How to Create a Company in Nepal: Essential Legal and Financial Tips

Choosing between a private vs public company in Nepal is one of the first strategic decisions foreign companies face when entering the Nepalese market. The structure you select affects ownership, compliance, fundraising, timelines, and exit options. Make the wrong call, and expansion becomes costly and slow. Make the right one, and Nepal can become a scalable South Asian base. This guide breaks down the legal, financial, and operational realities so you can decide with confidence.

Why Nepal Is on Foreign Investors’ Radar

Nepal has quietly become attractive for foreign companies seeking cost efficiency, skilled talent, and access to South Asia. Reforms under the Companies Act and foreign investment policies have improved transparency and timelines.

Key pull factors include:

• Competitive operating costs

• English-speaking professional workforce

• Access to India and China

• Gradual liberalization of foreign direct investment

Understanding the private vs public company in Nepal framework is essential before committing capital.

Understanding Company Types Under Nepalese Law

Under the Companies Act 2006, companies in Nepal are primarily categorized as Private Limited Companies and Public Limited Companies.

What Is a Private Company in Nepal?

A private company in Nepal is designed for closely held ownership. It is the most common structure for foreign investors.

Core features

• 1 to 50 shareholders

• Share transfer restrictions

• No public share issuance

• Lower compliance burden

Private companies are ideal for subsidiaries, joint ventures, and wholly owned foreign entities.

What Is a Public Company in Nepal?

A public company allows capital raising from the public and institutional investors.

Core features

• Minimum 7 shareholders

• Mandatory public disclosures

• Can issue shares and debentures

• Higher regulatory scrutiny

Public companies suit infrastructure, banking, hydropower, and large-scale manufacturing projects.

Private vs Public Company in Nepal: Side-by-Side Comparison

Insight: Over 90 percent of foreign investors entering Nepal start with a private company due to speed and flexibility.

Legal Process to Create a Company in Nepal

Company registration is handled by the Office of Company Registrar.

Step-by-Step Registration Process

1. Name reservation and approval

2. Preparation of Memorandum and Articles of Association

3. Filing incorporation documents

4. Company registration certificate issuance

5. PAN and tax registration

For foreign-owned entities, additional approvals apply.

Foreign Investment Approval Requirements

Foreign investors must comply with the Department of Industry and Nepal Rastra Bank regulations.

Additional Steps for Foreign Companies

• Foreign investment approval

• Capital inflow through banking channels

• Industry-specific licensing

• Post-investment reporting

Failing to structure correctly can delay operations by months.

Capital, Ownership, and Control Considerations

In the private vs public company in Nepal decision, ownership control matters.

Private Company Ownership

• 100 percent foreign ownership allowed in most sectors

• Share transfer requires shareholder approval

• Simple exit planning

Public Company Ownership

• Sector-specific foreign ownership caps

• Mandatory disclosures

• Share dilution risk

For control-focused foreign companies, private structures dominate.

Taxation Differences Between Private and Public Companies

Nepal’s corporate tax regime applies to both structures, but compliance differs.

Key Tax Points

• Corporate income tax generally applies uniformly

• Public companies face higher audit and disclosure obligations

• Withholding tax rules apply to dividends and services

Private companies benefit from lower ongoing compliance costs.

Compliance and Governance Burden

• Annual general meeting

• Annual returns filing

• Basic statutory registers

Public Company Compliance

• Mandatory independent directors

• Public disclosures

• External audit requirements

Foreign SMEs rarely need public-company-level governance.

When Does a Public Company Make Sense?

A public company is suitable when:

• Large capital requirements exist

• Public fundraising is planned

• Long-term Nepal presence is strategic

For most foreign service firms, a public structure is unnecessary.

Strategic Recommendation for Foreign Companies

Based on practical market entry experience, the private vs public company in Nepal decision usually favors private incorporation during the first five to seven years.

Public conversion can occur later if capital expansion demands it.

Common Mistakes Foreign Investors Make

Avoid these pitfalls:

• Choosing public status too early

• Ignoring sector-specific FDI limits

• Underestimating compliance costs

• Using generic regional templates

Local legal structuring saves time and capital.

Frequently Asked Questions (People Also Ask)

Is a private company better than a public company in Nepal for foreigners?

Yes. A private company offers faster setup, lower compliance, and better control for most foreign investors.

Can a private company convert into a public company later?

Yes. Nepalese law allows conversion once capital and compliance requirements are met.

How long does company registration take in Nepal?

Private company registration typically takes two to four weeks, excluding foreign investment approvals.

Is 100 percent foreign ownership allowed in Nepal?

Yes, in most sectors. Some industries have ownership caps or require special approvals.

Do public companies pay more tax in Nepal?

Tax rates are similar, but public companies face higher compliance and audit costs.

Final Thoughts on Private vs Public Company in Nepal

Choosing between a private vs public company in Nepal is a strategic decision, not just a legal one. For foreign companies, private incorporation offers speed, flexibility, and control. Public companies make sense only when scale and public capital are essential.