Investing in Nepal: A Deep Dive into Publicly Listed Companies

For foreign investors, choosing between a private vs public company in Nepal is not just a legal decision. It is a strategic one. The structure you choose affects ownership control, compliance burden, capital raising, exit options, and long-term scalability.

Nepal has steadily modernized its corporate and capital market framework. With clearer company laws, improved foreign investment rules, and a functioning stock exchange, the country now offers real choices for international businesses entering South Asia.

This guide gives you a practical, investor-grade comparison. It explains how private and public companies work in Nepal, when each makes sense, and how foreign companies can use them to enter, grow, or exit the market.

Nepal’s Corporate Landscape in Brief

Nepal’s company regime is governed primarily by the Companies Act 2006, supported by sector laws, tax legislation, and capital market regulations.

Foreign investors typically encounter three relevant structures:

• Private limited companies

• Public limited companies

• Listed public companies (on the Nepal Stock Exchange)

While branch offices and liaison offices also exist, this article focuses on equity-based entities where ownership and investment returns matter most.

What Is a Private Company in Nepal?

A private limited company is the most common entry vehicle for foreign businesses.

Core Characteristics

• Minimum shareholders: 1

• Maximum shareholders: 101

• Share transfer restricted by articles

• Cannot invite the public to subscribe for shares

• Lower disclosure and governance requirements

Private companies are regulated by the Office of the Company Registrar and relevant tax authorities, but they remain outside capital market supervision.

What Is a Public Company in Nepal?

A public limited company is designed for larger-scale operations and capital mobilization.

Core Characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Shares are freely transferable

• Can raise capital from the public

• Subject to higher disclosure and governance standards

Once listed, public companies fall under securities regulation and ongoing market supervision.

Private vs Public Company in Nepal: Strategic Comparison

Understanding the private vs public company in Nepal decision requires more than definitions. The real difference lies in strategy, compliance appetite, and growth plans.

High-Level Comparison Table

This table reflects real investor experience rather than just statutory theory.

When a Private Company Makes Sense for Foreign Investors

Most foreign companies start with a private entity. Here is why.

Advantages of a Private Company

• Faster incorporation

• Lower compliance costs

• Strong shareholder control

• Easier management of related-party transactions

• Suitable for back-office, services, and early-stage ventures

A private company is ideal if Nepal is a cost center, delivery hub, or pilot market.

Typical Use Cases

• Outsourced service centers

• Technology development teams

• Professional services firms

• Early-stage manufacturing

• Controlled joint ventures

When a Public Company Becomes the Right Choice

A public company is not for everyone. But for the right investor, it offers powerful benefits.

Advantages of a Public Company

• Access to large pools of capital

• Brand credibility and transparency

• Liquidity for shareholders

• Structured governance improves investor confidence

• Easier long-term exits

Public companies are particularly relevant for infrastructure, finance, hydropower, insurance, and large consumer businesses.

Capital Raising: Private vs Public Company in Nepal

Capital strategy is often the deciding factor.

Private Company Capital Options

• Shareholder equity

• Foreign direct investment

• Convertible instruments

• Private placements

Public Company Capital Options

1. Initial Public Offering (IPO)

2. Rights issues

3. Follow-on public offers

4. Market-linked debt instruments

If your growth model depends on continuous capital inflow, public status matters.

Governance and Compliance Expectations

Foreign investors often underestimate governance differences.

Private Company Governance

• Board structure is flexible

• Fewer mandatory committees

• Limited public disclosures

• Easier decision-making

Public Company Governance

• Independent directors required

• Audit and risk oversight

• Regular public reporting

• Market disclosures and scrutiny

Public companies must align operations with securities laws and listing rules.

Taxation Perspective for Investors

From a corporate tax rate perspective, Nepal treats private and public companies similarly.

Key points:

• Corporate income tax applies to both

• Withholding tax rules are identical

• Dividend taxation depends on distribution, not listing

• Transfer pricing rules apply to both

The real tax difference lies in documentation, audit intensity, and scrutiny.

Foreign Ownership Rules and Reality

Nepal permits 100 percent foreign ownership in most sectors, subject to sectoral caps.

Foreign investors can:

• Fully own private companies

• Hold shares in public companies

• Participate in IPOs where permitted

However, regulatory approvals, reporting, and capital repatriation processes must be planned carefully.

Exit Strategy: A Critical but Overlooked Factor

Your exit path should influence your entry structure.

Private Company Exits

• Share sale to strategic buyer

• Buyback arrangements

• Group restructuring

Public Company Exits

• Market sale of shares

• Strategic divestment

• Partial exits over time

Public listing provides liquidity that private companies cannot match.

Choosing the Right Structure: A Practical Framework

Ask yourself these questions:

• Do you need immediate capital from the public?

• Is control more important than visibility?

• Are you prepared for ongoing disclosures?

• Is Nepal a long-term growth market or support base?

For most foreign companies, the answer leads to a phased approach.

A Common Strategy: Start Private, Scale Public

Many successful investors follow a two-stage model:

• Phase 1: Private company for entry and stabilization

• Phase 2: Conversion to public company for scale

Nepal’s legal framework allows this transition with proper planning.

Risks and Mitigation Strategies

No structure is risk-free.

Key Risks

• Regulatory changes

• Capital controls

• Governance failures

• Market volatility

Mitigation

• Strong legal structuring

• Clear shareholder agreements

• Professional compliance management

• Early exit planning

Private vs Public Company in Nepal: Final Verdict

The private vs public company in Nepal decision is not about which is better. It is about which is right for your business stage.

Private companies offer speed, control, and cost efficiency. Public companies offer scale, credibility, and liquidity. Foreign investors who align structure with strategy consistently outperform those who choose based on assumptions.

Frequently Asked Questions 

Is a private or public company better for foreign investors in Nepal?

It depends on your goals. Private companies suit controlled market entry. Public companies suit large-scale capital raising and long-term exits.

Can foreigners own 100 percent of a public company in Nepal?

Yes, in most permitted sectors, subject to sector-specific caps and regulatory approvals.

How long does it take to convert a private company into a public company?

Typically, 6 to 12 months, depending on restructuring, approvals, and compliance readiness.

Are compliance costs much higher for public companies?

Yes. Public companies face ongoing disclosures, audits, and regulatory reporting obligations.

Is listing on NEPSE mandatory for public companies?

No. A company can be public without being listed, though listing provides liquidity and visibility.