Key Procedures for Foreigners Starting a Business in Nepal

If you are evaluating private vs public company in Nepal, you are already asking the right question. For foreign companies, the legal structure you choose quietly shapes control, tax exposure, compliance load, and exit options. This guide is written for international founders, CFOs, and expansion teams who want clarity, not jargon. Within the first few weeks, your decision will lock in how capital enters Nepal, how profits move out, and how regulators engage with you.

This article walks you through the key procedures for foreigners starting a business in Nepal, with a practical comparison of private and public companies, grounded in current foreign investment rules and real execution experience.

Why “Private vs Public Company in Nepal” Matters for Foreign Companies

For local founders, the distinction can feel academic. For foreign investors, it is strategic.

Your company type determines:

• Whether FDI approval is required before incorporation
• How much capital must be committed upfront
• How shares can be transferred or exited
• The depth of ongoing regulatory scrutiny

Most foreign companies do not fail in Nepal because the market is wrong. They struggle because the structure constrains decisions later.

Nepal’s Legal Framework for Foreign Business Registration

Foreigners can legally invest in Nepal under a well-defined framework administered by multiple authorities.

Key pillars include:

• Foreign Investment and Technology Transfer Act (FITTA)
• Companies Act
• Industrial Enterprises Act
• Income Tax Act
• Foreign exchange directives issued by the central bank

Together, these laws regulate FDI approval, company incorporation, capital inflow, taxation, and repatriation.

Types of Companies Available to Foreign Investors in Nepal

Foreign investors primarily choose between:

1. Private Limited Company
2. Public Limited Company

Other forms such as branch offices or representative offices exist, but they are structurally different and outside the scope of this comparison.

What Is a Private Limited Company in Nepal?

A private limited company is the most common structure used by foreign investors entering Nepal.

Core characteristics

• Shareholders: 1–101
• Shares are not offered to the public
• Transfer of shares is restricted
• Can be 100% foreign owned (sector permitting)

Why foreign companies prefer it

Private companies offer control, speed, and flexibility, especially during early market entry.

What Is a Public Limited Company in Nepal?

A public limited company is designed for larger, capital-intensive operations.

Core characteristics

• Minimum shareholders: 7
• No upper limit on shareholders
• Can issue shares to the public
• Higher minimum capital requirements
• Heavier disclosure and compliance obligations

Public companies are typically used for banking, insurance, hydropower, or large infrastructure projects.

Private vs Public Company in Nepal: Strategic Comparison

Insight: For 90% of foreign companies entering Nepal, the private limited company is not just simpler. It is strategically safer.

Step-by-Step Procedures for Foreigners Starting a Business in Nepal

This process applies whether you choose a private or public company, with variations in depth and timing.

1. Sector eligibility confirmation

Not all sectors are open to foreign investment. Some are restricted or capped.

Typical open sectors include:

• IT and software services
• Manufacturing
• Tourism and hospitality
• Energy (with approvals)

2. FDI approval application

Foreign investors must obtain approval before incorporation.

This includes:

• Project proposal
• Shareholding structure
• Capital commitment
• Technology or know-how details

3. Company name reservation

Names are reserved through the company registrar system and must be:

• Unique
• Not misleading
• Compliant with naming rules

4. Company incorporation

Upon approval, incorporation documents are filed, including:

• Memorandum of Association
• Articles of Association
• Shareholder resolutions

5. Capital inflow through banking channels

Foreign capital must enter Nepal through approved banking routes and be reported to regulators.

6. Tax and statutory registrations

After incorporation:

• Permanent Account Number registration
• VAT registration if applicable
• Social Security Fund enrollment

7. Operational readiness

This includes:

• Local office setup
• Employment contracts
• Ongoing compliance calendars

Capital Requirements: Private vs Public Company in Nepal

Capital thresholds vary by sector, but patterns are clear.

• Private companies allow staged capital inflow aligned with business growth.
• Public companies often require significant upfront capitalization and proof of funds.

For foreign companies testing the market, flexibility matters more than optics.

Tax Implications for Foreign-Owned Companies in Nepal

Both private and public companies are taxed under the same corporate tax regime.

Key points:

• Corporate income tax applies on Nepal-sourced income
• Withholding tax rules apply to dividends and royalties
• Repatriation is permitted after tax clearance

However, public companies face greater audit and disclosure expectations, increasing administrative cost.

Compliance Burden: A Hidden Differentiator

Foreign executives often underestimate compliance load.

Private company compliance includes

• Annual filings
• Tax returns
• Statutory audits

Public company compliance adds

• Enhanced disclosures
• Regulatory reporting
• Governance requirements

If Nepal is not your primary market, simplicity preserves focus.

Control, Governance, and Decision-Making

Private companies allow:

• Tighter board control
• Faster decision cycles
• Clearer IP and management authority

Public companies dilute control by design.

For foreign founders, control is risk management.

Exit, Share Transfer, and Repatriation Considerations

Exit strategy should be considered before incorporation.

Private companies offer:

• Easier share transfers
• Cleaner exits via strategic sale
• More predictable repatriation processes

Public companies introduce:

• Market dependencies
• Regulatory approvals
• Higher unwind complexity

When Does a Public Company Make Sense for Foreigners?

A public company may be appropriate if:

• You require large local capital participation
• Your sector mandates public ownership
• You plan a Nepal stock exchange listing
• Long-term infrastructure investment is the goal

For most foreign operating companies, this is the exception, not the rule.

Common Mistakes Foreign Companies Make in Nepal

1. Choosing a public company for credibility alone
2. Overcommitting capital too early
3. Ignoring repatriation mechanics
4. Treating compliance as an afterthought

Each mistake is avoidable with the right structure.

Private vs Public Company in Nepal: Executive Summary

If you are a foreign company entering Nepal:

• Start with a private limited company
• Preserve flexibility
• Scale only when regulatory certainty is earned

Structure first. Scale second.

FAQs: Private vs Public Company in Nepal

Is a private limited company allowed 100% foreign ownership in Nepal?

Yes. Many sectors permit 100% foreign ownership through a private limited company, subject to FDI approval.

How long does company registration take for foreigners in Nepal?

Typically 4–8 weeks, depending on sector approvals and document readiness.

Can a private company later convert into a public company?

Yes. Conversion is permitted but involves regulatory approvals and restructuring.

Is minimum capital different for private and public companies?

Yes. Public companies generally require higher minimum capital and stricter proof.

Can profits be repatriated from Nepal by foreign shareholders?

Yes. Profits can be repatriated after tax compliance and central bank approval.

Conclusion: Choosing the Right Entry Structure

The private vs public company in Nepal decision is not about size or prestige. It is about control, risk, and future options. For most foreign companies, a private limited company provides the cleanest path to enter, operate, and exit Nepal efficiently.

If you are planning your Nepal market entry, structure it deliberately. The right choice today prevents expensive constraints tomorrow.