Key Steps in Business Registration: A New Firm Owner’s Guide

If you are evaluating a private vs public company in Nepal, your structure choice will shape control, capital access, tax exposure, and long-term scalability. For foreign companies, this decision is not administrative. It is strategic.

Nepal’s legal framework is primarily governed by the Companies Act 2006, the Foreign Investment and Technology Transfer Act 2019 (FITTA), and the Income Tax Act 2002. Registration is handled by the Office of the Company Registrar (OCR).

This guide walks you through:

• The legal difference between private and public companies
• Capital, shareholder, and compliance requirements
• Tax and reporting implications
• Step-by-step business registration in Nepal
• Strategic considerations for foreign investors

Let’s break it down clearly.

Understanding the Legal Framework for Company Registration in Nepal

Nepal follows a codified company law regime. The primary statute is the Companies Act 2006. It defines company types, governance, and reporting obligations.

Foreign investment approvals fall under FITTA 2019 and are processed through:

• Department of Industry (DOI)
• Investment Board Nepal (for large projects)
• Nepal Rastra Bank (for foreign currency inflows and repatriation)

Corporate taxation is governed by the Income Tax Act 2002. The standard corporate tax rate is generally 25%, with sectoral variations.

Understanding this framework ensures compliance from day one.

Private vs Public Company in Nepal: Core Structural Differences

1. Definition of a Private Company

Under the Companies Act 2006, a private company:

• Restricts share transfer
• Limits shareholders to 1–101
• Cannot invite the public to subscribe for shares

This structure is ideal for closely held businesses, joint ventures, and subsidiaries of foreign companies.

2. Definition of a Public Company

A public company:

• Requires a minimum of 7 shareholders
• Can invite the public to subscribe for shares
• May list on the stock exchange
• Must comply with stricter disclosure norms

Public companies face enhanced governance and regulatory oversight.

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

Strategic Insight:
Foreign companies entering Nepal almost always begin with a private limited company. Public conversion happens later if capital markets access is required.

Why Structure Choice Matters for Foreign Companies

Choosing between a private vs public company in Nepal affects:

• Control and voting rights
• Capital flexibility
• Exit strategy
• Regulatory burden
• Investor perception

For foreign investors, risk architecture matters. A private company allows tighter governance and faster decision-making.

Public companies bring credibility but increase compliance complexity.

Key Steps in Business Registration in Nepal

Here is the structured pathway.

Step 1: Name Reservation

Apply to the OCR online portal.
The name must not conflict with existing entities.

Step 2: Draft Memorandum & Articles of Association

These documents define:

• Business objectives
• Share structure
• Governance framework

Foreign shareholders must align this with FITTA requirements.

Step 3: Foreign Investment Approval (If Applicable)

Foreign investors must obtain:

• DOI approval
• Capital approval from Nepal Rastra Bank

This step is mandatory before capital injection.

Step 4: Company Incorporation at OCR

Submit:

• Incorporation documents
• Shareholder details
• Director identification
• Capital structure

Once approved, the OCR issues the Certificate of Incorporation.

Step 5: Tax Registration (PAN/VAT)

Register with Inland Revenue Department under the Income Tax Act 2002.

Step 6: Sectoral Licenses (If Required)

Examples include:

• Industrial registration
• Tourism licensing
• Financial services approvals

Step 7: Bank Account & Capital Injection

Foreign currency must flow through formal banking channels.
Nepal Rastra Bank monitors repatriation eligibility.

Private Company Advantages for Foreign Investors

Most foreign companies prefer private companies due to:

• Greater ownership control
• Faster board decisions
• Lower compliance cost
• Confidential financial disclosures
• Easier restructuring

This structure also helps avoid premature public scrutiny.

When a Public Company Makes Strategic Sense

A public company is ideal when:

1. Large capital is required from domestic investors
2. Infrastructure projects demand public participation
3. IPO listing is part of the exit strategy
4. Government mandates public structure for certain sectors

However, this structure increases compliance obligations significantly.

Compliance & Reporting Requirements

Private Company Compliance

• Annual general meeting
• Annual return filing
• Tax filing under Income Tax Act
• Audit by licensed auditor

Public Company Compliance

• Detailed prospectus requirements
• Board committees
• Enhanced audit disclosures
• Regulatory reporting

Public companies face closer scrutiny from regulators and investors.

Taxation Considerations

Corporate tax is generally 25%.
Certain industries receive concessions.

Under the Income Tax Act 2002:

• Dividends are subject to withholding tax
• Loss carry-forward is permitted for limited years
• Record retention is required for statutory periods

Foreign investors must structure dividend repatriation carefully.

Governance Differences

Private companies:

• Fewer board composition requirements
• Flexible shareholder agreements
• Easier restructuring

Public companies:

• More independent oversight
• Shareholder transparency obligations
• Formalized governance framework

Governance impacts long-term scalability.

Risk Matrix: Strategic Considerations for Foreign Companies

For market entry, simplicity often wins.

Common Mistakes in Business Registration

Avoid these errors:

• Choosing public structure without capital strategy
• Ignoring foreign exchange compliance
• Underestimating reporting obligations
• Drafting weak Memorandum objectives
• Not aligning shareholder agreements with Nepali law

Structure determines future flexibility.

Practical Example: FDI Entry Strategy

Most foreign tech, service, and manufacturing investors:

• Incorporate a private limited company
• Maintain full foreign ownership
• Structure intercompany agreements
• Retain profit repatriation rights

Public conversion is rarely the first step.

How Long Does Company Registration Take?

Typical timelines:

• Name approval: 1–3 days
• OCR incorporation: 5–10 working days
• FDI approval: 2–4 weeks

Public company registration may take longer due to documentation requirements.

Cost Overview

Costs vary by structure. Key expenses include:

• Government registration fees
• Legal drafting
• Audit and compliance setup
• Capital injection

Public companies incur higher compliance setup costs.

Frequently Asked Questions

1. What is the main difference between private vs public company in Nepal?

A private company limits shareholders and cannot offer shares to the public. A public company can raise funds publicly and faces stricter compliance requirements.

2. Can a foreign investor own 100% of a private company in Nepal?

Yes, subject to sectoral restrictions under FITTA 2019. Many sectors allow full foreign ownership.

3. Is minimum capital required for a public company?

Yes. Public companies require higher paid-up capital thresholds than private companies under the Companies Act.

4. Can a private company convert into a public company?

Yes. Conversion is permitted by amending constitutional documents and meeting public company requirements.

5. Which structure is better for market entry?

For most foreign companies, a private company is more practical during the initial phase.

Final Thoughts: Choosing the Right Structure

Deciding on a private vs public company in Nepal is foundational. It determines control, compliance exposure, capital flexibility, and investor confidence.

For most foreign companies entering Nepal, a private limited company provides the right balance between compliance and strategic flexibility. Public structure is usually a growth-stage decision.

If you are planning to register a business in Nepal, align structure with long-term goals not short-term assumptions.