Legal Requirements for Private and Public Companies in Nepal

Understanding private vs public company Nepal is one of the first legal decisions a foreign company must make before entering the Nepali market.
This choice affects ownership, capital requirements, compliance burden, fundraising ability, and long-term exit options.

Nepal welcomes foreign investment, but the regulatory framework is detailed. Selecting the wrong structure can delay approvals, increase costs, or limit growth.
This guide explains the legal requirements for private and public companies in Nepal in clear, practical terms—specifically for foreign founders, boards, and CFOs.

What Is a Private Company in Nepal?

A private company in Nepal is a closely held corporate entity governed by the Companies Act, 2006.

Core Legal Characteristics

A private company must:

• Limit the right to transfer shares

• Restrict public invitations to subscribe for shares

• Operate within a capped shareholder structure

Key Legal Requirements for a Private Company

• Shareholders: 1 to 101

• Directors: Minimum 1

• Minimum paid-up capital: NPR 100,000

• Public fundraising: Not permitted

• FDI eligibility: Yes, subject to sector approval

Private companies are the most common structure for foreign investors establishing wholly owned subsidiaries in Nepal.

What Is a Public Company in Nepal?

A public company is designed for large-scale operations, institutional investment, and public capital markets.

Core Legal Characteristics

A public company:

• May invite the public to subscribe to shares

• Has stricter governance and disclosure rules

• Can be listed on the Nepal Stock Exchange

Key Legal Requirements for a Public Company

• Shareholders: Minimum 7, no maximum

• Directors: Minimum 3

• Minimum paid-up capital: NPR 10,000,000

• Public fundraising: Permitted

• Regulatory oversight: Higher

Public companies are suitable for infrastructure, banking, hydropower, insurance, and large manufacturing projects.

Private vs Public Company Nepal: Legal Requirements Compared

Ownership and Control Rules

• Private companies offer tight ownership control

• Public companies dilute control but enable scale

Capital Thresholds

Private companies require minimal capital.
Public companies demand significant upfront capitalization.

Regulatory Burden

Public companies face higher scrutiny from regulators, auditors, and investors.

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

Legal Compliance Obligations for Both Structures

Regardless of structure, all companies must meet baseline statutory obligations.

Mandatory Registrations

• Office of Company Registrar (OCR)

• Inland Revenue Department (PAN/VAT)

• Social Security Fund (SSF)

• Local ward registration

Annual Compliance Requirements

1. Annual General Meeting (AGM)

2. Annual return filing with OCR

3. Audited financial statements

4. Income tax filings

Failure to comply may result in fines, director liability, or business suspension.

FDI Rules: How Structure Impacts Foreign Investment

Private Company and FDI

Private companies are preferred for foreign direct investment because:

• 100% foreign ownership is allowed in most sectors

• Governance is simpler

• Capital repatriation is more straightforward

Public Company and FDI

Public companies are viable for FDI when:

• Large capital is required

• Multiple institutional investors are involved

• Public listing is planned

Sectoral caps and approval thresholds still apply under the Foreign Investment and Technology Transfer Act, 2019.

Advantages of a Private Company for Foreign Investors

Why most foreign companies choose private companies in Nepal:

• Faster incorporation timelines

• Lower capital commitment

• Fewer disclosure requirements

• Easier exit and restructuring

Private companies offer flexibility during early market entry.

Advantages of a Public Company for Strategic Expansion

Public companies are beneficial when:

• Long-term capital raising is critical

• Public trust and visibility matter

• The business operates in regulated industries

However, compliance costs are significantly higher.

Choosing Between Private vs Public Company Nepal

Ask These Strategic Questions

• Is the investment long-term or exploratory?

• Will external capital be raised later?

• Is public trust essential for operations?

Practical Guidance

• Market entry: Private company

• Infrastructure or finance: Public company

• FDI pilot projects: Private company

Most foreign firms start private and convert later if needed.

Common Mistakes Foreign Companies Make

• Over-capitalizing too early

• Choosing public structure without funding plans

• Ignoring sector-specific FDI limits

• Underestimating compliance costs

Strategic legal structuring at incorporation avoids these risks.

Private vs Public Company Nepal: Compliance Cost Reality

Private companies typically incur:

• Lower audit fees

• Fewer filings

• Leaner governance

Public companies must budget for:

• Enhanced audits

• Board committees

• Public disclosures

This difference materially affects operating costs.

Frequently Asked Questions (People Also Ask)

Is a private company better than a public company in Nepal?

For most foreign investors, yes. A private company offers flexibility, lower costs, and faster setup. Public companies suit large, capital-intensive projects.

Can a foreigner own 100% of a Nepali company?

Yes. Most sectors allow 100% foreign ownership, subject to FDI approval and minimum investment thresholds.

What is the minimum capital for a public company in Nepal?

A public company requires at least NPR 10 million paid-up capital at incorporation.

Can a private company convert into a public company later?

Yes. Conversion is legally permitted after meeting capital, shareholder, and governance requirements.

Which structure is best for startups in Nepal?

Private companies are ideal for startups due to low capital needs and simplified compliance.

Conclusion: Private vs Public Company Nepal—The Strategic Choice

Choosing private vs public company Nepal is a foundational decision that shapes compliance, control, and growth.
For most foreign companies, a private company provides the right balance of speed, flexibility, and regulatory efficiency.
Public companies remain powerful tools for scale, but only when aligned with funding and governance capacity.