How to Convert from One Company Type to Another in Nepal

Understanding the types of companies in Nepal is essential for foreign investors who plan to scale, restructure, or comply with evolving regulations. Many businesses start small. Over time, strategy changes. Capital grows. Foreign ownership becomes relevant.

This is where company conversion comes in. Nepal allows legal conversion from one company type to another under the Companies Act. When done correctly, the business continues without dissolution. Assets, contracts, and employees remain intact.

This guide explains how to convert from one company type to another in Nepal, step by step, with a clear focus on foreign companies, NRNs, and global founders.

What Does Company Conversion Mean in Nepal?

Company conversion is a statutory restructuring process. The legal identity remains, but the form of the company changes.

Examples include:

• Private Limited → Public Limited

• Partnership → Private Limited

• Local Company → Foreign-owned Company

• Liaison Office → Branch Office

The conversion is regulated by the Companies Act", overseen by the Office of the Company Registrar".

Types of Companies in Nepal Eligible for Conversion

Nepal recognizes several business structures. Not all conversions are allowed. Below are the most common and legally supported transitions.

Private Limited Company

• Most popular structure for foreign investors

• Limited liability

• Restriction on public share issuance

Common conversions:

• Private Limited → Public Limited

• Private Limited → Foreign-owned Company

Public Limited Company

• Minimum seven shareholders

• Can raise capital publicly

• Higher disclosure requirements

Conversion notes:

• Reverse conversion to private is allowed, but regulated

Partnership Firm

• Governed by Partnership Act

• Unlimited liability for partners

Allowed conversion:

• Partnership → Private Limited Company

Sole Proprietorship

• Not a separate legal entity

• Owner bears full liability

Important:
Direct conversion is not permitted. A new company must be incorporated instead.

Branch Office of Foreign Company

• Extension of parent company

• No separate legal personality

Possible restructuring:

• Branch Office → Subsidiary Company (new incorporation)

Liaison Office

• Non-commercial presence

• Market research and coordination only

Typical transition:

• Liaison Office → Branch Office

Why Foreign Companies Convert Their Company Type in Nepal

Foreign investors usually convert due to growth, compliance, or strategic expansion.

Common reasons include:

• Allowing foreign direct investment (FDI)

• Raising capital or issuing shares

• Limiting personal or partner liability

• Meeting regulatory thresholds

• Improving credibility with banks and regulators

Conversion is often cheaper and faster than closing and reincorporating.

Legal Framework Governing Company Conversion in Nepal

Company conversion is governed by multiple statutes.

Key laws include:

• Companies Act"

• Foreign Investment and Technology Transfer Act"

• Industrial Enterprises Act"

• Directives of Nepal Rastra Bank"

Foreign-owned conversions require FDI approval before registration.

Step-by-Step Process to Convert Company Types in Nepal

1. Board or Partner Resolution

A formal resolution must approve:

• The new company type

• Capital structure changes

• Updated ownership pattern

2. Legal Due Diligence

Before conversion, authorities review:

• Tax clearance

• Pending liabilities

• Employee compliance

• Shareholder agreements

Unresolved issues delay approval.

3. Drafting Conversion Documents

Key documents include:

• Amended Memorandum of Association

• Updated Articles of Association

• Conversion application form

• Share structure statement

4. FDI Approval (If Applicable)

Foreign investors must obtain approval from:

• Department of Industry

• Or Investment Board Nepal

This step is mandatory before registrar filing.

5. Filing with the Office of the Company Registrar

Documents are filed with the Office of the Company Registrar.
If approved, a conversion certificate is issued.

6. Post-Conversion Updates

After approval, update:

• PAN and tax records

• Bank mandates

• Contracts and licenses

• Payroll and SSF registrations

Conversion Timelines and Costs in Nepal

Costs vary based on capital, foreign ownership, and advisory support.

Risks and Compliance Pitfalls to Avoid

Foreign companies should watch for these common mistakes:

• Ignoring tax or SSF arrears

• Assuming conversion avoids FDI approval

• Poorly drafted shareholder resolutions

• Mismatch between old and new objectives

• Failure to update banks and regulators

Professional guidance reduces rejection risk.

Types of Companies in Nepal – Conversion vs New Incorporation

When conversion is better:

• Existing contracts must continue

• Licenses are already issued

• Brand continuity matters

When new incorporation is better:

• Ownership structure changes completely

• Legacy liabilities exist

• Strategic reset is planned

Each case requires legal analysis.

Frequently Asked Questions (People Also Ask)

Can a private limited company be converted into a public company in Nepal?

Yes. The Companies Act allows conversion if capital, shareholders, and compliance requirements are met. Approval from the Company Registrar is mandatory.

Can foreigners convert an existing Nepali company into a foreign-owned company?

Yes. However, prior FDI approval under FITTA is compulsory before filing conversion documents.

Does company conversion require business closure?

No. Conversion allows continuity. The company retains assets, contracts, and legal identity.

How long does company conversion take in Nepal?

Timelines range from three weeks to two months. Foreign involvement usually extends the process.

Is tax clearance required before conversion?

Yes. Tax authorities must confirm no outstanding liabilities before approval.

Final Thoughts on Types of Companies in Nepal

Choosing among the types of companies in Nepal is not permanent. Nepal’s legal framework allows businesses to evolve without disruption.

For foreign companies, conversion is a powerful tool. It supports scaling, compliance, and long-term investment strategy. When handled correctly, it saves time, cost, and risk.

Call to Action

Planning to convert your company type in Nepal?
Book a consultation with our Nepal FDI and corporate restructuring specialists to receive a step-by-step conversion roadmap tailored to your business.