How the Company Act Nepal Applies to Foreign Companies and NRNs

Company Act Nepal (Companies Act 2063, 2006 AD) is the main law for company formation and governance in Nepal. It mandates that any foreign company must register a branch or liaison office before undertaking business in Nepal. Non-Resident Nepalis (NRNs) are considered foreign investors under Nepalese law, so they also must comply when investing in Nepal. Understanding the Act’s provisions is crucial for foreign firms and NRN entrepreneurs. This guide explains how the Company Act applies to foreign-owned companies and NRNs, covering setup steps and ongoing compliance.

Company Act 2063: Overview and Key Provisions

Nepal’s Companies Act 2063 (2006) consolidates and updates corporate law to promote good governance and transparency. It covers all stages of a company’s life cycle – from incorporation, share capital rules and board governance, to annual meetings, financial reporting, mergers, and liquidation. Companies must register with the Office of the Company Registrar (OCR) and follow Act requirements for share issues and director duties. Chapter 16 specifically deals with foreign companies, prescribing branch registration, audit and record-keeping rules. In effect, the Act treats NRNs as foreign investors (under FITTA 2019), so many provisions apply equally to them.

Business Structures under the Company Act Nepal

Foreign entities can enter Nepal via several structures:

• Branch Office: A branch acts as an extension of the parent company. It must register with OCR and typically pursue the same business activities as its foreign parent. A branch can earn income in Nepal, but only after obtaining any necessary industry or investment approvals.

• Liaison Office: A liaison (representative) office is a 100% foreign-owned office for non-commercial activities (such as market research or liaison). It must also register with OCR but cannot engage in income‑generating trade or contracts. It is mainly for facilitating parent-company operations.

• Local Subsidiary: A foreign investor may incorporate a private (or public) limited company in Nepal by equity investment. This requires filing a Memorandum/Articles of Association and other documents with OCR. Such subsidiaries are treated like domestic companies, with the added step of obtaining foreign investment approval under FITTA. Importantly, the Act notes that an approved share investment by a foreign company in a Nepalese firm is not itself treated as “doing business” requiring a branch. This allows for wholly foreign-owned subsidiaries (subject to sectoral rules).

The table below compares these options:

Compliance Requirements for Foreign Companies

Foreign-controlled entities must meet all Company Act obligations just like Nepali businesses. Key duties include:

• Statutory Registration: Maintain an active registration with OCR. Register any change in capital, board members or address promptly.

• Accounting & Audit: Appoint a Nepal-registered auditor annually. Branches file audited financial statements and balance sheet within 6 months of fiscal year‑end; liaison offices file within 3 months. Public or private subsidiary companies must also file annual reports and tax returns.

• Company Meetings: (For incorporated companies) Hold an Annual General Meeting and circulate AGM notices and financials to shareholders within prescribed timelines. If the company is private, some flexibility exists (e.g. written resolutions for small companies).

• Shareholders & Governance: Maintain share transfer records and shareholder registers. The Act protects shareholder rights (e.g. Section 139 on remedy against abuse). Directors must act in the company’s best interest and follow their fiduciary duties.

• Regulatory Filings: Besides OCR, foreign investors must also notify the Nepal Rastra Bank (NRB) when bringing in foreign capital and obtaining foreign investment approval. Companies pay Nepalese company registration and renewal fees based on capital and submit any required statutory filings (e.g. VAT/PAN registration with tax authorities).

• Industrial Registration (if applicable): Many projects must register under the Industrial Enterprises Act 2020. NRNs and foreign investors must ensure their business is recognized as an “industry” as required by FITTA.

The Foreign Investment and Technology Transfer Act (FITTA 2019) works alongside the Companies Act. It defines “foreign investor” to include foreign individuals, companies and NRNs, and sets conditions for investment approvals, including a negative list of restricted sectors (e.g. aviation, atomic energy). Crucially, FITTA specifies no overall cap on foreign equity. (Service sectors may have ceilings based on Nepal’s WTO commitments.)

1. Obtain necessary approvals (e.g. industry or investment board clearance). Prepare incorporation documents (MOA, AOA, board resolution, etc.).

2. Submit an application with OCR (online portal) including notarized foreign documents and regulatory permissions.

3. Upon review (usually ~30 days), receive the company or branch registration certificate. After registration, register with tax (PAN/VAT), NRB (for capital), and local authorities as needed. Ensure timely audit and filings annually.

Key Actions for Compliance:

• Appoint a local authorized representative or Nepali director as required.

• Keep proper accounting records (use local accountant, follow Nepalese GAAP/IFRS).

• Hold meetings and file annual returns.

• Adhere to labor, tax and sector-specific regulations outside the Company Act.

Table: Foreign Investment Options in Nepal

Special Provisions for NRNs

Non-Resident Nepalis enjoy particular investment rights. Under FITTA 2019, NRNs (with valid NRN ID) are explicitly included as “foreign investors”. However, the Non-Resident Nepali Act, 2008 and related rules grant them some privileges: they can invest foreign currency remittances in Nepal without local partners, and repatriate investment funds in convertible currency. For company investment, NRNs must still obtain FITTA approval. The current rules specify that NRN investments must meet certain thresholds: typically, a minimum of NPR 50 million is required for new industries, and the business must not fall under FITTA’s negative list. They may invest via equity, lease financing, venture capital, listed securities or tech-transfer deals. NRNs also can own land (within ceilings) for investment purposes. In practice, an NRN setting up or investing in a company follows the same Company Act incorporation steps as other foreigners, but should ensure they have an NRN registration and passport for identity and can take advantage of NRN-specific incentives.

Conclusion & Next Steps

Navigating the Company Act Nepal and related investment laws can be complex for foreign businesses and NRNs. It’s vital to structure your Nepal venture correctly (branch vs liaison vs subsidiary) and to adhere to all post-registration requirements (audits, filings, etc.). Expert guidance can smooth this process. Ready to expand in Nepal? Our team offers company incorporation and legal compliance consultation services tailored to foreign investors and NRNs. Contact us to ensure your Nepalese company is set up right and fully compliant with Nepal’s Company Act and investment laws.