From Concept to Corporation: Starting a Private Company in Nepal

Choosing between a private vs public company in Nepal is one of the first strategic decisions foreign companies must make before entering the Nepalese market. The choice affects ownership control, regulatory exposure, capital flexibility, tax planning, and exit strategy.

In this definitive guide, written for foreign investors and international companies, we break down the legal, commercial, and operational realities of both structures so you can confidently decide which model aligns with your Nepal expansion goals.

Why Nepal Is on the Radar for Foreign Companies

Nepal is increasingly attractive as a cost-efficient South Asian base for technology, professional services, back-office operations, and regional support teams.

Key drivers include:

• Competitive talent costs with strong English proficiency

• Strategic proximity to India and China

• Liberalization under modern investment laws

• Growing digital infrastructure

• Government incentives for foreign direct investment

However, Nepal’s corporate framework is rule-driven and compliance-centric, making structure selection critical from day one.

Understanding Company Structures in Nepal

Under Nepal’s corporate framework, companies are broadly categorized as private companies and public companies. While both are incorporated entities, their purpose, governance, and regulatory burden differ significantly.

What Is a Private Company in Nepal?

A private company is designed for closely held ownership, limited shareholders, and operational flexibility. It is the default and preferred structure for foreign companies entering Nepal.

Core characteristics:

• Shareholders: 1–50

• No public share issuance

• Restricted share transfers

• Faster incorporation

• Lower compliance burden

What Is a Public Company in Nepal?

A public company is designed for capital mobilization from the public and large-scale enterprises. It is typically relevant only if public fundraising or listing is planned.

Core characteristics:

• Minimum 7 shareholders

• Can issue shares to the public

• Heavily regulated

• Mandatory disclosures and audits

• Longer setup timelines

Private vs. Public Company in Nepal: High-Level Comparison

Legal Framework Governing Companies in Nepal

Corporate entities in Nepal are governed primarily by:

• Companies Act, 2006

• Foreign Investment and Technology Transfer Act, 2019

• Industrial Enterprises Act, 2020

• Income Tax Act, 2002

• Labor Act, 2017

• Social Security Act, 2018

Foreign investors must also comply with sector-specific approvals where applicable.

This legal environment favors private companies for foreign entrants due to regulatory predictability.

Why Foreign Companies Prefer Private Companies in Nepal

1. Faster Market Entry

Private companies can typically be incorporated within 2–4 weeks, assuming documentation is in order. Public companies take significantly longer due to approval layers.

2. Ownership Control

Foreign parent companies retain full strategic and economic control, without dilution or public disclosure of sensitive information.

3. Lower Compliance Cost

Annual obligations are simpler, making private companies ideal for cost-center operations, shared services, and captive teams.

4. Flexible Capital Structuring

Capital can be injected through equity, shareholder loans, or retained earnings without public scrutiny.

When Does a Public Company Make Sense?

A public company in Nepal is appropriate only if:

1. You plan to raise capital from the Nepalese public

2. You intend to list on the Nepal Stock Exchange

3. You operate in infrastructure or regulated sectors requiring public participation

For most foreign SMEs and multinationals, these conditions do not apply.

Detailed Breakdown: Private Company in Nepal

Incorporation Requirements

To register a private company, you need:

• Name reservation approval

• Memorandum and Articles of Association

• Shareholder and director identification

• Registered office address in Nepal

• Capital commitment declaration

Foreign shareholders must provide notarized and legalized documents.

Shareholding and Capital Rules

• 100 percent foreign ownership is permitted in most sectors

• Minimum capital depends on sector and investment category

• Capital must be injected through approved banking channels

Governance Structure

A private company requires:

• At least one director

• Company secretary not mandatory for small entities

• Board resolutions for key decisions

This lean governance structure appeals to foreign companies seeking agility.

Public Company in Nepal: Compliance Reality Check

Public companies must comply with:

• Prospectus approvals

• Public disclosures

• Statutory audits

• Regulatory reporting

• Annual general meetings with public notice

These requirements increase cost, time, and legal exposure.

Taxation Considerations for Both Structures

Both private and public companies are taxed similarly in Nepal:

• Corporate income tax standard rate applies

• Withholding taxes on payments

• VAT registration if turnover thresholds are met

However, compliance management is simpler in private companies, especially for foreign-managed entities.

Employment and Labor Compliance

Regardless of structure, companies must comply with:

• Written employment contracts

• Minimum wage rules

• Social security fund contributions

• Statutory leave entitlements

Private companies allow faster onboarding and scalable hiring models.

Common Mistakes Foreign Companies Make

Avoid these pitfalls when choosing between a private vs public company in Nepal:

• Assuming public company status improves credibility

• Underestimating compliance cost

• Over-structuring too early

• Ignoring exit planning

• Choosing structure without sector review

Step-by-Step: Choosing the Right Structure

1. Define your Nepal business purpose

2. Assess capital and ownership needs

3. Review sector restrictions

4. Model compliance cost

5. Plan exit or expansion strategy

For 90 percent of foreign companies, this exercise leads to a private company.

Frequently Asked Questions 

Is a private company better than a public company in Nepal for foreign investors?

Yes. A private company offers lower compliance, faster setup, and full ownership control, making it ideal for foreign investors entering Nepal.

Can a private company be converted into a public company later?

Yes. A private company in Nepal can be converted into a public company if future capital raising or listing is planned.

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

There is no fixed minimum capital universally. Requirements vary by sector and foreign investment category.

Are foreign directors allowed in Nepal companies?

Yes. Foreign nationals can serve as directors, subject to visa and residency compliance.

How long does company registration take in Nepal?

A private company typically takes two to four weeks, assuming documents are complete and approvals are smooth.

Private vs. Public Company in Nepal: Final Verdict

When evaluating private vs. public company in Nepal, the answer for most foreign companies is clear. A private company delivers speed, control, cost efficiency, and regulatory clarity. Public companies are relevant only for specific, capital-intensive use cases.

If your goal is market entry, back-office operations, or regional expansion, a private company is the smartest starting point.