Exploring Nepal's Export Markets: Insights for Foreign Investors

Entering a new market requires clarity. When evaluating Private vs public company in Nepal, foreign investors must understand not only legal structures but also how each model supports export growth, capital access, and compliance.

Nepal offers strategic trade access to India and China. It also enjoys preferential export arrangements with the EU and the United States. But choosing the wrong company structure can limit fundraising, delay regulatory approvals, and complicate repatriation.

This guide provides a clear comparison tailored for foreign companies exploring Nepal’s export markets. It blends legal insight, commercial strategy, and practical risk analysis.

Nepal’s Export Landscape: Why Structure Matters

Nepal’s economy is evolving. According to the World Bank, Nepal’s GDP growth has been stabilizing post-pandemic, with manufacturing and hydropower positioned as high-potential sectors.

Key export categories include:

• Handicrafts and carpets
• Garments and textiles
• Tea and cardamom
• Hydropower and energy-related services
• IT and outsourcing services

Nepal benefits from:

• Duty-free access to India under bilateral treaties
• Trade preferences to the EU under GSP arrangements
• US market access under preferential programs
• Competitive labor costs
• 100% foreign ownership in most sectors under the Foreign Investment and Technology Transfer Act (FITTA)

However, your export ambitions must align with your company structure. This is where the Private vs public company in Nepal debate becomes critical.

Understanding the Legal Framework in Nepal

Company formation in Nepal is governed by the Companies Act 2063.

Foreign investment is regulated under FITTA 2019 and monitored by the Department of Industry (DOI).

Public capital market activity falls under the Securities Board of Nepal (SEBON).

These frameworks define:

• Shareholding structure
• Minimum capital requirements
• Reporting obligations
• Public disclosure standards
• Governance requirements

What Is a Private Company in Nepal?

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

Core Characteristics

• Minimum 1 director
• 1 to 101 shareholders
• Restriction on share transfer
• Cannot invite public subscription
• Lower disclosure requirements

Private companies are registered at the Office of Company Registrar. They are ideal for controlled ownership structures.

Why Foreign Exporters Prefer Private Companies

For export-focused foreign investors, private companies offer:

• Tight board control
• Easier decision-making
• Limited compliance burden
• Faster incorporation timelines
• Clear dividend repatriation process via commercial banks

Most foreign manufacturing and IT export firms enter Nepal as private companies.

What Is a Public Company in Nepal?

A public limited company can offer shares to the general public and must comply with stricter governance standards.

Core Characteristics

• Minimum 7 shareholders
• Minimum 3 directors
• Mandatory public disclosure
• Subject to SEBON oversight
• Can list on the Nepal Stock Exchange (NEPSE)

Public companies are typically used for:

• Large hydropower projects
• Infrastructure development
• Banking and finance
• Capital-intensive export industries

Private vs Public Company in Nepal: Strategic Comparison for Export Investors

Comparison Table for Foreign Investors

When Should a Foreign Investor Choose a Private Company?

You should consider a private structure if:

1. You want full foreign ownership.
2. You are entering Nepal for export manufacturing.
3. You prefer tight board and bank signatory control.
4. You aim for dividend repatriation with minimal public reporting.
5. Your capital requirement is moderate.

This structure works well for:

• Garment export units
• IT outsourcing firms
• Renewable energy EPC contractors
• Trading and distribution companies

When Does a Public Company Make Sense?

Public companies are appropriate when:

• You need large-scale capital.
• You plan infrastructure projects.
• You want domestic co-investors.
• You aim to list shares on NEPSE.
• Regulatory credibility is crucial.

Hydropower companies often adopt this structure due to high capital expenditure.

Governance & Compliance: What Foreign Investors Must Know

Private companies must file:

• Annual returns
• Financial statements
• Tax returns under the Income Tax Act 2058

Public companies must additionally:

• Publish audited reports
• Conduct annual general meetings
• Maintain independent directors
• Disclose material events

Compliance costs for public companies can be 2–3 times higher than private entities.

Taxation & Repatriation Considerations

Nepal’s corporate tax rate is generally 25%. Certain sectors receive concessions.

Export-oriented industries may receive:

• Customs duty exemptions
• VAT refunds
• Income tax incentives in Special Economic Zones

Repatriation requires:

• Audited financial statements
• Tax clearance certificate
• Board resolution approving dividend
• Commercial bank processing

Recent regulatory updates have streamlined dividend processing through commercial banks. Prior central bank approvals are no longer required in most cases.

Capital Raising & Market Credibility

Public companies benefit from:

• Retail investor funding
• Institutional investment
• Greater domestic credibility

However, foreign-controlled export ventures often prioritize operational efficiency over public listing.

For most foreign SMEs, private structures reduce complexity.

Risk Analysis: Export Strategy Alignment

Your export strategy should dictate your company structure.

If your export model is:

Low-volume, high-margin:
Private company recommended.

High-capex manufacturing:
Public company may support capital pooling.

Joint venture with Nepali investors:
Either structure works, depending on scale.

Technology outsourcing:
Private company offers agility.

Regulatory Bodies Foreign Investors Should Understand

• Department of Industry
• Office of Company Registrar
• Inland Revenue Department
• Securities Board of Nepal
• Nepal Stock Exchange

Each body has distinct compliance roles.

Understanding their mandates avoids delays.

Practical Decision Framework for Foreign Companies

Before deciding between private vs public company in Nepal, ask:

1. How much capital is required?
2. Do you need public fundraising?
3. How important is ownership control?
4. What is your export growth timeline?
5. Do you plan to list shares?

For 80% of foreign export investors, a private company provides optimal balance.

Common Mistakes Foreign Investors Make

• Overestimating the need for public listing
• Ignoring compliance costs
• Underestimating governance requirements
• Misaligning capital structure with export strategy
• Failing to plan dividend repatriation early

Strategic structuring prevents long-term inefficiencies.

Frequently Asked Questions (People Also Ask)

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

Yes. Under FITTA 2019, 100% foreign ownership is allowed in most sectors except restricted industries.

2. Is a public company mandatory for large projects?

Not always. Only certain sectors like banking require public structures. Many large projects operate privately.

3. How long does incorporation take in Nepal?

Typically 2–4 weeks, depending on sector approvals and foreign investment clearance.

4. Can profits be repatriated easily?

Yes. With audited accounts and tax clearance, dividends are processed through commercial banks.

5. Is compliance significantly higher for public companies?

Yes. Public companies must meet SEBON disclosure and governance standards.

Conclusion: Choosing the Right Structure for Export Success

Understanding Private vs public company in Nepal is more than a legal exercise. It shapes governance, capital access, and export scalability.

Private companies offer control and agility. Public companies offer capital depth and credibility.

For most foreign investors targeting Nepal’s export markets, the private limited structure delivers speed, control, and efficient compliance.

The right decision depends on your capital intensity, fundraising strategy, and long-term growth plans.