From Start-Up to IPO: The Transition from Private to Public in Nepal

Choosing between a private vs public company in Nepal is one of the most strategic decisions a foreign business can make when entering the Nepalese market. The structure you select affects ownership control, capital raising, compliance exposure, governance standards, and long-term exit options.

For most foreign companies, the journey starts private. Some later transition to a public company through an IPO once scale, credibility, and regulatory readiness align. This guide explains that journey clearly, practically, and from an investor’s point of view.

Written for founders, CFOs, and international expansion leaders, this article gives you the most authoritative and current explanation of private vs. public company in Nepal, grounded in law, market practice, and real investor behavior.

Understanding Company Structures Under Nepalese Law

Corporate entities in Nepal are governed primarily by the Companies Act 2006. The Act recognizes two principal company types relevant to foreign investors:

• Private Limited Company

• Public Limited Company

Both can receive foreign direct investment subject to sectoral approval rules.

What Is a Private Company in Nepal?

A private company in Nepal is designed for closely held ownership. It is the default structure for startups, foreign subsidiaries, and operational businesses.

Core legal features:

• Minimum shareholders: 1

• Maximum shareholders: 50 (excluding employees)

• Restriction on share transfer

• No public share offering

Private companies prioritize flexibility, control, and speed.

What Is a Public Company in Nepal?

A public company in Nepal is structured to raise capital from the public and list shares on the stock exchange.

Core legal features:

• Minimum shareholders: 7

• No maximum shareholder limit

• Shares freely transferable

• Mandatory compliance with securities laws

Public companies operate under heavier regulatory oversight, mainly from the Securities Board of Nepal and the Nepal Stock Exchange.

Why Most Foreign Companies Start Private in Nepal

For foreign investors, a private company is almost always the first step.

Strategic reasons include:

• Faster incorporation timelines

• Lower setup and annual compliance costs

• Tighter ownership control

• Easier group reporting and consolidation

• Lower public disclosure requirements

A private structure allows you to validate the market, build teams, and establish regulatory footing before scaling.

Private vs. Public Company in Nepal: Core Differences That Matter

Legal, financial, and operational contrasts

This private vs. public company in Nepal comparison highlights why structure selection must match business stage and ambition.

Capital Raising: Private Funding vs. Public Markets

How private companies raise capital

Private companies typically rely on:

• Promoter equity

• Foreign direct investment

• Strategic investors

• Inter-company loans

This approach favors speed and confidentiality.

How public companies raise capital

Public companies raise capital through:

1. Initial Public Offering (IPO)

2. Follow-on public offers

3. Rights issues

4. Convertible securities

Public fundraising improves liquidity but reduces promoter control.

Governance and Compliance Expectations

Private company governance

Private companies operate with:

• Board-driven governance

• Limited public disclosures

• Simplified shareholder approvals

They must comply with:

• Companies Act filings

• Tax and labor laws

• Sectoral regulations

Public company governance

Public companies must comply with:

• SEBON listing rules

• Quarterly and annual disclosures

• Independent directors

• Audit committees

• Continuous reporting obligations

Governance quality directly affects valuation and investor confidence.

Tax and Financial Reporting Considerations

From a tax perspective, both private and public companies are subject to Nepal’s corporate income tax regime.

However, public companies face:

• Higher audit costs

• Tighter financial transparency

• Market-driven valuation pressures

Private companies retain more discretion in internal financial structuring.

Foreign Direct Investment and Ownership Rules

Foreign investment is governed by the Foreign Investment and Technology Transfer Act 2019.

Key points for foreign companies:

• 100% foreign ownership permitted in many sectors

• Certain sectors require prior approval

• Minimum investment thresholds apply

• Repatriation rules must be followed

These rules apply equally to private and public companies, but public companies face additional scrutiny during IPOs.

Transitioning From Private to Public Company in Nepal

Many foreign-backed companies consider going public once they achieve scale.

Typical triggers for conversion:

• Large capital requirements

• Desire for investor exits

• Brand credibility and market trust

• Regional expansion plans

The transition process involves:

1. Conversion to public company status

2. Capital restructuring

3. Enhanced governance frameworks

4. Regulatory approvals

5. IPO execution

This transition can take 12–24 months in practice.

Advantages of Staying Private Longer

Remaining private longer can offer strategic benefits:

• Founder and parent company control

• Reduced regulatory exposure

• Flexible restructuring options

• Lower compliance costs

For many foreign companies, Nepal serves as an operational hub rather than a capital market play.

Advantages of Going Public in Nepal

A public company structure can unlock:

• Access to domestic capital

• Liquidity for early investors

• Enhanced corporate reputation

• Talent attraction through equity incentives

Public status also improves credibility with banks and regulators.

Which Structure Is Right for Your Business?

A private company is ideal if you:

• Are entering Nepal for the first time

• Need operational flexibility

• Want tight ownership control

• Are building a cost center or service hub

A public company is ideal if you:

• Have strong local revenue

• Need large-scale capital

• Want market visibility

• Are planning long-term Nepal operations

Choosing correctly at the outset saves years of restructuring later.

Common Mistakes Foreign Companies Make

Avoid these pitfalls:

• Incorporating public too early

• Underestimating compliance costs

• Ignoring IPO readiness timelines

• Misaligning Nepal's structure with global tax planning

Professional structuring advice is critical.

Private vs. Public Company in Nepal: Key Takeaways

• Most foreign companies should start private

• Public companies suit mature, capital-hungry businesses

• Transitioning is possible but resource-intensive

• Structure choice affects valuation, control, and compliance

Understanding private vs. public company in Nepal ensures your expansion strategy remains compliant, efficient, and scalable.

Frequently Asked Questions 

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

A private company is better for most foreign investors initially due to lower compliance and greater control.

Can a foreign-owned company go public in Nepal?

Yes. A foreign-owned private company can convert into a public company and list, subject to approvals.

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

There is no fixed minimum, but IPO eligibility depends on regulatory and financial thresholds.

How long does it take to convert from private to public?

Typically 12 to 24 months, depending on readiness and approvals.

Are compliance costs higher for public companies?

Yes. Public companies face significantly higher reporting, audit, and disclosure obligations.