Company Act Nepal is the cornerstone of business law in the country, defining how companies are formed, operated, and regulated. For foreign companies eyeing Nepal, understanding this Act is crucial. Nepal’s Company Act 2063 (2006) outlines the entire process for registering a company – from company name reservation to obtaining the certificate of incorporation – and ensures businesses operate within a legal framework. In recent years, Nepal has streamlined company registration (with online filing systems and clearer guidelines) to attract international investment. This means foreign investors can register a company in Nepal with 100% ownership in most sectors, provided they follow the law’s procedures. In this comprehensive guide, we’ll break down how the Company Act regulates company registration, foreign investment (FDI) approvals, compliance requirements, and the step-by-step process for setting up a business under Nepalese law.
Nepal’s Companies Act 2006 (widely referred to as Company Act Nepal) is the primary legislation governing company incorporation and administration. It covers all types of companies – private, public, and even non-profit – and lays out rules on formation, shareholder rights, reporting, and dissolution. For foreign investors, the Act is especially important because it specifies how foreign-owned companies or branch offices must register and operate. Section 154 of the Act, for instance, provides the regulatory framework for foreign companies: it details the requirements to register a branch or liaison office and limits their activities to ensure compliance with local laws. The Act strikes a balance between encouraging foreign investment and maintaining regulatory oversight. In essence, Nepal’s company law ensures that whether you form a new Nepali company or open a branch of a foreign company, you must adhere to transparent procedures, capital requirements, and ongoing compliance mandated by the government.
Types of companies recognized under the Act include:
Private Limited Company: Most common for foreign investors; can have 1 to 101 shareholders with limited liability.
Public Limited Company: Can offer shares to the public (requires at least 7 promoters and a minimum paid-up capital of NPR 10 million). Certain sectors (banking, insurance, etc.) must register as public companies.
Non-Profit Company: Formed under Chapter 19 of the Act for social or charitable objectives, not distributing profits (requires at least 5 members).
Foreign Company Branch or Liaison: An overseas company’s Nepal branch or representative office, governed by Section 154 for registration and operation.
For most foreign investors, a Private Limited Company is the vehicle of choice due to ease of setup and full local entity status. However, the Act also allows foreign companies to establish branch offices for specific projects or liaison (representative) offices for non-commercial activities. We’ll compare these options in the table below.
To enter Nepal’s market, foreign companies have two main pathways: incorporate a new local company or register a branch/liaison office of the foreign company. The Company Act and related laws treat these options differently. Here’s a comparison:
| Aspect | Private Limited Company (Subsidiary) | Branch Office (Foreign Company) | Liaison Office (Representative Office) |
|---|---|---|---|
| Legal Status | Separate Nepali legal entity (limited company) | Extension of the foreign parent company | Extension of foreign company (no separate legal person) |
| Allowed Activities | Any permitted business activities per its objectives (broad scope) | Only activities similar to parent company’s business and permitted in Nepal. | Non-commercial – cannot engage in income-generating activities (solely coordination/representative work) |
| Foreign Ownership | Up to 100% foreign shareholding allowed in most sectors (except restricted industries) | Wholly owned by the foreign company (parent holds 100% of branch) | Wholly owned by the foreign company (no local equity needed) |
| Capital Requirement | Minimum FDI capital of NPR 20 million (~USD 150k) per foreign investor (required by law for any foreign-owned company) | No specific equity capital (branch is funded by parent as needed), but must show investment for operations; registration fee varies by the amount of investment in Nepal. | No share capital (since it’s not a revenue-earning entity); parent company funds its expenses. |
| Registration Approval | Prior FDI approval from Department of Industry (DoI) or Investment Board Nepal (for large projects) is required; then register with Office of Company Registrar (OCR) | Must obtain approval from the relevant line ministry or regulator for the sector before OCR registration (E.g., a foreign bank needs central bank approval to open a branch.) | Similar to branch – requires approval from appropriate authority and OCR registration. Often used for market research or liaison with local stakeholders. |
| Compliance Duties | Must maintain local books, file annual returns, hold annual general meetings, and undergo yearly financial audit as per the Company Act. Tax filings (e.g., income tax, VAT) are required annually. | Must appoint a Nepali auditor and submit audited financial statements of the branch to OCR within 6 months of fiscal year end, including the parent company’s balance sheet. Branch profits are taxed in Nepal and repatriation requires approval from Nepal Rastra Bank. | Must appoint an auditor and submit an annual statement of expenditures to OCR within 3 months of fiscal year end. No income tax (since it cannot earn revenue), but it must report expenses (rent, salaries, taxes withheld, etc.). |
| Ideal Use Case | Full business operations in Nepal with long-term presence, ability to engage in any profit-making activities. Establishing a subsidiary gives credibility and access to local incentives. | Executing specific contracts or projects in Nepal under the foreign company’s banner. Suited for short-term or narrowly defined business activities where creating a separate company is not needed. | Representational purposes – e.g. marketing, research, liaison with Nepali clients or government. Good for establishing presence without starting commercial operations. |
Note: In both branch and liaison cases, Nepal’s law prohibits a foreign company from doing business in Nepal without registering. If a foreign firm engages in regular transactions or sets up a physical presence for over a month, it is deemed to be doing business and must register a branch or liaison office. Essentially, you cannot simply operate in Nepal from abroad; you must either incorporate locally or go through the foreign company registration process for a branch.
Registering a company in Nepal as a foreign investor involves several stages, combining general company incorporation steps with additional foreign investment approvals. Below is a step-by-step guide aligning with Nepal’s Company Act and FDI regulations:
Check Industry Eligibility – Ensure your business sector is open to foreign investment. Under Nepal’s Foreign Investment and Technology Transfer Act (FITTA) 2019, certain industries are on a negative list (e.g. small-scale trading, real estate, arms manufacturing, etc., where foreign ownership is not allowed). Most productive sectors (IT, tourism, manufacturing, energy, etc.) are open to up to 100% foreign ownership. Also confirm your investment will meet the minimum FDI threshold (NPR 20 million per investor).
Obtain Foreign Investment Approval (FDI Approval) – Foreign investors must get approval from the government before incorporating. For investments up to NPR 6 billion (~USD 50 million), apply to the Department of Industry (DoI); larger investments go to the Investment Board Nepal (IBN). You’ll submit an application outlining the project, along with documents like a business plan, financial projections, investor details, and draft incorporation documents. This step, governed by FITTA 2019, ensures the project is permitted and verifies the investors’ credentials. Approval usually takes a few weeks and results in an FDI Approval Letter or license.
Name Reservation – While your FDI application is in process (or after approval), reserve your company name with the Office of the Company Registrar. This can be done online via the OCR’s Central portal (CAMIS). The name must be unique and comply with naming rules (no prohibited words, etc.). Name approval typically takes 2–3 working days.
Prepare Incorporation Documents – Draft the Memorandum of Association (MOA) and Articles of Association (AOA) for the new company, in line with Company Act requirements. Also gather required documents:
Foreign investors’ IDs (passport copies) or if the investor is a company, its incorporation certificate.
Board Resolution from the foreign company (if applicable) authorizing the Nepal investment.
Charter documents of foreign company (for branch/liaison or corporate shareholders) – notarized and translated to Nepali.
FDI Approval Letter from DoI/IBN (obtained in step 2).
Power of Attorney appointing a local representative to handle the registration if you’re not present in Nepal.
Application Form for company registration (as provided by OCR).
Bank Reference or affidavit of investment (sometimes required to show you’ll bring in the capital).
Recent photographs and signatures of promoters (as per OCR guidelines).
Having these documents ready in advance will streamline the process.
Company Registration at OCR – Submit the application for incorporation to the Office of the Company Registrar along with all the documents. You will also pay the government registration fee, which is based on the company’s authorized capital (for example, NPR 16,000 for up to NPR 10 million capital, scaling upwards for higher capital). The OCR will review the application, and if everything is in order, incorporate the company under the Companies Act. The Act requires that upon a complete application, the Registrar should issue the Certificate of Incorporation within 30 days. In practice, approvals are often quicker (a few days to a week for the company registration once the FDI approval is secured).
Register for Tax (PAN/VAT) – After incorporation, the new company must register with the Inland Revenue Office for a Permanent Account Number (PAN) which is used for tax identification. If the business will be involved in goods or services subject to VAT, register for VAT as well. Tax registration is mandatory before commencing operations, and it’s a straightforward process taking about a week. You will need your company incorporation certificate and company charter documents for this.
Local Municipality Registration – Register your business at the local ward or municipality office where your company’s office is located. This is a compliance step to notify local authorities of your business presence and pay any local business taxes or fees. In Nepal, businesses typically obtain a “Ward Office Registration” or local trade license. Fees depend on the municipality (roughly NPR 10,000–25,000 per year for city areas)
Bring in Capital & Nepal Rastra Bank (NRB) Compliance – With the company established, you can now remit the investment funds into Nepal. The central bank, Nepal Rastra Bank, must be informed of and approve the inbound foreign investment funds. Typically, you’ll open a capital account in a Nepali bank and the foreign currency is brought in against your FDI approval. NRB will issue a confirmation, which is crucial for future repatriation of profits. (Without NRB record, you cannot repatriate dividends later.) Ensure to channel all equity investments and any loans through approved banking channels as per NRB guidelines.
Obtain Additional Licenses – Depending on your industry, you may need specific licenses or permits before operating. For example, a tourism business might need a Tourism Board license; a fintech company might need a central bank license. The Company Act incorporation is just the start – sectoral regulators handle operational licenses.
Post-registration Compliance Setup – Finally, set up the necessary compliance processes: appoint a qualified auditor (the law requires every company to have an auditor), register employees for social security funds, and prepare to file annual reports. The Company Act mandates that companies hold an Annual General Meeting and file annual returns with the OCR. Ensure bookkeeping and record-keeping are in place from day one. Hiring a local accountant or service provider can help meet ongoing tax and regulatory filings.
This entire process for a foreign investor typically takes around 4–8 weeks in total. The FDI approval is usually the longest part (2–4 weeks), while company incorporation after that is relatively quick (about a week). In total, Nepal’s laws allow about 1–2 months for completion of all formalities, if documents are in order. Planning ahead and following each step carefully will help you avoid delays.
Nepal’s Company Act works in tandem with its foreign investment laws to regulate how overseas investors can do business. The key legislation for FDI is the Foreign Investment and Technology Transfer Act, 2019 (FITTA), along with its 2021 Regulations. Under FITTA, any foreign individual or company can invest in Nepal in permitted sectors, but they must obtain prior approval and meet the minimum capital requirements. The Industrial Enterprises Act 2020 further classifies industries and supports investors with certain incentives once registered.
Key points foreign investors should note:
Minimum Investment Requirement: Nepal imposes a minimum foreign investment of NPR 20 million per investor (approximately USD 150,000). This threshold applies whether you’re starting a new company or injecting capital into an existing one. (Exception: The IT sector has been given some relaxation recently – e.g. tech startups may be exempted from the minimum in certain cases). Plan your capital accordingly; underestimating this can stall your registration. It’s often advisable to structure at least the minimum paid-up capital in your investment plan from the start.
Foreign Ownership Limits: Nepal allows up to 100% foreign ownership in most industries. You do not need a local partner or shareholder just to satisfy ownership rules – a foreigner can fully own a Private Limited Company in Nepal. Only a few sectors have caps: for instance, certain consulting services cannot exceed 51–49% foreign ownership, and ride-sharing businesses are capped at 70% foreign equity. Always check the latest “negative list” of industries not open or partially open to FDI.
Approval Authorities: The Department of Industry (DoI) is the primary body that approves standard FDI proposals under FITTA. The Investment Board Nepal (IBN) handles large-scale projects (generally above NPR 6 billion) or certain sectors like infrastructure and hydropower, under the Public-Private Partnership and Investment Act. It’s critical to apply to the correct authority based on your project size. Both bodies coordinate with the Office of Company Registrar as well – you’ll typically submit the IBN/DoI approval letter when registering the company.
Repatriation and Exit: The Company Act ensures that if a company is properly registered and operating, it can distribute dividends to shareholders. However, the actual repatriation of profits or sale proceeds out of Nepal requires clearance from Nepal Rastra Bank and proof that all due taxes are paid. This means maintaining proper accounts and audits is not just a local compliance issue but also tied to your ability to remit funds abroad. Nepal’s laws permit repatriation of dividends, capital gains, and invested capital, but only through prescribed procedures and with supporting documentation.
Legal Compliance and Reporting: Once your company is set up, staying compliant with local laws is essential. The Companies Act requires an annual return filing and timely notification to the OCR for any major changes (e.g., changes in directors, office address, share transfers, etc.). Meanwhile, FITTA requires that any changes in the investment (like additional investment, loan inflow, technology transfer agreements) be reported to DoI/IBN and NRB. Non-compliance can result in fines or difficulties in obtaining services (for example, you might need a tax clearance certificate to renew certain licenses or to repatriate money).
In summary, foreign investment in Nepal is regulated by a framework of laws – primarily FITTA 2019 for permissions and the Companies Act 2006 for incorporation and governance. By following these laws closely, foreign companies can enjoy full ownership of businesses in Nepal and operate in a stable legal environment. Nepal is keen on attracting FDI, so processes are improving (e.g., introduction of online applications and faster approvals). Understanding the legal requirements upfront will save you time and ensure your investment is protected under Nepali law.
Registering your company is just the first step. The Company Act and related regulations impose ongoing compliance requirements to keep your business in good standing:
Annual Financial Statements and Audit: Every company in Nepal must prepare annual financial statements and have them audited by a licensed auditor. Private companies typically need to submit their audited balance sheet and profit/loss account to the OCR within 6 months of the fiscal year end. Branch offices of foreign companies have an extra duty of submitting the parent company’s audited financials as well, for transparency. Liaison offices file a statement of expenditures as noted earlier, since they don’t generate profit.
Annual General Meeting (AGM): The Companies Act requires that companies hold an AGM of shareholders within six months from the end of the fiscal year. During the AGM, the shareholders approve accounts, appoint/reappoint the auditor, and address any major decisions (dividends, director appointments, etc.). After the AGM, an Annual Return must be filed with the OCR, reporting the meeting was held and attaching the approved financial statements.
Tax Filings: Nepal’s tax year ends in mid-July. Companies must file an annual income tax return by the end of October (within 3 months of fiscal year end, with a possible extension). Value Added Tax (VAT) filings are monthly or quarterly, and taxes like withholding tax on payments, or social security contributions, need periodic submissions. Ensure you have a good accountant or advisor to handle tax compliance, as the Inland Revenue Department strictly enforces filings.
Renewals and Licenses: While the company registration itself does not expire (it’s perpetual as long as compliance is maintained), any industry-specific licenses may require renewals (often annually or bi-annually). For example, an export business might need to renew its export license, a telecom service provider would renew its operating license, etc. Always keep track of such renewals to avoid penalties.
Changes and Updates: If your company changes its name, increases capital, adds a new business objective, or makes other significant changes, you must file the appropriate resolutions and amended documents with the OCR for approval. Likewise, changes in directors or the company’s registered address need to be reported. The Company Act has prescribed forms for each such change – failing to update the registry can lead to fines or difficulties in enforcement of your rights.
Labour and Employment Laws: When you hire employees, you’ll need to comply with Nepal’s labor laws (employment contracts, minimum wages, provident fund, Social Security Fund registration, etc.). While not directly under the Company Act, these compliance areas are part of the “ongoing regulatory compliance” mentioned in the business goal. Foreign companies must ensure they treat local employees per law and make necessary registrations (for example, contributing to the Social Security Fund for each employee).
Staying compliant not only avoids legal trouble but also reinforces your company’s credibility. Nepal’s regulators (OCR, tax office, central bank) are increasingly interconnected – for instance, you might need an up-to-date OCR registration to open a bank account, or a tax clearance to get central bank approvals. A good rule of thumb is to maintain a compliance calendar for your Nepali entity. Many foreign investors engage local legal and accounting professionals for ongoing support, which can be invaluable in navigating local procedures and deadlines.
In conclusion, the Company Act Nepal provides the legal roadmap for launching and running a company in the country. By understanding how it regulates company registration – especially in conjunction with FDI rules – foreign investors can confidently navigate the process and establish a business that’s built on solid legal ground. Nepal’s evolving regulatory environment is designed to welcome foreign investment while ensuring companies operate transparently and responsibly. With the right preparation and local guidance, registering a company in Nepal is a straightforward process rather than an obstacle.
As an expert team with years of experience in Nepali corporate law and foreign investment, we ensure your incorporation is done right the first time. From securing FDI approvals to drafting compliant charter documents and obtaining tax registrations, we’ve got you covered every step of the way. If you’re looking to enter the Nepalese market, don’t let paperwork or legal formalities slow you down. Book a Free Consultation with us today and let’s kick-start your Nepal venture on a strong note. Speak to a Nepal company registration expert now to explore your options and get personalized advice.
Yes. Foreigners can own up to 100% equity in a Nepali company under current laws, except in a few restricted sectors. Nepal’s Company Act and FDI regulations allow full foreign ownership in most industries (IT, manufacturing, tourism, etc.) with no local partner required.
Foreign investors must bring a minimum of NPR 20 million (approximately USD 150,000) as investment capital for each company they register. This threshold is mandated by Nepal’s FDI policy (FITTA 2019). Certain industries like IT startups have been given exceptions to this rule in recent updates.
On average, it takes about 4 to 6 weeks for a foreign investor to register a company in Nepal. Obtaining FDI approval can take 2–4 weeks, and the company incorporation at the Office of Company Registrar takes around 3–7 days. Additional time may be required for post-incorporation tasks like tax and local registrations.
No, a local partner is not required in most cases. Nepal permits 100% foreign-owned companies in the majority of sectors. You only need a Nepali partner if you choose to (e.g., joint venture for strategic reasons) or if operating in a sector where foreign ownership is limited by law (e.g., certain consulting or retail services).
Key documents include identification (passports) of foreign promoters, a board resolution from any corporate investor approving the Nepal investment, the parent company’s incorporation documents (for branch or corporate shareholders), a business proposal or project plan, draft Memorandum and Articles of Association for the Nepal company, the filled application forms, and the FDI approval letter from the government. All foreign documents should be notarized and accompanied by Nepali translations as needed.