Do’s and Don’ts for Foreign Entrepreneurs in Nepal

If you are a foreign company entering Nepal, one of the first major decisions you’ll face is private vs public company structure. Many entrepreneurs treat it as a formality. It isn’t. It affects ownership control, compliance burden, FDI approval, fundraising flexibility, and long-term scalability.

This topic matters because Nepal’s regulatory framework is relationship-driven and compliance-sensitive. Your structure influences how regulators, banks, and investors perceive your business from day one.

This guide is designed for foreign companies—whether you’re expanding from Australia, China, India, Europe, or the US. In this post, we’ll break down private vs public company differences, outline the key do’s and don’ts for foreign entrepreneurs, explain step-by-step how to choose the right structure, and share practical insights from real cross-border setups.

If structured correctly, Nepal can be a high-margin, strategic market. If structured incorrectly, it can become slow and expensive.

Let’s make sure you choose wisely.

What Is Private vs Public Company, and Why Does It Matter?

Before discussing do’s and don’ts, let’s define the term clearly.

Private Company in Nepal

A private company:

• Limits the number of shareholders
• Restricts share transfer
• Cannot invite the public to subscribe shares
• Has lower compliance burden
• Is governed under the Companies Act, 2063 (2006)

Public Company in Nepal

A public company:

• Can issue shares to the public
• Requires higher minimum capital
• Has stricter governance requirements
• Requires more directors
• Is subject to additional regulatory oversight

Why This Matters for Foreign Companies

Choosing between private vs public company determines:

• Control vs public fundraising
• Speed of incorporation
• Reporting and audit requirements
• Board structure
• Capital strategy
• Exit flexibility

In practice, 90% of foreign direct investment (FDI) projects in Nepal start as private companies. Public companies are typically used when raising capital locally or preparing for stock exchange listing.

Structure equals strategy.

How to Choose Between Private vs Public Company in Nepal

Here is a clear, step-by-step breakdown.

Step 1: Define Your Capital Strategy

Ask yourself:

• Are you raising funds from the Nepali public?
• Or is funding coming entirely from your foreign parent company?

If capital is internal → Private company is usually appropriate.
If you plan IPO or public investment → Public company may be required.

Example:
An Australian mortgage back-office support firm entering Nepal typically chooses a private company because ownership remains offshore-controlled.

Step 2: Assess Compliance Tolerance

Public companies face:

• Higher disclosure requirements
• Mandatory board composition rules
• Greater reporting obligations
• Stricter corporate governance

If you want operational simplicity → Choose private.

Foreign entrepreneurs often underestimate compliance costs. Public structures require stronger internal governance frameworks.

Step 3: Consider Shareholder Structure

Private company:

• Limited shareholders
• Share transfers restricted
• Ideal for foreign parent-subsidiary model

Public company:

• Wider ownership base
• Share transfer flexibility
• Mandatory public disclosures

If you want tight ownership control → Private company is safer.

Step 4: Evaluate Minimum Capital Requirements

Public companies require higher paid-up capital.
Private companies have comparatively lower thresholds.

This affects:

• Cash flow planning
• FDI approval timing
• Bank account opening process

For capital-efficient entry strategies, private structures are more flexible.

Step 5: Align with FDI Approval Strategy

Under Nepal’s Foreign Investment framework:

• FDI approval is required before incorporation (unless structured differently under branch models).
• Sector restrictions apply.
• Investment thresholds must be met.

Most foreign entrepreneurs prefer a private limited company because:

• It aligns smoothly with FDI approvals.
• It simplifies dividend repatriation.
• It reduces administrative friction.

Do’s for Foreign Entrepreneurs in Nepal

✅ Do Choose Structure Based on Long-Term Strategy

Think 5–10 years ahead, not 6 months.

✅ Do Prioritize Control in Early Stages

Private companies provide tighter governance control.

✅ Do Understand Regulatory Perception

Banks and regulators view public companies differently. Choose only if strategic.

✅ Do Get Local Compliance Advice

Nepal’s system is document-heavy. A small error can delay incorporation.

✅ Do Align Structure with Tax Planning

Corporate tax implications vary based on structure and activity.

Don’ts for Foreign Entrepreneurs in Nepal

❌ Don’t Choose Public Company for Prestige

Some entrepreneurs assume “public” means stronger reputation. It also means heavier compliance.

❌ Don’t Ignore Governance Obligations

Public companies require stronger board governance.

❌ Don’t Underestimate Reporting Costs

Audit, disclosure, and filings increase operational costs.

❌ Don’t Delay FDI Strategy Planning

Structure and FDI approval are interconnected.

❌ Don’t Copy Another Company’s Structure Blindly

What works for a manufacturing investor may not work for a tech or services firm.

Practical Example: Services vs Capital-Heavy Businesses

Structure must match your funding model.

Tips to Avoid Costly Mistakes

• Conduct a structure workshop before filing documents.
• Map dividend repatriation flows in advance.
• Design board composition carefully.
• Review compliance calendar annually.
• Align structure with exit strategy.

Final Verdict: Private V.s Public Company

Choosing between private vs public company in Nepal is not just a legal formality. It shapes governance, compliance, funding, and long-term flexibility.

For most foreign companies entering Nepal, a private company offers speed, control, and capital efficiency. Public companies make sense when large-scale fundraising is planned.

The right structure reduces friction. The wrong structure creates years of administrative complexity.

Be strategic from day one.

Frequently Asked Questions (FAQ)

1. What is the main difference between private vs public company in Nepal?

A private company limits shareholders and cannot offer shares publicly. A public company can issue shares to the public and faces stricter governance and compliance requirements.

2. Can a foreign investor own 100% of a private company in Nepal?

Yes, in most sectors foreign investors can fully own a private company, subject to FDI approval and sector regulations.

3. Is a public company required for foreign investment in Nepal?

No. Most foreign investments are structured as private limited companies unless public fundraising is planned.

4. Does a public company pay more tax in Nepal?

Corporate tax rates are generally similar, but compliance and reporting costs are higher for public companies.

5. Can a private company later convert into a public company?

Yes, conversion is possible if regulatory requirements and capital thresholds are met.

Call to Action

If you’re planning to enter Nepal and want clarity on the right structure, compliance roadmap, and FDI process:

👉 Book a strategic consultation with our Nepal market entry team.

We’ll assess your business model, funding structure, and long-term objectives—and design the right private vs public company framework for your expansion.

Entering a new market should feel strategic, not stressful.

Let’s structure it right from the start.