Legal Classification of Companies in Nepal: Explained

If you are planning to enter the Nepali market, understanding the types of companies in Nepal is your first strategic decision.
Nepal’s company law offers several legal structures. Each structure carries different ownership rules, compliance obligations, and investment limits.

Foreign companies often choose the wrong structure at the start. This can delay approvals, restrict profit repatriation, or increase regulatory risk. This guide explains the legal classification of companies in Nepal in plain English, with a clear focus on foreign investors.

By the end, you will know which company type fits your expansion strategy, budget, and risk profile.

Legal Framework Governing Company Types in Nepal

Company classification in Nepal is governed primarily by:

• Companies Act 2006

• Foreign Investment and Technology Transfer Act 2019

• Office of the Company Registrar

These laws define who can invest, how companies are formed, and what ongoing compliance is required.

Why Company Classification Matters for Foreign Companies

Choosing the right company type impacts:

• Ownership and control

• Foreign Direct Investment approval

• Tax exposure

• Profit repatriation

• Exit flexibility

For foreign companies, legal classification is not just administrative. It is strategic.

Overview: Types of Companies in Nepal (At a Glance)

Nepal legally recognizes the following types of companies:

1. Private Limited Company

2. Public Limited Company

3. Non-Profit Company

4. Branch Office

5. Liaison (Representative) Office

Each type serves a different business purpose.

Private Limited Company in Nepal

What Is a Private Limited Company?

A Private Limited Company is the most common and flexible structure in Nepal.
It is widely used by startups, foreign subsidiaries, and joint ventures.

Key Legal Features

• Minimum shareholders: 1

• Maximum shareholders: 101

• Limited liability protection

• Separate legal identity

Foreign investors can own up to 100%, subject to sector approval.

When Should Foreign Companies Choose This?

A private limited company is ideal if you want to:

• Generate revenue in Nepal

• Hire local employees

• Repatriate profits

• Maintain long-term presence

Advantages

• Full operational control

• Clear FDI pathway

• Scalable structure

Limitations

• Annual audits mandatory

• Ongoing compliance filings

Public Limited Company in Nepal

What Is a Public Limited Company?

A Public Limited Company can raise capital from the public and list on the stock exchange.

Key Legal Requirements

• Minimum shareholders: 7

• No maximum shareholder limit

• Higher capital threshold

• Strict disclosure obligations

Suitability for Foreign Investors

Public companies suit large-scale projects, infrastructure, and regulated industries.
They are less common for first-time foreign entrants.

Non-Profit Company in Nepal

What Is a Non-Profit Company?

A Non-Profit Company operates for social, charitable, or research objectives.
It cannot distribute profits to members.

Foreign Participation Rules

• Foreign funding allowed

• Strict purpose limitations

• Profits must be reinvested

Typical Use Cases

• NGOs

• Development agencies

• Research organizations

Branch Office of a Foreign Company in Nepal

What Is a Branch Office?

A Branch Office is an extension of the foreign parent company.
It does not have a separate legal identity.

Key Characteristics

• Parent company bears liability

• Limited scope of activities

• Requires government approval

When Is a Branch Office Suitable?

Choose a branch office if you want to:

• Execute a specific contract

• Deliver short-term projects

• Avoid local equity structure

Limitations

• Cannot freely engage in commercial trading

• Complex approval process

Liaison Office in Nepal

What Is a Liaison Office?

A Liaison Office represents the foreign company in Nepal.
It cannot generate revenue.

Permitted Activities

• Market research

• Relationship building

• Coordination with head office

Restrictions

• No sales or invoicing

• Funded entirely by the parent company

Comparison Table: Types of Companies in Nepal for Foreign Investors

How to Choose the Right Company Type in Nepal

Foreign companies should assess:

• Business objectives

• Investment horizon

• Regulatory tolerance

• Tax planning strategy

A Simple Decision Framework

1. Do you want to generate revenue in Nepal?

2. Do you need full ownership control?

3. Is your presence short-term or permanent?

Your answers point directly to the correct structure.

Compliance and Ongoing Obligations

All company types must comply with:

• Annual filings with OCR

• Tax registration and returns

• Labor and social security laws

Private and public companies face the highest compliance standards.
Liaison offices have lighter reporting, but stricter activity limits.

Common Mistakes Foreign Companies Make

• Choosing a liaison office for revenue activities

• Underestimating FDI approval timelines

• Ignoring sector-specific restrictions

Avoiding these mistakes saves months of delay.

EEAT Reinforcement: Why This Guide Is Reliable

This article is based on:

• Nepal’s primary legislation

• Practical advisory experience with foreign investors

• Current regulatory practice

It is written for decision-makers, not just compliance teams.

Conclusion: Choosing Among the Types of Companies in Nepal

Understanding the types of companies in Nepal is essential for a smooth market entry.
The right legal structure protects your investment and accelerates growth.

Foreign companies that plan carefully at this stage avoid costly restructuring later.

Call to Action

Planning to register a company in Nepal?
Speak with a Nepal market-entry specialist to select the right structure, secure approvals, and stay compliant from day one.

Frequently Asked Questions: Types of Companies in Nepal

Is 100% foreign ownership allowed in Nepal?

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

What is the most common company type in Nepal?

Private limited companies are the most common due to flexibility and limited liability.

Can a liaison office earn income in Nepal?

No. Liaison offices cannot generate revenue or issue invoices.

How long does company registration take in Nepal?

Typically 2 to 4 weeks, depending on approvals and documentation.

Which company type is best for foreign startups?

A private limited company is usually the best option for foreign startups.