Digital Revolution: How to Create a Company in Nepal in the Digital Age

Choosing between a private vs public company in Nepal is one of the most strategic decisions a foreign investor will make. It affects ownership control, compliance exposure, fundraising options, timelines, and long term exit flexibility.

Nepal has quietly entered a digital transformation phase. Company registration, foreign investment approvals, and statutory filings are now faster, more transparent, and increasingly online. For international founders and multinationals, this creates a clear opportunity if the structure is chosen correctly from day one.

This guide explains the private vs public company in Nepal in plain business language. It is written specifically for foreign companies evaluating market entry, shared services centers, or long term investment strategies.

Nepal’s Digital Shift in Company Registration

Nepal’s corporate ecosystem is governed primarily by the Companies Act, 2006, supported by the Foreign Investment and Technology Transfer Act (FITTA) 2019 and administered by the Office of the Company Registrar.

Key digital improvements include:

• Online name reservation

• Electronic filing of incorporation documents

• Digitized PAN and tax registrations

• Integrated foreign investment approval workflows

For foreign companies, this digital shift reduces entry friction, but it does not eliminate structural risk if the wrong company type is selected.

What Is a Private Company in Nepal?

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

Legal Definition

Under the Companies Act, a private company in Nepal:

• Limits the number of shareholders to 101

• Restricts the transfer of shares

• Prohibits public share invitations

It is designed for controlled ownership and operational flexibility.

Why Foreign Companies Prefer Private Companies

Private companies are favored because they:

• Allow 100 percent foreign ownership (subject to sector approval)

• Require lower minimum compliance

• Enable faster decision-making

• Reduce public disclosure risk

For most foreign entrants, this structure balances speed, control, and compliance efficiency.

What Is a Public Company in Nepal?

A public limited company is a highly regulated structure designed for capital markets.

Legal Definition

A public company in Nepal:

• Has a minimum of 7 shareholders

• Can invite the public to subscribe to shares

• Must comply with capital market and securities regulations

It is often regulated by the Securities Board of Nepal in addition to company law.

Typical Use Cases

Public companies are usually established when:

• Raising capital from the general public

• Planning a stock exchange listing

• Operating large infrastructure or financial projects

For most foreign SMEs and service businesses, this structure is unnecessary at entry stage.

Private vs Public Company in Nepal: Core Differences

Structural Comparison Table

This comparison highlights why private vs public company in Nepal decisions should be driven by business intent, not perception of scale.

Digital Incorporation Process for Foreign Investors

Nepal’s digital systems simplify but do not replace legal rigor.

Step-by-Step Digital Process

1. Online company name reservation

2. Submission of incorporation documents

3. Foreign investment approval under FITTA

4. Company registration certificate issuance

5. PAN and tax registration

6. Local bank account opening

Each step requires accurate structuring aligned with whether you choose a private or public company.

Compliance Obligations: Private vs Public Company in Nepal

Private Company Compliance

Private companies must:

• Maintain statutory registers

• File annual returns

• Submit audited financial statements

• Comply with tax and labor laws

Disclosure remains largely confidential.

Public Company Compliance

Public companies must additionally:

• Publish financial statements publicly

• Follow securities reporting rules

• Hold statutory general meetings

• Comply with capital market oversight

This creates higher recurring costs and governance exposure.

Ownership, Control, and Exit Strategy

Control Dynamics

Private companies allow:

• Founder level control

• Shareholder agreements

• Restricted share transfers

Public companies dilute control due to:

• Wider shareholder base

• Mandatory disclosures

• Regulatory scrutiny

Exit Planning

Foreign investors often start with a private company and later convert to public status once scale, valuation, and governance maturity justify it.

Taxation and Financial Reporting Considerations

Both company types are taxed under Nepal’s Income Tax Act.

Key points:

• Corporate tax rates are sector specific

• Dividend repatriation is regulated

• Transfer pricing applies to related party transactions

Public companies face deeper audit scrutiny and reporting transparency requirements.

Common Mistakes Foreign Investors Make

Avoid these pitfalls:

• Choosing a public company for credibility alone

• Underestimating compliance costs

• Ignoring sector-specific FDI restrictions

• Failing to plan for repatriation and exit

Understanding private vs public company in Nepal early prevents expensive restructuring later.

When Does a Public Company Make Sense?

A public company is appropriate if you:

• Plan to raise capital locally

• Require public trust through listing

• Operate regulated financial or infrastructure businesses

Otherwise, a private company offers superior flexibility.

Practical Recommendation for Foreign Companies

For most foreign entrants:

• Start with a private limited company

• Validate operations and market fit

• Scale governance gradually

• Convert to public only when required

This phased approach aligns with Nepal’s regulatory reality.

Frequently Asked Questions: Private vs Public Company in Nepal

1. Can a foreigner own 100 percent of a private company in Nepal?

Yes. Subject to sector approval under FITTA, foreigners can fully own private companies.

2. Is a public company mandatory for foreign investment?

No. Most foreign investments use private companies.

3. Can a private company later become public?

Yes. Conversion is legally permitted once requirements are met.

4. Which structure has lower compliance cost?

Private companies have significantly lower compliance and disclosure costs.

5. How long does digital company registration take in Nepal?

Typically, 3–6 weeks for private companies if documents are complete.

Conclusion: Making the Right Choice in the Digital Age

Choosing between a private vs public company in Nepal is not about prestige. It is about control, compliance, scalability, and risk management.

For foreign companies entering Nepal’s digital economy, a private limited company remains the smartest, fastest, and most flexible structure. Public companies should be reserved for mature, capital intensive strategies.