Creating Your Business in Nepal: What Every New Entrepreneur Needs to Know

Choosing the right company structure is the first major decision when entering Nepal.
For foreign companies, the private vs public company in Nepal question shapes ownership control, compliance exposure, funding options, and long-term scalability.

Nepal welcomes foreign investment.
But it operates under a formal legal framework.
Understanding this framework early saves time, cost, and regulatory risk.

This guide explains the differences clearly.
It is written for international founders, CFOs, and expansion leaders.
By the end, you will know which structure fits your market-entry goals.

Why Nepal Is on the Radar of Foreign Companies

Nepal has become a strategic destination for international businesses.

Key drivers include:

• Competitive labor costs with strong English proficiency

• Rapid growth in IT, BPO, fintech, and professional services

• Legal pathways for 100 percent foreign ownership

• Increasing government focus on foreign direct investment

However, structure matters.
The wrong entity can slow approvals or limit flexibility.

Legal Foundation for Company Formation in Nepal

Company structures in Nepal are governed primarily by:

• Companies Act, 2006

• Foreign Investment and Technology Transfer Act (FITTA), 2019

• Industrial Enterprises Act, 2020

• Income Tax Act, 2002

These laws define how private and public companies are formed, managed, and regulated.

Understanding Company Types in Nepal

Nepal recognizes several legal entities.
For foreign investors, two dominate:

1. Private Limited Company

2. Public Limited Company

This article focuses on private vs public company in Nepal, as these are the main vehicles for FDI.

What Is a Private Company in Nepal?

A private limited company is the most common entry structure for foreign businesses.

Key Characteristics

• Minimum shareholders: 1

• Maximum shareholders: 101

• Share transfer restrictions

• No public share issuance

• Limited liability protection

Private companies are ideal for controlled operations and phased expansion.

What Is a Public Company in Nepal?

A public limited company is designed for large-scale capital raising.

Key Characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Can issue shares to the public

• Higher disclosure and governance standards

• Often listed or planning to list

Public companies suit infrastructure, banking, hydropower, and large manufacturing projects.

Private vs Public Company in Nepal: Core Comparison

Ownership and Control

Private companies provide tighter ownership control.
Public companies dilute control as shareholders increase.

Compliance Burden

Public companies face significantly higher compliance.
Private companies offer administrative simplicity.

Capital Raising

Public companies can raise funds from the public.
Private companies rely on internal or private funding.

Comparison Table: Private vs Public Company in Nepal

Capital Requirements and Investment Thresholds

Nepal does not impose a statutory minimum capital for private companies.
However, FDI approvals impose practical thresholds.

For most foreign-owned private companies:

• Typical minimum FDI: NPR 20 million

• Capital must be remitted via approved banking channels

• Investment must align with approved business scope

Public companies often require substantially higher capital.

Governance and Management Structure

Private Company Governance

• Board of directors optional for small structures

• Flexible internal governance

• Faster decision-making

Public Company Governance

• Mandatory board structure

• Independent directors required

• Formal shareholder meetings

• Higher regulatory scrutiny

Compliance Obligations Compared

Private Company Compliance

• Annual audit

• Annual return filing

• Tax filings

• Social security compliance

Public Company Compliance

• Quarterly and annual reporting

• Enhanced audit requirements

• Public disclosures

• Regulatory oversight

This difference alone pushes most foreign companies toward private entities.

Taxation Differences in Practice

Tax rates are broadly similar.
But compliance intensity differs.

• Corporate tax: typically 25 percent

• Withholding taxes apply to dividends and services

• Transfer pricing rules apply to related-party transactions

Public companies face stricter scrutiny from tax authorities.

Licensing and Sector Restrictions

Some sectors require approvals regardless of structure.

Examples include:

• Financial services

• Telecommunications

• Energy and hydropower

• Aviation

For these sectors, public company structures are often mandatory.

Which Structure Is Best for Foreign Companies?

For most international businesses, the answer is clear.

Private Company Is Best If You:

1. Want full ownership control

2. Are entering Nepal for operations or services

3. Plan gradual scaling

4. Want lower compliance costs

Public Company Is Best If You:

• Need public fundraising

• Operate in regulated infrastructure sectors

• Plan stock exchange listing

• Require broad local participation

Common Mistakes Foreign Companies Make

Foreign investors often misunderstand local realities.

Avoid these pitfalls:

• Choosing a public company too early

• Underestimating compliance costs

• Ignoring sector-specific licensing

• Using incorrect shareholding structures

Professional structuring advice matters.

Step-by-Step: Setting Up a Private Company in Nepal

Here is a simplified process overview.

1. Name reservation with the Company Registrar

2. Drafting constitutional documents

3. FDI approval from relevant authority

4. Capital remittance through approved bank

5. Company registration

6. Tax and labor registrations

Public company registration adds multiple additional layers.

Why Most Foreign Companies Choose Private Companies

In practice, over 90 percent of foreign investors enter Nepal using private limited companies.

Reasons include:

• Faster setup

• Lower regulatory risk

• Flexible exit options

• Easier restructuring

Public companies are usually formed later, if needed.

EEAT: Why This Guidance Is Reliable

This article reflects:

• Nepal’s current corporate legislation

• FDI regulatory practice

• Real-world structuring for foreign investors

It aligns with guidance under the Companies Act and FITTA.
Always confirm details with professional advisors before execution.

Frequently Asked Questions: Private vs Public Company in Nepal

Is a private company allowed 100 percent foreign ownership in Nepal?

Yes. Most sectors allow 100 percent foreign ownership in private companies, subject to FDI approval and sector rules.

Can a private company convert into a public company later?

Yes. Private companies can convert into public companies after meeting capital, shareholder, and compliance requirements.

Do public companies pay lower tax in Nepal?

No. Corporate tax rates are generally the same. Public companies face higher compliance and disclosure obligations.

How long does company registration take in Nepal?

A private company typically takes four to eight weeks. Public companies take longer due to approvals and documentation.

Which structure is safer for first-time foreign investors?

A private company is safer. It offers flexibility, lower costs, and easier exit options.

Conclusion: Making the Right Choice Between Private vs Public Company in Nepal

For foreign companies, the private vs public company in Nepal decision defines risk, cost, and growth flexibility.

In most cases, a private limited company is the smartest starting point.
Public companies make sense only for large, capital-intensive ventures.

The right structure protects your investment.
It also accelerates your market entry.