Foreign Investors’ Guide to Company Registration in Nepal: Overcoming Challenges

Choosing between a private vs public company in Nepal is one of the most important decisions a foreign investor will make.
The structure you select affects ownership control, compliance, capital raising, taxes, and exit flexibility.

Many foreign companies enter Nepal with strong commercial intent but face delays due to regulatory complexity, unfamiliar laws, and unclear structuring choices. This guide breaks down private and public companies in Nepal in plain language, with practical insights designed for foreign investors.

By the end, you will know which structure fits your expansion strategy and how to avoid common pitfalls.

Why Nepal Attracts Foreign Companies

Nepal has quietly become a strategic market for South Asia expansion. Investors are drawn by:

• Competitive labor costs with a young, English-speaking workforce

• Preferential access to India and China

• Liberalized Foreign Investment and Technology Transfer Act (FITTA) regime

• Government incentives for priority sectors like IT, hydropower, and manufacturing

Yet, success depends on choosing the right company structure from day one.

Understanding Company Types in Nepal

Nepalese company law recognizes two primary corporate structures relevant to foreign investors:

1. Private Limited Company

2. Public Limited Company

Both can be foreign-owned, but their governance, disclosure, and capital requirements differ significantly.

What Is a Private Company in Nepal?

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

Key Characteristics

• Minimum shareholders: 1

• Maximum shareholders: 50

• Restriction on share transfer

• No public share issuance

• Lower compliance burden

Private companies are governed by the Companies Act, 2006, administered by the Office of the Company Registrar (OCR).

What Is a Public Company in Nepal?

A public company in Nepal is designed for large-scale ventures that plan to raise capital from the public.

Key Characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Mandatory public disclosures

• Can issue shares to the public

• Subject to securities regulation

Public companies are regulated by the Securities Board of Nepal (SEBON) in addition to OCR oversight.

Private vs Public Company in Nepal: Core Comparison

Structural Differences at a Glance

This table alone answers why over 90% of foreign investors choose private companies when entering Nepal.

Capital Requirements for Foreign Investors

Private Company Capital

• No statutory minimum capital under company law

• FDI approval thresholds apply under-investment regulations

• Capital must be brought through banking channels

Public Company Capital

• Higher paid-up capital expectations

• Mandatory prospectus approval

• Ongoing capital adequacy norms

For most foreign firms, capital flexibility makes private companies far more attractive.

Ownership and Control Considerations

One of the biggest advantages in the private vs public company in Nepal debate is control.

Private Company Control

• Share transfer restrictions protect founders

• Fewer board members required

• Strategic decisions remain internal

Public Company Control

• Shareholding dispersion

• Strong minority shareholder protections

• Board accountability obligations

Foreign companies seeking tight governance and operational control almost always prefer private entities.

Compliance and Reporting Burden

Private Company Compliance

• Annual financial statements

• Annual general meeting

• Basic audit requirements

Public Company Compliance

• Quarterly and annual disclosures

• Independent directors

• SEBON reporting

• Enhanced audit and governance standards

Compliance costs for public companies can be 3–5x higher than private companies.

Taxation: Does Structure Matter?

Both private and public companies are subject to:

• Corporate income tax under the Income Tax Act, 2002

• Withholding tax obligations

• VAT registration where applicable

However, public companies face additional disclosure and reporting scrutiny from tax authorities.

Foreign Direct Investment Approval Process

Regardless of structure, foreign investors must obtain approval from:

• Department of Industry or Investment Board Nepal, depending on sector and size

• Nepal Rastra Bank for capital inflow compliance

Private companies generally experience faster approval timelines due to simpler documentation.

When Should a Foreign Company Choose a Private Company?

A private company in Nepal is ideal if you:

• Are entering Nepal for the first time

• Want full ownership control

• Do not plan public fundraising

• Prefer faster setup and lower compliance

Most IT, outsourcing, consulting, and trading firms fall into this category.

When Does a Public Company Make Sense?

A public company in Nepal may be suitable if you:

• Plan a Nepal IPO

• Require large-scale public capital

• Operate in infrastructure or hydropower

• Need enhanced public credibility

These cases are strategic exceptions, not the norm.

Common Mistakes Foreign Investors Make

Foreign companies often struggle due to:

• Choosing a public company unnecessarily

• Underestimating compliance costs

• Misunderstanding capital repatriation rules

• Failing to plan exit strategies

Avoiding these mistakes begins with choosing the right structure upfront.

Step-by-Step: Registering a Company in Nepal

Typical Registration Flow

1. Name reservation with OCR

2. FDI approval from authorities

3. Company incorporation filing

4. Bank account and capital injection

5. Tax and VAT registration

Private companies typically complete this process in 3–5 weeks with proper advisory support.

Private vs Public Company in Nepal: Strategic Verdict

For foreign investors, the conclusion is clear.

• Private companies offer flexibility, control, and speed

• Public companies suit only capital-intensive, long-term plays

Your decision should align with your market entry strategy, not assumptions about scale.

FAQs: People Also Ask

Is a private company better than a public company in Nepal?

Yes, for most foreign investors. Private companies offer lower compliance, faster setup, and stronger control compared to public companies.

Can a foreigner fully own a private company in Nepal?

Yes. Subject to FDI approval, foreigners can own up to 100% of a private company in permitted sectors.

What is the minimum capital for a public company in Nepal?

There is no fixed statutory minimum, but regulators expect significantly higher paid-up capital than private companies.

How long does company registration take in Nepal?

Private companies typically take 3–5 weeks. Public companies take longer due to regulatory approvals.

Can a private company convert into a public company later?

Yes. Nepalese law allows conversion, subject to regulatory approvals and compliance upgrades.

Conclusion

Understanding private vs public company in Nepal is essential for foreign investors seeking a smooth market entry.
For most businesses, a private limited company delivers speed, flexibility, and control, while public companies remain a niche option.

Choosing wisely at the start can save years of regulatory friction and unnecessary cost.