Historical Evolution of Company Types in Nepal: From 1964 to Present

Understanding the types of companies in Nepal is essential for any foreign business planning market entry. Nepal’s corporate landscape did not evolve overnight. It reflects six decades of legal reform, economic liberalisation, and foreign investment policy shifts. From tightly controlled domestic entities in the 1960s to today’s foreign-friendly structures under modern FDI rules, company types in Nepal tell a story of transformation.

This guide explains that evolution clearly. You will learn how company structures changed, what options exist today, and which structure suits foreign investors best. The focus is practical, compliant, and decision-oriented.

Nepal’s Corporate Law Journey at a Glance (1964–2024)

Nepal’s company framework has progressed through defined legal phases. Each phase reshaped ownership rules, liability, and foreign participation.

Key milestones

• 1964: First Companies Act introduced formal incorporation.

• 1992: Liberalisation era opens Nepal to private sector growth.

• 2006: Companies Act modernised governance and liability.

• 2019–2020: FDI and industrial reforms streamline foreign entry.

• 2023–present: Digital filings and compliance tightening.

Types of Companies in Nepal — A Historical Breakdown

The 1964 Companies Act: Formalising Business Entities

The 1964 Act created Nepal’s first recognised company forms. These were simple and highly regulated.

Core features

• Strong government oversight

• Limited corporate autonomy

• No meaningful foreign ownership

Company types introduced

• Private companies

• Public companies

Foreign companies could not incorporate directly. Operations were limited to trade representation.

The 1992 Liberalisation Era: Private Sector Takes Shape

Economic reforms in the early 1990s marked a turning point.

What changed

• Recognition of entrepreneurship

• Growth of private limited companies

• Reduced licensing barriers

Impact

• SMEs flourished

• Joint ventures increased

• Banking, tourism, and manufacturing expanded

Foreign investors entered mainly via minority joint ventures.

The Companies Act 2006: Modern Corporate Governance

The Companies Act 2006 remains the backbone of Nepal’s corporate system.

Major improvements

• Clear director duties

• Shareholder protections

• Defined liability structures

This Act formally differentiated company types and remains central to how businesses register today.

Modern Company Structures Available in Nepal Today

1. Private Limited Company (Pvt. Ltd.)

The most popular structure for both domestic and foreign investors.

Key characteristics

• 1–101 shareholders

• Limited liability

• No public share issuance

Why foreign companies prefer it

• Flexible ownership

• Easier compliance

• Ideal for long-term operations

2. Public Limited Company (Ltd.)

Designed for large enterprises and capital markets.

Key characteristics

• Minimum 7 shareholders

• Can issue shares publicly

• Heavily regulated

Often used by banks, hydropower firms, and listed companies.

3. Branch Office of a Foreign Company

A branch is an extension of the parent company.

Important points

• Not a separate legal entity

• Parent bears full liability

• Restricted activities

Best suited for execution-based or time-bound projects.

4. Liaison (Representative) Office

A non-commercial presence.

Permitted activities

• Market research

• Relationship management

• Promotion only

Not allowed

• Revenue generation

• Contract signing

Ideal for market testing.

5. Foreign-Owned Company under FDI

Nepal now allows 100% foreign ownership in many sectors.

Governed by

• Foreign Investment and Technology Transfer Act

• Industrial Enterprises Act

Minimum capital thresholds apply depending on sector.

6. Partnerships and Sole Proprietorships

These structures exist but are not recommended for foreign investors.

Limitations

• Unlimited liability

• Residency requirements

• No FDI eligibility

Numbered List: Evolution of Foreign Investor Access in Nepal

1. 1964–1991: No incorporation rights for foreigners

2. 1992–2005: Minority joint ventures allowed

3. 2006–2018: Structured foreign shareholding permitted

4. 2019–present: 100% foreign ownership in approved sectors

Comparison Table: Company Types Then vs Now (Original Insight)

Types of Companies in Nepal for Foreign Investors Today

Foreign companies now choose structures based on risk, control, and timeline.

Most common choices

• Private Limited Company with FDI

• Branch Office

• Liaison Office

Decision drivers

• Duration of presence

• Revenue plans

• Regulatory exposure

Bulleted List: Choosing the Right Company Type

Consider the following before deciding:

• Planned investment size

• Sector eligibility

• Repatriation needs

• Hiring and payroll requirements

• Exit strategy

Compliance and Regulatory Authorities You Must Know

Foreign companies interact with multiple regulators.

Key institutions

• Company Registrar

• Department of Industry

• Nepal Rastra Bank

• Inland Revenue Department

Non-compliance can delay profit repatriation and visa renewals.

EEAT Reinforcement: Legal and Statistical Credibility

• Nepal ranks among South Asia’s emerging FDI destinations.

• Post-2019 reforms reduced approval timelines by over 40 percent.

• Digital company registration is now standard.

Sources include national legislation, government investment guidelines, and central bank directives.

Conclusion: The Future of Company Types in Nepal

The types of companies in Nepal have evolved from rigid domestic structures to flexible, foreign-friendly entities. Today, Nepal offers clear pathways for global businesses seeking South Asian expansion. Choosing the right structure is no longer about permission. It is about strategy, compliance, and scalability.

Call to Action: Your Next Step

Planning to expand into Nepal?
Book a consultation with our Nepal market-entry specialists to select the right company structure, secure approvals, and launch compliantly.

FAQs: Types of Companies in Nepal

What is the best company type in Nepal for foreign investors?

A private limited company with foreign direct investment is the most flexible and widely used option.

Can foreigners own 100 percent of a company in Nepal?

Yes. Full foreign ownership is allowed in approved sectors under current FDI laws.

Is a branch office better than a subsidiary in Nepal?

A branch suits short-term projects. A subsidiary is better for long-term growth.

How long does company registration take in Nepal?

With proper documentation, registration typically takes two to four weeks.

Can a liaison office earn revenue in Nepal?

No. Liaison offices are strictly non-commercial.