Fundraising Options in Nepal: Public Versus Private Companies

Private vs public company in Nepal is one of the first strategic decisions foreign investors face when planning market entry or capital raising. The choice directly affects fundraising flexibility, regulatory exposure, speed to launch, and long-term exit options. In this guide, you’ll find a practical, investor-grade comparison focused on how companies raise capital in Nepal, what regulators expect, and which structure fits different growth paths. We’ll translate local law into commercial reality, so you can move forward with confidence.

Why the Company Type Matters for Fundraising in Nepal

Nepal allows both private and public limited companies to raise capital, but how they do so differ materially. The legal framework is administered by the Office of Company Registrar and capital markets overseen by Securities Board of Nepal. Your choice influences:

• Investor eligibility and disclosure thresholds

• Time and cost to secure funds

• Ongoing compliance and governance

• Exit routes via strategic sale or public markets

Understanding these trade-offs early prevents costly restructuring later.

Legal Snapshot: What the Law Permits

Nepal’s company regime recognizes private limited companies and public limited companies under the Companies Act. In brief:

• Private companies raise funds from founders, permitted private investors, and institutions via private placements.

• Public companies can raise funds from the general public through regulated offerings and list on Nepal Stock Exchange after meeting eligibility criteria.

Private vs Public Company in Nepal; Fundraising Overview

Private Limited Company: Capital Without the Spotlight

A private company is the preferred entry vehicle for most foreign firms. It prioritizes speed, control, and confidentiality.

Key fundraising channels

• Founder equity and retained earnings

• Angel investors and strategic partners

• Institutional private placements

• Inter-company loans and shareholder advances

Why investors choose it

• Faster capital deployment

• Lower disclosure and compliance burden

• Flexible shareholder arrangements

Public Limited Company: Scale With Scrutiny

Public companies unlock large-scale capital but demand rigorous governance.

Key fundraising channels

• Initial Public Offering (IPO)

• Follow-on public offers and rights issues

• Public debt instruments (subject to approvals)

Why investors choose it

• Access to a broad investor base

• Enhanced credibility and valuation discovery

• Structured exit via market liquidity

Capital Sources Compared

What Private Companies Can Raise

• Equity from permitted shareholders

• Convertible instruments by agreement

• Debt from banks and related parties

• FDI inflows aligned with sector caps

What Public Companies Can Raise

• Public equity via IPO and secondary offers

• Rights issues to existing shareholders

• Market-linked debt with disclosures

Compliance Intensity and Timelines

• Private company: weeks to a few months for private placements.

• Public company: months to a year, including prospectus approval, audits, and market readiness.

Fundraising Mechanics: Step by Step

Private Placement (Typical)

1. Board and shareholder approvals

2. Valuation and term negotiation

3. Subscription agreement execution

4. Share allotment and filings

IPO Route (Typical)

1. Conversion to public company

2. Appoint issue manager and auditors

3. Draft and approve prospectus

4. Offer period and allotment

5. Listing on NEPSE

Original Insight: Cost-to-Capital vs Control

Foreign investors often underestimate the implicit cost of public capital. While public funds may appear cheaper, governance dilution, disclosure risk, and timing uncertainty can outweigh benefits for sub-scale operations. Private capital, though limited in size, often delivers higher strategic control per dollar raised.

Comparison Table: Fundraising Reality Check

Private vs Public Company in Nepal – Which Fits Your Strategy?

Choose a Private Company If You:

• Are entering Nepal for the first time

• Need rapid setup and early revenue

• Prefer controlled ownership

• Plan phased funding rounds

Choose a Public Company If You:

• Require large, repeat funding rounds

• Operate at national scale

• Value market visibility

• Seek a public-market exit

Sector Sensitivities and Foreign Ownership

Some sectors impose foreign ownership caps or special approvals. Align your fundraising plan with sectoral rules before committing to a structure.

Risk Matrix for Foreign Investors

• Regulatory risk: higher for public issuers

• Market risk: public valuations fluctuate

• Execution risk: IPO timelines can slip

• Control risk: dilution increases with public capital

Practical Scenarios

• Tech or services entrant: start private, scale later.

• Infrastructure or utilities: public structure may fit long-term financing.

• Regional HQ: private structure with institutional funding.

Governance Expectations

Public companies must maintain independent directors, committees, and quarterly disclosures. Private companies customize governance to investor needs.

Tax and Reporting Considerations

Tax rates broadly align, but reporting frequency and audit scope expand significantly for public issuers.

Conclusion

Choosing private vs public company in Nepal is a capital strategy decision, not just a legal formality. For most foreign companies, a private company offers the fastest, most controlled path to fund operations and validate the market. A public company suits mature businesses seeking scale and liquidity. Start with your funding horizon, then select the structure that minimizes friction and maximizes returns.

FAQs

Is it mandatory to go public to raise large capital in Nepal?

No. Private companies can raise significant funds via private placements, but scale is limited compared to public offerings.

Can a private company convert into a public company later?

Yes. Conversion is permitted, subject to approvals and compliance readiness.

How long does an IPO take in Nepal?

Typically 6–12 months, depending on readiness and regulatory review.

Are foreign investors allowed in public companies?

Yes, subject to sectoral caps and approvals.

Which structure is cheaper to maintain?

Private companies generally have lower ongoing compliance costs.