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.
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.
All companies in Nepal are governed by the Companies Act, 2006 and administered by the Office of the Company Registrar.
Private Limited Company
Public Limited Company
Both structures allow foreign ownership, subject to sectoral approvals and compliance with the Foreign Investment and Technology Transfer Act, 2019.
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.
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
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.
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
| Factor | Private Company | Public Company |
|---|---|---|
| Minimum shareholders | 1 | 7 |
| Maximum shareholders | 101 | Unlimited |
| Public share issuance | Not allowed | Allowed |
| Compliance burden | Moderate | High |
| Capital requirement | Lower | Higher |
| Foreign investor preference | Very high | Limited |
| Suitable for SMEs | Yes | No |
Insight:
Over 90 percent of foreign owned companies in Nepal choose the private company structure due to flexibility and cost efficiency.
Foreign investors retain strong control in private companies.
Benefits include:
Custom shareholder agreements
Board control through nomination rights
Restricted share transfers
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.
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 companies must meet higher capital thresholds and sector-specific requirements, particularly in regulated industries.
Name reservation with OCR
Approval from investment authority (if foreign-owned)
Submission of constitutional documents
Company registration certificate issuance
Tax and statutory registrations
Both structures follow similar steps, but public companies face additional layers of approval and disclosure.
Annual returns filing
Financial statements submission
Tax compliance under the Income Tax Act, 2002
Labor compliance under the Labour Act, 2017
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.
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.
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.
Full foreign ownership
Cost-efficient operations
Faster setup
Confidential governance
Public fundraising
Regulatory credibility for infrastructure projects
Large-scale capital mobilization
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.
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.
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.
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.
For most foreign investors, yes. Private companies offer flexibility, lower costs, and stronger control, making them the preferred structure.
Yes. Subject to sector approval and FDI thresholds, foreigners can own 100 percent of a private company.
No. Large investments can still operate as private companies unless sector regulations require public status.
Private companies are significantly easier to manage due to simpler compliance and governance requirements.
Only after converting into a public company and meeting regulatory requirements.
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.