Entrepreneur’s Handbook: How to Register Your New Business

Entering Nepal’s market starts with one strategic decision: Private vs public company in Nepal.

For foreign companies, this choice shapes taxation, ownership control, capital raising, compliance costs, and exit strategy. It determines whether your Nepal entity becomes a tightly controlled subsidiary or a capital-raising vehicle open to investors.

This comprehensive handbook explains both structures under Nepal’s legal framework, primarily governed by the Companies Act 2006 and the Foreign Investment and Technology Transfer Act 2019 (FITTA).

If you are expanding into South Asia, this guide gives you clarity, compliance confidence, and a structured roadmap.

Why Legal Structure Matters for Foreign Companies

Choosing between a private and public company is not a formality.

It influences:

• Capital flexibility
• Shareholding control
• Disclosure obligations
• Corporate governance
• Tax exposure
• Regulatory scrutiny

Nepal’s regulatory system is structured but formal. The Office of the Company Registrar (OCR) oversees company incorporation. The Department of Industry (DOI) approves foreign direct investment.

Your structure must align with both.

Private vs Public Company in Nepal: Legal Definitions

What Is a Private Company in Nepal?

Under the Companies Act 2006, a private company:

• Restricts share transfer
• Limits shareholders to 200
• Cannot invite the public to subscribe to shares
• Requires minimum 1 director
• Can be formed with 1–50 promoters initially

It is the most common structure for foreign investors.

Why Foreign Companies Prefer Private Companies

• Easier compliance
• Greater ownership control
• Faster incorporation
• Lower disclosure burden
• Ideal for subsidiaries

In practice, over 90% of FDI entities in Nepal register as private companies.

What Is a Public Company in Nepal?

A public company:

• Has no shareholder cap
• Can invite the public to subscribe shares
• Requires minimum 7 shareholders
• Requires minimum 3 directors
• Must comply with securities regulations

Public companies fall under additional oversight from the Securities Board of Nepal (SEBON) if they issue shares publicly.

They are suitable for:

• Large infrastructure projects
• Banks and financial institutions
• Capital-intensive industries
• IPO-driven strategies

Side-by-Side Comparison Table

Insight:
For 95% of foreign market entrants, a private company offers optimal flexibility with controlled compliance exposure.

Legal Framework Governing Both Structures

Foreign companies must comply with:

1. Companies Act 2006
2. Foreign Investment and Technology Transfer Act 2019
3. Industrial Enterprises Act 2020
4. Income Tax Act 2002
5. Nepal Rastra Bank directives for capital repatriation

Each law impacts registration and operations.

Step-by-Step Guide: How to Register a Company in Nepal

Below is the structured registration roadmap.

Step 1: Name Reservation

Submit application to the Office of the Company Registrar.
Name approval usually takes 1–3 working days.

Step 2: Prepare Constitutional Documents

Required:

• Memorandum of Association (MOA)
• Articles of Association (AOA)
• Share structure
• Promoter details

For FDI entities, board resolutions from the parent company are mandatory.

Step 3: Foreign Investment Approval (If Applicable)

Foreign investors must obtain approval from the Department of Industry.

Documents include:

• Investment proposal
• Financial credibility documents
• Passport/incorporation certificate
• Business plan

Approval timeline: 2–6 weeks.

Step 4: Company Incorporation Certificate

Upon approval and submission, OCR issues:

• Certificate of Incorporation
• PAN registration

Step 5: Capital Injection

Capital must be remitted via banking channels and verified by Nepal Rastra Bank.

Step 6: Post-Incorporation Compliance

• VAT registration (if required)
• Social Security Fund registration
• Local ward registration
• Industry registration

When Should You Choose a Private Company?

Choose a private company if:

• You are setting up a wholly owned subsidiary
• You want ownership control
• You do not plan immediate IPO
• You want simpler governance
• You aim for operational flexibility

It is ideal for tech companies, consulting firms, manufacturing units, and outsourcing operations.

When Should You Choose a Public Company?

Choose a public company if:

• You need large capital infusion
• You plan public share offerings
• You are entering banking or insurance
• Your project exceeds multi-million dollar infrastructure scale

Public structures suit power projects and large manufacturing zones.

Tax Implications

Corporate income tax is governed by the Income Tax Act 2002.

Standard corporate tax rate: 25%
Certain industries qualify for reduced rates.

Dividend distribution is subject to withholding tax.

There is no structural tax difference between private and public companies.

However, public companies incur higher compliance costs.

Governance & Compliance Differences

Private Company

• Annual General Meeting required
• Annual return filing
• Board meeting documentation
• Financial audit

Public Company

• Enhanced disclosures
• SEBON reporting (if listed)
• Prospectus compliance
• Independent directors required

Governance is stricter in public companies.

Capital Raising Flexibility

Risk Management Perspective

Foreign companies must consider:

• Profit repatriation rules
• Permanent establishment exposure
• Transfer pricing
• Dividend distribution compliance
• Sectoral restrictions under FITTA

A private company provides easier ring-fencing of risk.

Common Mistakes Foreign Investors Make

1. Choosing public structure unnecessarily
2. Underestimating compliance costs
3. Ignoring capital repatriation procedures
4. Not aligning shareholding with exit strategy
5. Poor drafting of MOA/AOA

Strategic structuring prevents regulatory friction later.

Frequently Asked Questions 

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

A private company restricts share transfer and limits shareholders to 200. A public company can offer shares to the public and has unlimited shareholders.

2. Can a foreign investor open a public company in Nepal?

Yes. But it requires minimum seven shareholders and higher compliance. Most FDI investors choose private companies.

3. Is there a minimum capital requirement?

There is no fixed minimum capital for most sectors. However, FDI approval often requires a minimum threshold as per FITTA guidelines.

4. How long does company registration take?

Private company registration typically takes 2–4 weeks including FDI approval.

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

Yes. Conversion is allowed under the Companies Act 2006 subject to regulatory approval.

Strategic Recommendation for Foreign Companies

If you are entering Nepal for operational expansion, outsourcing, manufacturing, or services, a private company is typically optimal.

If your model includes large-scale capital mobilization or IPO, then public structure makes sense.

Most international firms begin private and convert later.

Conclusion: Choosing Between Private vs Public Company in Nepal

The decision between Private vs public company in Nepal is strategic, not administrative.

It defines governance complexity, capital flexibility, and compliance exposure.

For most foreign investors, a private company delivers speed, control, and regulatory simplicity.

If you are evaluating Nepal market entry, our advisory team can structure your entity for compliance, tax efficiency, and long-term scalability.

Ready to register your company in Nepal?
Book a consultation today and receive a tailored incorporation roadmap aligned with your sector and investment size.