If you are evaluating private vs public company in Nepal, you are already asking the right strategic question. The structure you choose will determine control, taxation, reporting obligations, capital raising ability, and long-term exit flexibility.

Nepal is positioning itself as a competitive South Asian investment destination. Reforms under the Foreign Investment and Technology Transfer Act (FITTA 2019) and the Industrial Enterprises Act have simplified foreign ownership. Company formation is governed by the Companies Act, while taxation falls under the Income Tax Act.

But the real question for foreign companies is not just legal compliance.

It is strategic positioning.

This guide explains the differences, legal framework, tax exposure, compliance burden, and decision matrix for 2026 investors entering Nepal.

Why Structure Matters for Foreign Investors

Your company type determines:

1. Shareholding flexibility
2. Capital raising capability
3. Regulatory reporting level
4. Board governance requirements
5. Exit and IPO readiness
6. Risk exposure and public scrutiny

In Nepal, foreign investors typically choose between:

• Private Limited Company
• Public Limited Company

Each has different implications under Nepalese corporate law.

Legal Framework Governing Companies in Nepal

Foreign investors must navigate four key legal pillars:

• Companies Act 2006 – Governs company registration and governance
• FITTA 2019 – Governs foreign investment approvals
• Industrial Enterprises Act 2020 – Defines industry classification and incentives
• Income Tax Act 2002 – Governs taxation

Regulatory authorities include:

• Office of the Company Registrar (OCR)
• Department of Industry (DOI)
• Inland Revenue Department (IRD)
• Nepal Rastra Bank (NRB)

NRB approval is required for foreign capital inflow and repatriation.

What Is a Private Company in Nepal?

A Private Limited Company is the most common structure for foreign investors.

Key Characteristics

• Minimum 1 shareholder
• Maximum 101 shareholders
• Cannot publicly trade shares
• Restricts share transfer
• Limited liability

Foreign investors often prefer this structure for:

• Subsidiaries
• Joint ventures
• Back-office operations
• Technology and services companies

It offers tighter control and simpler compliance.

What Is a Public Company in Nepal?

A Public Limited Company is designed for larger ventures.

Key Characteristics

• Minimum 7 shareholders
• No maximum shareholder limit
• Can offer shares to the public
• Must comply with stricter disclosure rules
• Requires minimum paid-up capital as prescribed

Public companies are regulated more strictly. If listed, they must comply with securities laws overseen by the Securities Board of Nepal.

This structure suits:

• Infrastructure projects
• Banking and insurance
• Large manufacturing
• Companies seeking IPO

Private vs Public Company in Nepal: Detailed Comparison

Below is a strategic comparison designed specifically for foreign companies.

Strategic Insight

If your goal is operational efficiency and control, choose private.

If your goal is capital scale and market credibility, choose public.

Registration Process for Foreign Investors

Foreign investors must follow a structured process:

Step-by-Step Incorporation

1. Obtain foreign investment approval from DOI
2. Incorporate company at OCR
3. Open bank account and inject capital
4. Register for PAN and VAT
5. Obtain industry-specific licenses
6. Register with Social Security Fund

Under FITTA 2019, minimum foreign investment thresholds apply (subject to updates).

Capital and Tax Considerations

Corporate income tax in Nepal generally stands at 25% for most industries.
Certain industries enjoy incentives.

Tax Incentives May Apply For:

• Export industries
• Hydropower
• Special Economic Zones
• IT and technology services

The Industrial Enterprises Act 2020 provides:

• Tax holidays
• Customs exemptions
• Depreciation benefits

Public companies do not enjoy automatic tax advantages solely due to structure.

Tax exposure depends on activity, not structure.

Compliance Requirements: Private vs Public

Private Company Compliance

• Annual general meeting
• Annual return filing
• Financial audit
• Tax filings

Public Company Additional Requirements

• Quarterly reporting
• Independent directors
• Public disclosures
• Securities compliance

Compliance cost for public companies is significantly higher.

Governance and Control Differences

Foreign investors often prioritize governance control.

Private companies allow:

• Founder-drafted Articles of Association
• Share transfer restrictions
• Controlled board composition

Public companies require:

• Broader shareholder accountability
• Regulatory oversight
• Transparency requirements

For most foreign subsidiaries, private structure is safer and more flexible.

When Should a Foreign Company Choose Public Structure?

Consider public structure if:

• You plan IPO within 5 years
• You need domestic capital raising
• You are entering infrastructure or finance
• You require public credibility

Otherwise, private structure remains optimal.

Risk Architecture for Foreign Investors

Choosing the wrong structure can create:

• Excess compliance burden
• Reduced control
• Capital restrictions
• Unintended regulatory exposure

Private companies reduce public exposure and protect strategic control.

Public companies increase transparency and funding potential.

Industry-Specific Recommendations

IT and Outsourcing

Private limited is ideal.
Allows foreign ownership and operational control.

Manufacturing

Private initially.
Convert to public if expansion demands capital.

Infrastructure

Public company often required due to scale.

Foreign Ownership Rules

Under FITTA 2019:

• 100% foreign ownership permitted in most sectors
• Restricted sectors listed separately
• Capital repatriation allowed via NRB approval

Repatriation includes:

• Dividends
• Technology fees
• Royalties
• Loan repayment

Cost Comparison: Private vs Public

Public companies face higher professional fees.

Long-Term Exit Strategy

Private companies allow:

• Share transfer to strategic investors
• M&A flexibility

Public companies allow:

• IPO
• Secondary market liquidity

Exit strategy should influence your structure choice.

Decision Matrix for 2026 Investors

Choose Private Limited Company if:

• You want operational control
• You are establishing a subsidiary
• You are testing the Nepal market
• You want limited compliance exposure

Choose Public Limited Company if:

• You need public capital
• You are building a national-scale venture
• You plan public listing

Common Mistakes Foreign Investors Make

• Choosing public structure prematurely
• Ignoring capital repatriation planning
• Underestimating compliance costs
• Failing to structure shareholder agreements properly

Professional structuring advice reduces long-term risk.

Conclusion: Private vs Public Company in Nepal

The debate around private vs public company in Nepal is not about which is better.

It is about which aligns with your strategic objective.

For most foreign companies entering Nepal in 2026:

Private Limited Company offers control, flexibility, and manageable compliance.

Public Limited Company suits large-scale capital-driven ventures.

The right structure protects your capital, reputation, and growth potential.

If you are planning entry into Nepal, now is the time to structure correctly.

Frequently Asked Questions

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

Yes. FITTA 2019 permits 100% foreign ownership in most sectors, except restricted industries.

2. Is there a minimum capital requirement for public companies?

Yes. Public companies must meet prescribed paid-up capital requirements under the Companies Act.

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

Yes. Conversion is allowed after fulfilling regulatory conditions and shareholder approval.

4. Is taxation different between private and public companies?

No. Corporate tax rates generally apply equally. Incentives depend on industry, not structure.

5. Which structure is faster to register?

Private companies are typically faster due to fewer regulatory requirements.