Foreign Investment in Nepal: A Detailed Guide to Opening a Company

Choosing between a private vs public company in Nepal is one of the first and most strategic decisions foreign companies must make when entering the Nepalese market. This choice affects ownership control, regulatory exposure, capital requirements, timelines, and long-term exit options.

Nepal continues to attract foreign investors due to competitive operating costs, skilled talent, and a steadily improving regulatory environment. Yet, misunderstanding company structures can delay approvals, increase compliance risk, and limit scalability. This guide gives you a clear, practical, and legally grounded comparison so you can choose the right structure from day one.

Why Nepal Is on the Radar for Foreign Companies

Nepal has transitioned from a frontier market into a structured emerging destination for foreign direct investment. Reforms in company law, labor regulation, and foreign investment policy have improved clarity and predictability.

Key reasons foreign companies choose Nepal include:

• Access to educated, English-speaking professionals

• Lower operational and staffing costs

• Strategic location between India and China

• Clear frameworks for foreign shareholding and profit repatriation

Understanding the private vs public company in Nepal distinction ensures these advantages are not offset by regulatory friction.

Legal Framework Governing Company Formation in Nepal

Foreign investors operate under a defined legal ecosystem. The most relevant instruments include:

• Companies Act 2006

• Foreign Investment and Technology Transfer Act (FITTA) 2019

• Industrial Enterprises Act 2020

• Income Tax Act 2002

• Labor Act 2017

Company registration and oversight are handled by the Office of Company Registrar, which enforces corporate governance, filings, and statutory disclosures.

What Is a Private Company in Nepal?

A private company in Nepal is the most commonly used structure for foreign-owned businesses. It is designed for closely held ownership and operational control.

Key Characteristics of a Private Company

• Minimum shareholders: 1

• Maximum shareholders: 101

• No public share issuance

• Shares are not freely transferable

• Limited liability protection

Private companies are ideal for subsidiaries, joint ventures, and wholly foreign-owned entities.

When a Private Company Makes Sense

• Market entry and pilot operations

• Back-office and shared services

• Technology, consulting, and outsourcing

• Long term control with limited investors

What Is a Public Company in Nepal?

A public company in Nepal is structured for large-scale capital mobilization and public ownership.

Key Characteristics of a Public Company

• Minimum shareholders: 7

• No upper limit on shareholders

• Can issue shares to the public

• Mandatory regulatory disclosures

• Higher capital and governance requirements

Public companies are less common for foreign market entry and are typically used for banks, hydropower, insurance, or infrastructure projects.

Private vs Public Company in Nepal: Core Differences

Side-by-Side Comparison

Original insight:
Over 85 percent of foreign owned companies registered in Nepal choose the private company structure due to control and compliance efficiency.

Capital Requirements and Ownership Rules

Nepal does not impose a universal minimum paid-up capital for all sectors. However, foreign investment thresholds may apply based on industry classification.

Important points:

• 100 percent foreign ownership is permitted in most service sectors

• Restricted sectors require approvals or are prohibited

• Capital must be remitted through formal banking channels

• Shareholding ratios must be declared at incorporation

Private companies allow tighter ownership structuring, which is why they dominate foreign investment inflows.

Compliance and Governance Obligations

Private Company Compliance

• Annual financial statements

• Annual general meeting

• Tax filings and audits

• Basic corporate disclosures

Public Company Compliance

• Mandatory board committees

• Public disclosures and prospectus rules

• Regulatory filings with capital market authorities

• Enhanced audit and reporting standards

For foreign investors, compliance complexity is a decisive factor in the private vs public company in Nepal decision.

Taxation Differences That Matter

Both private and public companies are subject to corporate income tax. However, operational impact differs.

Key considerations:

• Corporate tax applies uniformly

• Dividend distribution tax applies on profit repatriation

• Withholding tax obligations vary by transaction

• Public companies face additional disclosure scrutiny

Private companies offer simpler tax administration, especially during early-stage operations.

Step-by-Step: How Foreigners Open a Company in Nepal

1. Define business activity and sector eligibility

2. Choose between private vs public company in Nepal

3. Prepare constitutional documents

4. Obtain foreign investment approval

5. Register with the Office of Company Registrar

6. Complete tax and statutory registrations

7. Open bank accounts and remit capital

Private companies typically complete this process faster.

Common Mistakes Foreign Investors Make

• Choosing a public company unnecessarily

• Underestimating compliance obligations

• Misclassifying business activities

• Failing to plan profit repatriation

• Delaying regulatory approvals

Avoiding these errors protects both timeline and capital.

Which Structure Is Best for Foreign Companies?

Private Company Is Best If You:

• Want operational control

• Plan to start lean

• Need faster setup

• Prefer predictable compliance

Public Company Is Best If You:

• Need public fundraising

• Operate in regulated infrastructure sectors

• Plan large-scale domestic expansion

For most foreign companies, the private company wins decisively.

Frequently Asked Questions: Private vs Public Company in Nepal

Is a private company better for foreign investors in Nepal?

Yes. Most foreign investors choose private companies due to simpler compliance, faster setup, and full ownership control.

Can foreigners own 100 percent of a Nepal company?

In many sectors, yes. Ownership depends on industry classification and foreign investment approval.

How long does company registration take in Nepal?

A private company typically takes four to six weeks, excluding investment approvals.

Can a private company convert into a public company later?

Yes. Conversion is legally allowed but requires regulatory approvals and restructuring.

Is profit repatriation allowed from Nepal?

Yes. Dividends and approved returns can be repatriated under Nepal’s foreign exchange regulations.

Why Expert Guidance Matters

Nepal’s legal framework is clear but procedural. Foreign companies benefit from advisors who understand regulatory sequencing, sector approvals, and compliance calendars.

Professional structuring reduces risk and accelerates market entry.