Investing Across Borders: Opportunities in Nepal for Foreign Investors

If you are evaluating private vs public company in Nepal, your decision will shape everything. It will affect ownership control, regulatory burden, tax exposure, and exit strategy. For foreign companies entering Nepal, this choice is not just legal. It is strategic.

Nepal is emerging as a competitive South Asian investment destination. The country recorded steady FDI commitments under the Foreign Investment and Technology Transfer Act 2019 (FITTA). The regulatory framework is clearer than before. Incentives are stronger. Infrastructure is improving.

But structure matters.

In this guide, we break down private vs public company in Nepal from a foreign investor perspective. We reference the Companies Act 2006 (2063), FITTA 2019, Income Tax Act 2002, and regulatory guidance from the Office of Company Registrar (OCR), Department of Industry (DOI), and Nepal Rastra Bank (NRB).

Let’s build clarity.

Nepal’s Investment Climate in 2026: Why Foreign Companies Are Entering

Nepal offers a strategic location between India and China. It has preferential access to regional markets. Labor costs remain competitive. Hydropower, tourism, ICT, manufacturing, and outsourcing are high-growth sectors.

Key policy drivers include:

• Liberal FDI regime under FITTA 2019
• 100 percent foreign ownership allowed in most sectors
• Repatriation rights guaranteed by law
• Special Economic Zones incentives under the SEZ Act
• Corporate income tax framework under the Income Tax Act 2002

For foreign investors, Nepal provides scale at manageable risk. But selecting the right company structure is essential.

Private vs Public Company in Nepal: Legal Definition and Core Differences

Under the Companies Act 2006 (2063), companies in Nepal are primarily categorized as:

• Private Limited Company
• Public Limited Company

Both structures allow foreign investment under FITTA 2019, subject to sector restrictions.

What Is a Private Company in Nepal?

A private limited company:

• Restricts share transfers
• Limits shareholders to a maximum defined by law
• Cannot invite the public to subscribe shares
• Requires at least one director
• Can be fully foreign-owned

This is the most common structure for foreign investors.

What Is a Public Company in Nepal?

A public limited company:

• May offer shares to the public
• Requires a minimum number of shareholders
• Requires a minimum paid-up capital as prescribed
• Must comply with securities regulations
• Can list on the Nepal Stock Exchange

Public companies face stricter governance requirements.

Private vs Public Company in Nepal: Comparative Analysis for Foreign Investors

Below is a strategic comparison tailored for cross-border investors:

Strategic Insight

For foreign companies entering Nepal for operations, services, manufacturing, or outsourcing, the private limited company is typically more efficient.

Public companies are ideal when:

1. You plan large capital mobilization.
2. You aim for IPO within Nepal.
3. You seek brand credibility through public listing.

Otherwise, private structure offers operational agility.

Regulatory Authorities Involved in Company Formation

When assessing private vs public company in Nepal, foreign investors must understand institutional oversight.

• Office of Company Registrar (OCR) – Incorporation authority
• Department of Industry (DOI) – FDI approval authority
• Nepal Rastra Bank (NRB) – Foreign currency approval and repatriation
• Inland Revenue Department (IRD) – Tax registration and compliance

Each structure requires OCR incorporation. Foreign investment requires DOI approval under FITTA.

Incorporation Process for Foreign Investors

Regardless of structure, foreign investors follow these steps:

1. Industry approval from DOI
2. Capital investment approval
3. Company registration at OCR
4. Tax registration at IRD
5. Bank account and capital injection
6. NRB reporting for foreign currency

The difference lies mainly in governance and disclosure obligations.

Capital Requirements and Shareholding Structure

Private companies have more flexibility. Public companies must meet minimum paid-up capital requirements under the Companies Act and securities regulations.

Private companies can:

• Be 100 percent foreign-owned
• Have joint ventures with Nepali shareholders
• Structure preference shares privately

Public companies must comply with:

• Prospectus requirements
• Public disclosure standards
• Securities Board of Nepal regulations

For many foreign investors, this additional layer increases cost and timeline.

Taxation Framework Under the Income Tax Act 2002

Corporate income tax in Nepal is governed by the Income Tax Act 2002.

General corporate tax rate:
25 percent for most industries

Special rates may apply for:

• Financial institutions
• Special industries
• Hydropower projects

VAT registration is mandatory above threshold turnover.

Tax treatment does not materially differ between private and public companies. However, compliance burden is higher for public entities due to reporting obligations.

Governance and Compliance Differences

Private Company Governance

• Fewer board formalities
• Less public disclosure
• Flexible shareholder agreements
• Easier restructuring

Public Company Governance

• Mandatory board committees
• Annual general meetings with stricter rules
• Financial disclosures to regulators
• Potential external audits beyond statutory requirements

For foreign companies prioritizing speed and control, private structure reduces friction.

When Should a Foreign Company Choose a Private Limited Company?

Choose a private limited company if:

• You want 100 percent ownership
• You want operational control
• You do not need public capital
• You prefer faster setup
• You want reduced compliance burden

Most foreign service providers, tech companies, outsourcing firms, and manufacturers enter Nepal using this structure.

When Does a Public Company Make Strategic Sense?

A public company may be ideal if:

• Your project requires significant domestic capital
• You want Nepal Stock Exchange listing
• You plan broad local shareholder participation
• You aim for institutional visibility

This structure is common in banking, insurance, hydropower, and infrastructure.

Sector-Specific Considerations Under FITTA 2019

Foreign investors must verify whether their sector is:

• Fully open
• Partially restricted
• On the negative list

FITTA 2019 guarantees repatriation of:

• Dividends
• Royalties
• Technical fees
• Capital upon exit

NRB approval is required for repatriation transactions.

Risk Assessment: Private vs Public Company in Nepal

Private Company Risk Profile

• Concentrated ownership risk
• Lower public scrutiny
• Easier dispute management

Public Company Risk Profile

• Market volatility
• Shareholder activism
• Public reporting exposure

For foreign investors unfamiliar with Nepal’s capital markets, private structure often offers lower systemic risk.

Cost Comparison Overview

While actual figures depend on industry and scale, here is a general cost comparison:

• Incorporation fees are similar
• Public companies incur additional listing and prospectus costs
• Annual compliance for public companies is higher
• Legal advisory expenses are greater for public structures

Over a five-year horizon, public compliance can materially exceed private costs.

Repatriation and Exit Strategy

Under FITTA 2019, foreign investors are entitled to repatriate profits subject to tax clearance and NRB approval.

Private companies allow:

• Share transfer to strategic buyer
• Merger or acquisition
• Direct capital repatriation

Public companies allow:

• Secondary market exit
• Share dilution
• Structured IPO exits

Exit flexibility should guide your structure decision.

Compliance Checklist for Foreign Investors

Here is a simplified compliance list:

• DOI FDI approval
• OCR company registration
• PAN and VAT registration
• NRB reporting for foreign currency
• Annual tax filings
• Annual general meeting compliance
• Audit under Companies Act

Public companies must add securities compliance.

Common Mistakes Foreign Investors Make

• Choosing public structure prematurely
• Underestimating compliance cost
• Ignoring repatriation process
• Failing to structure shareholder agreements
• Misinterpreting sectoral restrictions

Strategic structuring avoids future restructuring expenses.

Frequently Asked Questions

1. Can a foreign investor own 100 percent of a private company in Nepal?

Yes. FITTA 2019 allows full foreign ownership in most sectors, except those on the negative list.

2. Is a public company mandatory for large projects?

Not necessarily. Many large hydropower projects start as private companies before listing.

3. What is the corporate tax rate in Nepal?

The general corporate tax rate is 25 percent under the Income Tax Act 2002.

4. How long does incorporation take?

Private company registration may take a few weeks after FDI approval. Public companies take longer due to additional documentation.

5. Can profits be repatriated freely?

Yes, subject to tax clearance and NRB approval as provided under FITTA 2019.

Conclusion: Choosing Between Private vs Public Company in Nepal

The debate around private vs public company in Nepal is ultimately strategic. Most foreign investors entering Nepal prefer private limited companies for control, speed, and cost efficiency.

Public companies serve capital-intensive sectors and IPO ambitions.

The right structure depends on your growth plan, capital strategy, and compliance appetite.

If you are considering entering Nepal, structure the decision carefully. The wrong choice can cost time and capital. The right choice accelerates scale.