From Start-Up to IPO: The Journey of Public and Private Companies in Nepal

For foreign companies exploring South Asia, Nepal is emerging as a compelling destination.
At the heart of every market-entry decision lies one critical choice: private vs public company in Nepal.

This decision affects ownership, fundraising, compliance, taxation, and long-term exit options.
Choosing the wrong structure can slow expansion or block future capital raising.
Choosing the right one can unlock scale, credibility, and investor confidence.

This guide delivers the most authoritative, up-to-date comparison of private vs public company in Nepal, written specifically for foreign investors planning market entry, expansion, or eventual IPO.

Nepal’s Corporate Framework at a Glance

Company formation and regulation in Nepal is primarily governed by:

• Companies Act, 2006

• Securities Act, 2007

• Industrial Enterprises Act, 2020

• Foreign Investment and Technology Transfer Act (FITTA), 2019

Company registration and oversight is handled by the Office of Company Registrar, while public companies and IPOs fall under the Securities Board of Nepal and listing rules of the Nepal Stock Exchange.

What Is a Private Company in Nepal?

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

Core Characteristics

• Shareholders: 1 to 101

• Share transfer: Restricted

• Capital raising: Private placements only

• Public subscription: Not permitted

Private companies are designed for control, flexibility, and speed.

Why Foreign Companies Start Private

Foreign investors usually begin with a private company because it allows:

• Faster incorporation

• Lower compliance burden

• Full operational control

• Confidential financial reporting

This structure aligns well with greenfield investments, back-office operations, and service centers.

What Is a Public Company in Nepal?

A public company is structured for capital markets and large-scale growth.

Core Characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Shares freely transferable (subject to law)

• Eligible to issue shares to the public

Public companies are mandatory for IPOs and stock exchange listings.

Private vs Public Company in Nepal: Structural Comparison

Ownership and Shareholding

Private companies tightly control ownership.
Public companies are built for broad investor participation.

Governance Expectations

Public companies face stricter governance, disclosure, and audit requirements.
Private companies retain flexibility in board composition and decision-making.

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

Capital Raising: The Biggest Difference

Private Companies

Private companies raise capital through:

1. Promoter funding

2. Foreign direct investment

3. Private equity or strategic partners

They cannot advertise or invite public subscriptions.

Public Companies

Public companies can:

• Issue IPOs

• Raise funds via rights shares

• Access institutional and retail investors

This is essential for scaling capital-intensive businesses.

Compliance and Reporting Obligations

Private Company Compliance

• Annual general meeting

• Annual financial statements

• Corporate filings with the registrar

Public Company Compliance

Public companies must also:

• Publish audited financials

• Disclose material events

• Comply with securities regulations

This increases transparency but adds cost.

Taxation: No Advantage, Only Visibility

There is no difference in corporate tax rates between private and public companies in Nepal.

However:

• Public companies face greater scrutiny

• Tax positions must withstand investor and regulator review

Transparency becomes non-negotiable.

When Should a Foreign Company Choose a Private Company?

A private company is ideal if you:

• Are entering Nepal for the first time

• Need operational flexibility

• Want to retain ownership control

• Are not raising public capital

Most foreign investors start private and scale later.

When Does a Public Company Make Sense?

A public company is appropriate when:

• Large capital is required

• Exit through IPO is planned

• Brand visibility matters

• Governance maturity is achieved

Public status is a growth milestone, not a starting point.

The Journey: From Private Company to Public Company

Many successful businesses follow this path:

1. Incorporate as a private company

2. Stabilize operations

3. Attract institutional investors

4. Convert to public company

5. Launch IPO and list

This phased approach reduces risk and cost.

Conversion Process: Private to Public in Nepal

Conversion involves:

• Shareholder approval

• Amendment of constitutional documents

• Regulatory filings

• Capital restructuring

Foreign investors should plan conversion 12–24 months before an IPO.

Common Mistakes Foreign Investors Make

• Starting public too early

• Underestimating compliance costs

• Ignoring exit strategy alignment

• Failing to structure for future conversion

Strategic planning avoids expensive restructuring later.

Strategic Insight: Why “Private First” Wins in Nepal

For most foreign companies, the optimal strategy is:

• Start private

• Design governance for future public conversion

• Scale operations

• Access public markets when ready

This balances speed with long-term opportunity.

Frequently Asked Questions: Private vs Public Company in Nepal

Is a private company better for foreign investors in Nepal?

Yes. Most foreign investors start with a private company for flexibility and control.

Can a foreign-owned private company later go public?

Yes. A private company can convert into a public company before an IPO.

Is public company registration mandatory for IPOs?

Yes. Only public companies can issue shares to the public.

Are compliance costs much higher for public companies?

Yes. Audit, disclosure, and governance costs increase significantly.

Does public company status improve credibility in Nepal?

Yes. Public companies enjoy higher market trust and visibility.

Conclusion: Making the Right Private vs Public Company in Nepal Choice

The private vs public company in Nepal decision is not about right or wrong.
It is about timing, strategy, and growth ambition.

For foreign companies, starting private provides speed and control.
Going public later unlocks scale and exit opportunities.

The most successful investors plan both stages from day one.