Costs and Considerations: Setting Up a Company in Nepal

If you are a foreign investor exploring South Asia, private vs public company in Nepal is one of the first strategic decisions you must make. This choice shapes your cost base, regulatory exposure, fundraising flexibility, and long-term exit options. Nepal welcomes foreign investment, but it also applies distinct legal and compliance rules depending on the company type you select. Understanding these differences early avoids delays, regulatory friction, and unexpected costs later.

This guide provides a practical, investor-focused comparison. It explains what private and public companies mean under Nepali law, how much they cost, and which structure fits different expansion goals.

Nepal’s Corporate Landscape in Brief

Nepal’s company law framework is primarily governed by the Companies Act, 2006, administered by the Office of the Company Registrar (OCR). Foreign investors can establish companies through foreign direct investment (FDI), subject to sectoral approval and compliance requirements.

From a structuring perspective, most foreign businesses choose between:

• A Private Limited Company

• A Public Limited Company

Both are incorporated entities under Nepalese law, but they differ substantially in scale, disclosure, and regulatory burden.

Nepal itself offers competitive labor costs, improving digital infrastructure, and preferential access to South Asian markets, making the structuring decision even more critical.

What Is a Private Limited Company in Nepal?

A private limited company is the most common entry vehicle for foreign investors.

Key Legal Characteristics

• Minimum shareholders: 1

• Maximum shareholders: 50

• Share transfer: Restricted

• Public share issuance: Not allowed

Why Foreign Companies Prefer This Model

Private companies are designed for operational control and cost efficiency. They suit wholly owned subsidiaries, joint ventures, and regional delivery centers.

Typical Use Cases

• IT and software development centers

• Outsourcing and shared services hubs

• Consulting, engineering, and design firms

• Manufacturing units with limited shareholders

What Is a Public Limited Company in Nepal?

A public limited company is designed for larger enterprises intending to raise capital from the public or institutional investors.

Key Legal Characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Share transfer: Freely transferable

• Public share issuance: Permitted, subject to approval

Typical Use Cases

• Infrastructure and hydropower projects

• Banks and financial institutions

• Large manufacturing or trading companies

• Businesses planning IPOs or public fundraising

Private vs Public Company in Nepal: Core Differences

Structural Differences at a Glance

This table highlights why most foreign entrants begin with a private company structure.

Cost Comparison: Private vs Public Company in Nepal

Cost is often the decisive factor for foreign investors.

Initial Incorporation Costs

Private Company

• Government registration fees: Lower

• Legal drafting and filings: Moderate

• Capital requirements: Flexible

Public Company

• Higher registration fees

• Mandatory prospectus preparation

• Additional regulatory approvals

• Higher minimum paid-up capital expectations

Ongoing Compliance Costs

Private companies typically incur:

• Annual return filing

• Financial audit

• Tax compliance

Public companies additionally incur:

• Enhanced disclosure obligations

• Regulatory reporting

• Shareholder meeting expenses

• Governance and compliance audits

From a pure cost perspective, private companies are significantly leaner.

Compliance and Regulatory Burden Explained

Private Company Compliance

A private company in Nepal must:

• Maintain statutory registers

• File annual returns with OCR

• Conduct annual financial audits

• Comply with tax and labor laws

Public Company Compliance

Public companies face:

• Mandatory board structures

• Stricter audit standards

• Prospectus and securities compliance

• Enhanced transparency requirements

For foreign companies without a capital-raising mandate, this extra burden rarely adds value.

Ownership, Control, and Decision-Making

Ownership flexibility is a major differentiator.

Private Companies

• Tight shareholder control

• Restricted share transfers

• Faster decision-making

• Confidential ownership structure

Public Companies

• Diluted ownership risk

• Mandatory disclosures

• Slower governance processes

• Greater public scrutiny

Foreign parent companies often prefer private structures to retain strategic control.

Tax Treatment: Is There a Difference?

From a corporate income tax perspective, Nepal does not differentiate between private and public companies.

Both are subject to:

• Corporate income tax

• Withholding taxes

• VAT (if applicable)

However, compliance administration is simpler for private companies due to fewer disclosure layers.

Fundraising and Capital Expansion Considerations

Private Companies

• Capital infusion via shareholders

• Foreign parent funding allowed

• No public fundraising

Public Companies

• Can issue shares to the public

• Suitable for IPO or large projects

• Requires regulatory clearance

Unless public fundraising is central to your strategy, a private company remains the pragmatic choice.

Risk Profile for Foreign Investors

Private Company Risks

• Limited exit liquidity

• Share transfer restrictions

Public Company Risks

• Regulatory exposure

• Market volatility

• Disclosure-driven reputational risk

Foreign investors focused on operational efficiency generally favor private structures to minimize non-core risks.

Which Structure Is Right for You?

Choose a private company if you want:

• Fast market entry

• Lower setup and compliance costs

• Full operational control

• A delivery or operating subsidiary

Choose a public company if you plan:

• Large-scale capital raising

• Public investment participation

• Long-term IPO strategy

For most foreign companies entering Nepal, private incorporation is the optimal first step.

Step-by-Step: How Foreign Companies Typically Enter Nepal

1. Conduct sector and regulatory eligibility assessment

2. Decide between private vs public company in Nepal

3. Secure foreign investment approvals

4. Incorporate with the Office of the Company Registrar

5. Register for tax and labor compliance

6. Operationalize banking and payroll

This phased approach minimizes risk and avoids restructuring later.

Common Mistakes Foreign Investors Make

• Over-engineering the structure too early

• Choosing a public company without fundraising need

• Underestimating compliance costs

• Misjudging shareholder control implications

Avoiding these mistakes saves months of delay and significant legal cost.

Conclusion: Private vs Public Company in Nepal Strategic Verdict

For foreign investors, the private vs public company in Nepal decision is less about prestige and more about strategy. Private companies deliver speed, cost efficiency, and control. Public companies suit capital-intensive ventures with a clear fundraising roadmap. Making the right choice at entry sets the foundation for compliant, scalable growth in Nepal.