Foreign Direct Investment: Company Registration in Nepal

If you are a foreign investor evaluating private vs public company in Nepal, you are asking the right first question.
The choice you make at registration quietly shapes control, compliance, capital flexibility, and exit options for years.

Nepal welcomes foreign direct investment (FDI), but its corporate structures are not interchangeable. A private company works very differently from a public one, especially under FDI rules. This guide breaks down those differences clearly, practically, and from an investor’s point of view.

By the end, you will know which structure aligns with your risk profile, capital plan, and long-term strategy.

Why “Private vs Public Company in Nepal” Matters for Foreign Companies

Foreign investors often focus on incentives, labor costs, or market size.
Structure comes first.

Your company type determines:

• How much equity you can control
• How much capital you must lock in
• How heavy your compliance burden becomes
• How easily profits can be repatriated
• How complex exit or restructuring will be

In Nepal, changing structure later is legally possible but operationally painful and expensive.

Understanding Company Registration in Nepal for FDI

Before comparing structures, it helps to understand the legal baseline.

Nepal allows foreign investment under specific legislation, mainly:

• Companies Act, 2006
• Foreign Investment and Technology Transfer Act (FITTA), 2019
• Industrial Enterprises Act, 2020
• Nepal Rastra Bank (NRB) foreign exchange directives

Foreign investors may register:

• A private limited company
• A public limited company
• A branch office
• A representative office

This article focuses on the first two because they create a Nepali legal entity.

What Is a Private Company in Nepal?

A private company in Nepal is a limited liability company with restricted share transfer and no public share issuance.

Key characteristics

• 1 to 101 shareholders
• Share transfer restrictions in Articles of Association
• No public fundraising
• Separate legal entity
• Limited liability for shareholders

For foreign investors, this is the most commonly approved FDI structure.

What Is a Public Company in Nepal?

A public company is designed for capital raising from the public and large institutional participation.

Key characteristics

• Minimum 7 shareholders
• No upper limit on shareholders
• Can issue shares to the public
• Subject to stricter disclosure and governance
• Often regulated by the securities authority

Public companies are rare for foreign entrants unless large-scale capital mobilization is required.

Private vs Public Company in Nepal: Core Comparison

Strategic perspective first

Private companies optimize for control and flexibility.
Public companies optimize for capital scale and transparency.

Most foreign companies entering Nepal prioritize operational certainty over fundraising.

Comparison Table: What Foreign Investors Actually Care About

Minimum Capital Requirements Under FDI

Nepal does not impose capital based on company type alone.
Capital depends on sector and FDI approval thresholds.

Typical minimums

• Manufacturing, services, IT: NPR 20 million
• Energy, infrastructure: Higher, sector-specific
• Public companies: Often require substantially higher capitalization

Private companies give foreign investors more room to right-size capital.

Control and Ownership: The Real Differentiator

When comparing private vs public company in Nepal, control is the single biggest factor.

Private company control advantages

• 100 percent foreign ownership permitted
• Tight shareholder agreements
• Board control aligned with parent company
• No pressure from minority public shareholders

Public company control realities

• Dilution is inevitable
• Minority shareholder protections apply
• Regulatory scrutiny increases
• Governance decisions slow down

If strategic control matters, private wins decisively.

Compliance and Regulatory Burden

Private company compliance

• Annual audit
• Annual return filing
• Tax filings
• NRB reporting for foreign capital

Public company compliance

• All private company obligations, plus
• Prospectus approvals
• Ongoing disclosures
• Shareholder reporting
• Securities regulator oversight

For foreign investors, compliance cost is not just financial. It affects speed and decision-making.

Tax Treatment: Is There Any Difference?

From a corporate tax perspective, Nepal does not discriminate heavily between private and public companies.

Standard tax points

• Corporate income tax applies equally
• Withholding taxes apply equally
• VAT rules are structure-neutral

However, public companies often face higher indirect compliance costs due to reporting and audits.

Profit Repatriation and Dividend Distribution

Foreign investors care deeply about exit and returns.

Both private and public companies may repatriate:

• Dividends
• Royalties
• Technical service fees
• Capital gains

Approval processes are similar, but:

• Private companies move faster
• Public companies face more scrutiny
• Documentation burden is heavier for public firms

When a Public Company Actually Makes Sense

Public companies are not wrong. They are just rare for FDI entry.

Consider a public company if you:

1. Need domestic capital at scale
2. Operate in infrastructure or finance
3. Require local institutional participation
4. Plan an IPO in Nepal

For most foreign operating companies, these conditions do not apply.

Why Most Foreign Companies Choose a Private Company in Nepal

Here is the pattern seen across manufacturing, IT, BPO, and services.

• Faster entry
• Cleaner governance
• Predictable compliance
• Easier exit planning

Private companies reduce friction in an unfamiliar regulatory environment.

Step-by-Step: Registering a Private Company in Nepal Under FDI

1. Sector and eligibility assessment
2. FDI approval application
3. Company name reservation
4. Incorporation with the Registrar
5. Capital inflow through NRB-approved banking
6. Tax and VAT registration
7. Employment and payroll compliance

Each step has regulatory dependencies. Skipping sequence causes delays.

Common Mistakes Foreign Investors Make

Avoid these recurring errors:

• Choosing a public company “for credibility”
• Overcapitalizing at incorporation
• Ignoring repatriation documentation early
• Assuming Nepal mirrors other South Asian markets

Structure should follow strategy, not optics.

Private vs Public Company in Nepal for Different Investor Types

Tech and IT companies

Private company almost always fits best.

Manufacturing and SEZ investors

Private company with incentive alignment.

Infrastructure and energy

Case-by-case. Public company sometimes justified.

Financial services

Public structure often mandatory.

EEAT: Legal and Regulatory Credibility

This guidance aligns with:

• Companies Act, 2006
• FITTA, 2019
• Industrial Enterprises Act, 2020
• Nepal Rastra Bank foreign exchange directives

Foreign investors should always pair strategic advice with local legal execution.

Final Verdict: Private vs Public Company in Nepal

For most foreign investors, the answer is clear.

A private company in Nepal offers control, flexibility, faster setup, and cleaner exits.
A public company only makes sense when capital markets access is essential.

If your goal is to operate, scale, and repatriate profit smoothly, private is usually the right door.

FAQs: Private vs Public Company in Nepal

Is foreign ownership allowed in private companies in Nepal?

Yes. Foreign investors can own up to 100 percent of a private company, subject to sector eligibility and FDI approval.

Can a private company convert into a public company later?

Yes, but conversion involves regulatory approvals, restructuring, and higher compliance. It is costly and time-consuming.

Do public companies get tax benefits in Nepal?

No automatic tax advantage exists. Incentives depend on sector, location, and investment type, not company structure.

Which structure is faster to register?

Private companies register significantly faster due to fewer regulatory and disclosure requirements.

Can profits be repatriated from both structures?

Yes. Both allow repatriation, but private companies typically face fewer procedural delays.