If you are a foreign company planning to enter Nepal, the Company Act Nepal will shape almost every legal and operational decision you make. From how you register your entity to how directors are appointed, profits distributed, and compliance maintained, this law defines the rules of the game.
Many international founders underestimate the impact of the Company Act of Nepal. That mistake often leads to delays, regulatory penalties, or structural inefficiencies. This guide explains the Act clearly, practically, and from a foreign investor’s perspective.
Whether you are a startup, SME, or scaling multinational, understanding the Company Act Nepal is essential for compliant and profitable operations.
The Company Act Nepal (Companies Act, 2006) is the primary legislation governing company formation, operation, governance, restructuring, and dissolution in Nepal.
It applies to:
Domestic companies
Foreign-invested companies
Subsidiaries and joint ventures
Startups and SMEs
The Act is administered by the Office of the Company Registrar (OCR) and works alongside Nepal’s foreign investment and tax laws.
Foreign businesses often focus on tax or market entry first. However, company law determines:
Ownership rights
Governance power
Capital structure
Exit and repatriation feasibility
For startups and SMEs, the Company Act Nepal is especially important because it dictates flexibility, compliance burden, and scalability.
This is the preferred structure for foreign investors.
Key features:
Minimum one shareholder
Maximum 101 shareholders
Restricted share transfer
No public share issuance
Suitable for large-scale investments or capital market entry.
Key features:
Minimum seven shareholders
Can issue public shares
Higher compliance and disclosure requirements
Although approved under foreign investment laws, internal governance and reporting still reference the Company Act Nepal.
The Company Act itself does not restrict foreign ownership percentages. However, it:
Enables foreign shareholders
Protects minority shareholder rights
Defines voting power and control
Foreign ownership limits are governed separately by investment laws, but corporate rights are enforced under the Company Act Nepal.
Here is a simplified process foreign companies follow:
Name reservation at OCR
Drafting Memorandum of Association (MOA)
Drafting Articles of Association (AOA)
Capital structure declaration
Director and shareholder disclosures
Registration approval and certificate issuance
This process typically takes 7 to 15 working days when structured correctly.
The Act does not impose a universal minimum capital. However:
Capital must be declared and subscribed
Share value and classes must be defined
Capital changes require regulatory filings
For foreign companies, declared capital often aligns with foreign investment approval thresholds.
Under the Company Act Nepal:
At least one director is mandatory
Directors can be foreign nationals
Director duties are fiduciary and statutory
Acting in good faith
Compliance oversight
Financial reporting accuracy
Protection of shareholder interests
Failure to comply can trigger personal liability.
The Act protects shareholders through:
Voting rights
Dividend entitlements
Access to company information
Legal remedies against mismanagement
This protection is particularly important for foreign minority investors.
Foreign companies must comply with ongoing obligations.
Annual General Meeting (AGM)
Annual returns to OCR
Updated director and shareholder records
Audited financial statements
Statutory disclosures
Corporate record maintenance
Non-compliance can lead to fines, director disqualification, or company suspension.
| Criteria | Private Limited Company | Public Limited Company |
|---|---|---|
| Shareholders | 1–101 | Minimum 7 |
| Share Transfer | Restricted | Freely transferable |
| Compliance Burden | Moderate | High |
| Public Fundraising | Not allowed | Allowed |
| Ideal For | Foreign startups and SMEs | Large enterprises |
The Act allows dividend distribution only when:
Profits are audited
Statutory reserves are met
AGM approval is obtained
Dividends must be proportional to shareholding unless otherwise stated.
Foreign companies planning exits must consider:
Share transfer procedures
Valuation requirements
OCR approval processes
The Company Act Nepal ensures transparency but requires strict documentation.
Foreign founders often:
Use incorrect MOA clauses
Misclassify share capital
Ignore director compliance duties
Miss statutory deadlines
These errors delay operations and increase legal risk.
Despite its formality, the Act offers:
Legal certainty
Investor protection
Corporate credibility
Scalable governance frameworks
For compliant companies, it becomes a growth enabler rather than a barrier.
The Company Act Nepal is the main law governing company formation, management, and compliance in Nepal, including foreign-owned entities.
Yes, the Act permits foreign shareholders, but sector-specific investment laws may impose ownership limits.
Yes. It offers flexibility, lower compliance, and strong control for foreign startups and SMEs.
Penalties include fines, director liability, company suspension, and difficulties in profit repatriation.
Companies must file annual returns and audited financials every fiscal year.
The Company Act Nepal is not just a legal requirement. It is a framework that protects investors, enforces discipline, and enables sustainable growth. For foreign startups and SMEs, understanding and structuring correctly under this Act determines success or stagnation.
With the right legal and compliance strategy, the Company Act of Nepal becomes a powerful foundation for long-term expansion.
Planning to enter Nepal or already operating under the Company Act Nepal?
Speak with our Nepal market-entry and compliance experts today to structure your company correctly, reduce risk, and accelerate growth.