From Idea to Incorporation: Your Journey to Starting a Company in Nepal

Choosing between a private vs public company in Nepal is one of the most important early decisions a foreign investor will make.
The structure you select affects ownership, compliance burden, fundraising ability, timelines, and long-term scalability.

Nepal is increasingly attractive for foreign companies. Labor costs are competitive. The talent pool is growing. Regulatory clarity has improved under modern company and foreign investment laws.

This guide is written specifically for foreign founders, CFOs, and expansion leaders.
It explains the difference between private and public companies in Nepal in plain English, without legal jargon.

By the end, you will know:

• Which structure is legally allowed for foreigners

• How costs and compliance differ

• When a public company makes sense

• How to move from idea to incorporation smoothly

In many countries, the private vs public decision is mainly about fundraising.
In Nepal, it is also about regulatory feasibility.

Most foreign investors are legally limited to private limited companies at entry.
Public companies come with heavier compliance and are rarely suitable for early-stage foreign operations.

Your choice impacts:

• Foreign Direct Investment (FDI) approval

• Capital repatriation

• Ongoing reporting obligations

• Exit options

Getting this wrong can delay your launch by months.

Understanding Company Types Under Nepalese Law

Nepal’s corporate framework is governed primarily by the Companies Act, 2006, supported by foreign investment and tax legislation.

There are two main company forms relevant here:

• Private Limited Company

• Public Limited Company

Both are legal entities, but they operate very differently.

What Is a Private Limited Company in Nepal?

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

Core characteristics

• Restricted share transfer

• Limited number of shareholders

• No public share offering

• Simplified governance

For foreign companies, this structure offers speed, control, and legal clarity.

Ownership rules

• Minimum shareholders: 1

• Maximum shareholders: 101

• 100 percent foreign ownership is permitted in most sectors

Capital requirements

• No fixed minimum capital for most sectors

• Capital is assessed based on business activity and FDI approval

What Is a Public Limited Company in Nepal?

A public limited company is designed for large, capital-intensive ventures.

Core characteristics

• Shares can be offered to the public

• Heavier disclosure and audit requirements

• Mandatory governance bodies

Ownership rules

• Minimum shareholders: 7

• No maximum shareholder limit

• Foreign ownership is allowed but tightly regulated

Capital requirements

• Statutory minimum paid-up capital applies

• Significantly higher compliance costs

For most foreign founders, this structure is unnecessary at entry stage.

Private vs Public Company in Nepal: Side-by-Side Comparison

Original insight:
In Nepal, over 90 percent of foreign-owned operating entities enter through private limited companies due to regulatory efficiency and lower risk.

Which Structure Can Foreign Companies Actually Use?

This is where many investors get confused.

Practical reality

• Private limited companies are the default and preferred route for foreign investors

• Public companies are usually viable only after significant local presence or strategic need

Most sectors approved for FDI are structured around private companies.

When a Private Limited Company Makes Sense

A private company is ideal if you:

• Are entering Nepal for the first time

• Want full ownership and control

• Are building a service, tech, or outsourcing operation

• Need faster incorporation

Typical foreign use cases include:

• IT and software development

• BPO and outsourcing

• Consulting and advisory services

• Manufacturing below public-threshold scale

When a Public Limited Company Makes Sense

A public company may be appropriate if:

• You plan to raise capital from the Nepalese public

• You operate in regulated sectors like banking or insurance

• You need very large paid-up capital

These cases are rare for new foreign entrants.

Step-by-Step: From Idea to Incorporation in Nepal

Here is a simplified journey most foreign companies follow.

1. Business activity assessment

Confirm your proposed activities are open to foreign investment.

2. Structure selection

Almost always: private limited company.

3. FDI approval

Obtain approval from the relevant investment authority.

4. Company registration

Register with the Office of the Company Registrar.

5. Tax and statutory setup

PAN, VAT (if applicable), payroll, and compliance registration.

Key Advantages of a Private Company for Foreign Investors

• Faster setup timelines

• Lower ongoing compliance cost

• Easier profit repatriation

• Clear shareholder control

Key disadvantages

• Cannot raise capital publicly

• Share transfers are restricted

For early and mid-stage foreign businesses, the advantages far outweigh the limits.

Compliance Differences Foreign Companies Must Understand

Private company compliance

• Annual financial statements

• Annual return filing

• Statutory audit

Public company compliance

• Stricter audits

• Board and committee requirements

• Enhanced disclosure obligations

This difference alone often determines the choice.

Common Mistakes Foreign Investors Make

Avoid these costly errors:

• Assuming public companies are “better”

• Over-capitalizing without regulatory need

• Choosing structure before FDI assessment

• Underestimating compliance costs

A properly structured private company avoids most of these risks.

Taxation Considerations

Both private and public companies are taxed under the same corporate tax framework.

However:

• Compliance complexity is higher for public companies

• Audit scrutiny is more intense

Tax efficiency is usually easier to manage in private structures.

How Long Does Incorporation Take?

Typical timelines:

• Private limited company: 3–6 weeks

• Public limited company: 2–4 months

Delays usually come from incomplete documentation or incorrect structuring.

Strategic Insight: Start Private, Scale Smart

Many successful foreign businesses in Nepal:

1. Start as a private limited company

2. Build operations and revenue

3. Convert to public status only if needed

Nepalese law allows restructuring later.
Starting simple keeps risk low.

Frequently Asked Questions (People Also Ask)

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

For most foreign investors, a private company is better due to lower compliance and faster setup.

Can a foreigner fully own a private company in Nepal?

Yes. 100 percent foreign ownership is permitted in many approved sectors.

Is there a minimum capital requirement for private companies?

There is no fixed minimum in most sectors. Capital is assessed during FDI approval.

Can a private company later become public in Nepal?

Yes. Conversion is legally possible once requirements are met.

Are public companies common among foreign investors?

No. Most foreign investors operate through private limited companies.

Conclusion: Private vs Public Company in Nepal — The Smart Choice

When comparing private vs public company in Nepal, the answer for most foreign investors is clear.

A private limited company offers:

• Legal certainty

• Faster market entry

• Lower risk

• Better operational control

Public companies serve a specific purpose, but rarely at entry stage.

If your goal is to enter Nepal efficiently and compliantly, start private and scale with confidence.