From Idea to Execution: Opening Your Dream Company in Nepal

Choosing between a private vs public company in Nepal is one of the most important legal and strategic decisions a foreign investor will make.
This choice affects ownership control, compliance costs, fundraising ability, and long-term scalability.

Nepal welcomes foreign investment, but its corporate framework is rules-driven. Understanding how private and public companies differ helps you avoid costly restructuring later.

This guide walks you from idea to execution. It is written specifically for foreign companies planning market entry, outsourcing, or long-term expansion in Nepal.

Why Nepal Is on the Radar of Foreign Investors

Nepal has quietly become a strategic hub for South Asia–focused operations.

Key drivers include:

• Competitive labor costs with a strong English-speaking talent pool

• Liberalized foreign investment regime under FITTA

• Growing digital infrastructure

• Preferential access to regional markets

Foreign companies typically enter Nepal for back office operations, IT services, shared services, manufacturing, or long term market presence.

Your first structural decision is whether to form a private company or a public company.

Understanding Company Structures Under Nepal Law

All companies in Nepal are governed by the Companies Act, 2006 and administered by the Office of the Company Registrar.

The Two Core Options

1. Private Limited Company

2. Public Limited Company

Both structures allow foreign ownership, subject to sectoral approvals and compliance with the Foreign Investment and Technology Transfer Act, 2019.

What Is a Private Company in Nepal?

A private limited company is the most common structure used by foreign investors.

It is designed for closely held businesses with limited shareholders and simplified governance.

Key Characteristics of a Private Company

• Minimum shareholders: 1

• Maximum shareholders: 101

• Share transfer restrictions apply

• Cannot invite public investment

• Lower compliance burden

Private companies are ideal for:

• Foreign subsidiaries

• Outsourcing centers

• Professional services firms

• Technology and IT companies

What Is a Public Company in Nepal?

A public limited company is designed for large-scale businesses intending to raise capital from the public.

This structure is heavily regulated and comes with strict governance obligations.

Key Characteristics of a Public Company

• Minimum shareholders: 7

• No maximum shareholder limit

• Can issue shares to the public

• Mandatory regulatory oversight

• Higher capital requirements

Public companies are usually formed for:

• Banking and financial institutions

• Insurance companies

• Hydropower and infrastructure projects

• Companies planning IPOs

Private vs Public Company in Nepal: Core Differences at a Glance

Insight:
Over 90 percent of foreign owned companies in Nepal choose the private company structure due to flexibility and cost efficiency.

Ownership and Control Considerations for Foreign Companies

Private Company Control Advantages

Foreign investors retain strong control in private companies.

Benefits include:

• Custom shareholder agreements

• Board control through nomination rights

• Restricted share transfers

Public Company Control Risks

Public companies dilute control by design.

Foreign investors must accept:

• Public disclosures

• Minority shareholder protections

• Regulatory scrutiny

For most foreign companies, control outweighs capital raising needs, making private companies the preferred option.

Capital Requirements and Investment Thresholds

Private Company Capital

Nepal does not impose a fixed minimum capital for private companies.
However, foreign direct investment thresholds apply.

The minimum FDI amount is NPR 20 million, as prescribed by investment regulations.

Public Company Capital

Public companies must meet higher capital thresholds and sector-specific requirements, particularly in regulated industries.

Registration Process: Private vs Public Company in Nepal

Step-by-Step Registration Flow

1. Name reservation with OCR

2. Approval from investment authority (if foreign-owned)

3. Submission of constitutional documents

4. Company registration certificate issuance

5. Tax and statutory registrations

Both structures follow similar steps, but public companies face additional layers of approval and disclosure.

Compliance and Ongoing Obligations Compared

Private Company Compliance

• Annual returns filing

• Financial statements submission

• Tax compliance under the Income Tax Act, 2002

• Labor compliance under the Labour Act, 2017

Public Company Compliance

• Everything a private company must do

• Mandatory audits

• Regulatory filings

• Shareholder meeting disclosures

Compliance costs for public companies can be 2–3 times higher annually.

Taxation Differences That Matter to Foreign Investors

Tax rates do not differ significantly between private and public companies.
The difference lies in audit intensity and disclosure.

Both are subject to:

• Corporate income tax

• VAT, if applicable

• Withholding taxes

• Social security contributions

Private companies offer more confidentiality, which many foreign firms value.

When Does a Public Company Make Sense?

A public company structure is justified if:

• You plan to raise capital locally

• You operate in regulated sectors

• You intend to list shares in Nepal

• Government participation is required

If none apply, a public company often becomes an unnecessary burden.

Strategic Use Cases: Which Structure Fits Your Goal?

Choose a Private Company If You Want:

• Full foreign ownership

• Cost-efficient operations

• Faster setup

• Confidential governance

Choose a Public Company If You Need:

• Public fundraising

• Regulatory credibility for infrastructure projects

• Large-scale capital mobilization

Common Mistakes Foreign Investors Make

Many foreign companies make avoidable errors.

These include:

• Choosing public company status too early

• Underestimating compliance costs

• Ignoring exit flexibility

• Overcapitalizing unnecessarily

Starting private and converting later is often smarter.

Can You Convert a Private Company into a Public Company Later?

Yes.
Nepalese law allows conversion from private to public status.

However:

• Conversion requires approvals

• Compliance obligations increase immediately

• Governance structure must change

Planning ahead avoids disruption.

Regulatory Authorities You Will Interact With

Foreign companies typically engage with:

• Office of the Company Registrar

• Investment Board or Department of Industry

• Inland Revenue Department

• Nepal Rastra Bank

Professional guidance streamlines these interactions.

Real World Insight: What Foreign Investors Actually Choose

In practice:

• Tech companies choose private companies

• Outsourcing firms choose private companies

• Professional services firms choose private companies

• Infrastructure projects choose public companies

The private vs public company in Nepal decision is rarely balanced.
Private companies dominate foreign investment structures.

Frequently Asked Questions: Private vs Public Company in Nepal

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

For most foreign investors, yes. Private companies offer flexibility, lower costs, and stronger control, making them the preferred structure.

Can a foreigner fully own a private company in Nepal?

Yes. Subject to sector approval and FDI thresholds, foreigners can own 100 percent of a private company.

Is it mandatory to form a public company for large investments?

No. Large investments can still operate as private companies unless sector regulations require public status.

Which company type is easier to manage in Nepal?

Private companies are significantly easier to manage due to simpler compliance and governance requirements.

Can a private company later raise public capital?

Only after converting into a public company and meeting regulatory requirements.

EEAT: Why This Guide Is Trustworthy

This article is based on:

• Nepal corporate legislation

• Regulatory practice

• Foreign investment frameworks

• Real advisory experience with foreign investors

All legal references align with current Nepalese laws and regulatory guidelines.