedule.
India:
Reserve the company name via the MCA portal.
File incorporation documents (MOA/AOA, directors’ details) through MCA21. This is usually a fully digital process.
Obtain a Director Identification Number (DIN) and Digital Signature.
Receive certificate of incorporation (often within days).
Post-incorporation, open a bank account and file foreign remittance forms with RBI (if FDI funds incoming).
Approval Process: India’s Companies Act operates via an online portal with minimal pre-clearances, while Nepal’s Company Act requires a separate foreign investment approval step (FITTA) before company registration.
Minimum Capital: Nepal’s law mandates a ₹1 crore (~USD 80K) minimum paid-up capital for public companies. India’s 2013 Act has no minimum capital requirement at all.
Ease of Doing Business: India has higher bureaucratic compliance (more filings, CSR, etc.), but its fully digital incorporation makes initial setup faster. Nepal has fewer mandatory compliances but takes longer to register (4–8 weeks).
Foreign Investment Rules: Both allow 100% ownership in most sectors, but Nepal’s FITTA explicitly lists sectors closed to foreigners. India’s FDI policy is largely open with some sector caps, updated regularly.
Corporate Governance: India’s Act imposes strict governance measures (e.g. compulsory CSR, audit committees, whistleblower policies), whereas Nepal’s Act is simpler but still requires basic transparency (audits, AGMs).
Q: Can a foreigner incorporate a company in Nepal?
A: Yes. A foreign investor can establish a company in Nepal by obtaining investment approval under FITTA and registering with the Office of Company Registrar. Nepal allows 100% foreign ownership in most sectors (except a few restricted industries). Foreign firms can also set up 100% foreign-owned subsidiaries or branch/liaison offices (Sec.154).
Q: How long does it take to start a company in Nepal vs India?
A: In Nepal, the two-step process (industry approval + registrar) usually takes 4–8 weeks. India’s online process is much faster: many companies incorporate within 2–4 weeks of applying. However, Indian companies may still need some follow-up (e.g. RBI approval for FDI).
Q: What is the minimum capital requirement?
A: Under Nepal’s Act, a public company needs NPR 10 million (≈ USD 80K) paid-up capital. Private companies in Nepal have no set minimum. India’s Companies Act (2013) removed all minimum capital requirements, so there is no mandatory paid-up capital for any company.
Q: Can NRNs (Non-Resident Nepalis) own a Nepalese company?
A: Yes. NRNs are treated much like other foreign investors under Nepal’s law. They can hold 100% of the shares and serve as promoters or directors. Recent updates to the Act specifically encourage NRN participation. There are some additional documentation steps, but they benefit from Nepal’s FITTA protections just like any foreign investor.
Q: Which law is easier for doing business: Nepal’s or India’s?
A: It depends on your priorities. India’s system is highly digital, so the initial registration is quicker. But its compliance framework (board rules, filings, taxes) can be heavier. Nepal’s framework is simpler and may involve fewer ongoing formalities, but initial approvals take longer. Strategically, choose India for scale and speed; choose Nepal for cost-efficiency and niche opportunities.
Choosing between Company Act Nepal vs India’s Companies Act depends on your business goals. Nepal’s Company Act 2063 offers a modern corporate law tuned for investors, with clear rules on registration, ownership, and governance. India’s Companies Act 2013 is more elaborate and tech-driven, favoring ease of digital incorporation and broad investor protections.
For foreign firms, Nepal can be especially attractive for cost-effective operations, targeted industries (hydropower, tourism, IT), and full equity ownership in most sectors. India, meanwhile, provides a vast market, deep financial ecosystem, and swift online setup. To make the best decision, we recommend consulting experts who can assess your specific needs.
Ready to expand your business? Contact our legal and business advisory team for a personalized analysis of Nepal vs India incorporation. We help foreign investors navigate both Company Act Nepal and India’s Companies Act, from initial approval to ongoing compliance. Book a consultation today to structure your new company optimally in Nepal.