Foreign Investment in Nepal: A Guide to Company Registration for Non-Nationals

Choosing between a private vs public company in Nepal is one of the first and most important decisions for foreign investors. The structure you select affects your foreign direct investment approval, capital requirements, compliance burden, tax exposure, and exit flexibility. Many non-nationals rush this choice and face avoidable delays later.

This expert guide explains private vs public company in Nepal from a foreign investor’s perspective. You will learn the legal differences, costs, timelines, regulatory expectations, and practical use cases so you can invest with confidence.

Nepal allows foreign investment under a regulated framework. Your company type determines:

• Whether foreign shareholding is permitted

• Minimum capital thresholds

• Ability to raise funds later

• Ongoing disclosure and governance duties

• Exit and repatriation pathways

Understanding private vs public company in Nepal early helps avoid restructuring costs and regulatory friction.

Overview of Company Registration Options for Foreigners

Foreign investors generally consider four legal entry routes:

1. Private Limited Company

2. Public Limited Company

3. Branch Office

4. Liaison or Representative Office

This article focuses on the private vs public company in Nepal, as these are the only options allowing equity ownership and long-term operations.

What Is a Private Limited Company in Nepal?

A private limited company is the most common structure for foreign investors entering Nepal.

Key Characteristics

• Minimum shareholders: 1

• Maximum shareholders: 50

• Foreign ownership: Allowed up to 100 percent (sector-specific)

• Share transfer: Restricted

• Public share offering: Not allowed

Why Foreigners Prefer Private Companies

Foreign companies choose private entities because they are faster to register, easier to manage, and cost-efficient during early operations.

What Is a Public Limited Company in Nepal?

A public limited company is designed for large-scale enterprises with long-term capital needs.

Key Characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Minimum paid-up capital: NPR 10 million

• Share transfer: Freely transferable

• Public share offering: Allowed

Public companies face higher regulatory oversight and are less common for first-time foreign entrants.

Private vs Public Company in Nepal: Core Differences

At a Glance Comparison

This table highlights why private vs public company in Nepal is not a one-size-fits-all decision.

Capital Requirements for Foreign Investors

Private Company Capital Rules

There is no fixed statutory minimum for private companies. However, foreign investment projects must meet sector-specific thresholds approved during FDI screening.

Public Company Capital Rules

Public companies must maintain at least NPR 10 million paid-up capital, often higher depending on licensing and industry regulations.

Foreign Direct Investment Approval Process

Regardless of structure, foreign investors must secure approval before incorporation.

Typical FDI Approval Steps

1. Submit project proposal

2. Obtain investment approval

3. Incorporate the company

4. Register with tax authorities

5. Open capital and operational bank accounts

Private companies generally move through this process faster than public entities.

Compliance Obligations Compared

Understanding ongoing obligations is crucial when assessing private vs public company in Nepal.

Private Company Compliance

• Annual general meeting

• Annual financial statements

• Income tax and VAT filings

• Limited disclosure

Public Company Compliance

• Mandatory board committees

• Enhanced audit requirements

• Public disclosures

• Regulatory reporting

Public companies require stronger governance frameworks and higher administrative budgets.

Governance and Control Considerations

Foreign investors often prioritize control.

Private Company Advantages

• Founder-friendly governance

• Restricted share transfers

• Easier decision-making

Public Company Challenges

• Diluted control

• Shareholder activism

• Formal board processes

This makes private companies more attractive for foreign SMEs.

Taxation Perspective for Foreign-Owned Companies

Both structures are taxed similarly under Nepalese tax law.

Key Tax Points

• Corporate income tax applies equally

• Withholding taxes on dividends

• Transfer pricing rules for foreign parents

Tax efficiency depends more on structuring than on choosing private vs public company in Nepal.

Sector Restrictions and Licensing

Some sectors impose additional rules.

• Strategic industries may require higher capital

• Certain sectors restrict foreign participation

• Regulated industries may mandate public status

Always verify sector-specific rules before deciding.

When Does a Public Company Make Sense?

A public company is suitable if you:

• Plan to raise capital from the public

• Need a strong local credibility signal

• Operate in infrastructure or capital-intensive sectors

For most foreign entrants, these conditions apply later, not at entry.

Why Most Foreign Investors Choose Private Companies

From advisory experience, over 90 percent of foreign investors begin with private limited companies.

Key Reasons

• Faster setup

• Lower cost

• Flexible governance

• Easier exit

Private companies provide a controlled environment to test the Nepal market.

Conversion from Private to Public Company

A private company can convert into a public company later.

Typical Triggers

• Expansion plans

• Capital market access

• Strategic partnerships

Conversion requires regulatory approval and compliance upgrades.

Practical Decision Framework

Use this checklist when choosing private vs public company in Nepal.

• Investment size

• Growth timeline

• Capital raising needs

• Governance appetite

• Regulatory tolerance

Most foreign companies start private and scale later.

Common Mistakes Foreign Investors Make

• Choosing public status too early

• Underestimating compliance costs

• Ignoring sector restrictions

• Over-capitalizing unnecessarily

Avoiding these mistakes saves time and capital.

Private vs Public Company in Nepal: Summary

The private vs public company in Nepal decision directly affects cost, control, and compliance. For foreign investors, private limited companies offer speed, flexibility, and lower risk. Public companies suit large, capital-intensive projects with long horizons.

Frequently Asked Questions

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

Yes. Foreigners can own up to 100 percent of a private or public company, subject to sector approvals.

2. Is a private company better than a public company for foreigners?

In most cases, yes. Private companies are faster to register and easier to manage for foreign investors.

3. What is the minimum capital for foreign investment in Nepal?

It depends on the sector. Public companies require at least NPR 10 million paid-up capital.

4. Can a private company later become public?

Yes. Conversion is allowed with regulatory approval and compliance upgrades.

5. How long does company registration take in Nepal?

Private companies typically register faster than public companies, depending on approvals.