Navigating FDI in Nepal: A Comprehensive Analysis for 2026

If you are evaluating Private vs public company in Nepal, your structure decision will shape tax exposure, governance control, capital strategy, and exit options. For foreign companies entering Nepal in 2026, this is not just a registration choice. It is a long-term strategic decision.

Nepal is positioning itself as a competitive South Asian investment destination. Reforms under the Foreign Investment and Technology Transfer Act (FITTA 2019) and the Industrial Enterprises Act have modernized the FDI framework. Company incorporation remains governed by the Companies Act.

Yet, the core question remains:

Should a foreign investor register a private limited company or a public limited company in Nepal?

This guide breaks it down clearly, practically, and strategically for global decision-makers.

Understanding the Legal Framework for Foreign Investors

Before comparing structures, it is important to understand the regulatory architecture.

Foreign investment in Nepal is regulated primarily by:

• Foreign Investment and Technology Transfer Act
• Industrial Enterprises Act
• Companies Act
• Department of Industry
• Office of the Company Registrar

FDI approval is mandatory before capital injection. After approval, the company must be incorporated and registered for tax, VAT (if applicable), and Social Security Fund compliance.

Nepal Rastra Bank approval is required for capital inflow and repatriation recording.

The structure you choose directly impacts:

• Minimum capital thresholds
• Share transfer flexibility
• Public fundraising rights
• Compliance burden
• Corporate governance obligations

Private vs Public Company in Nepal: Structural Overview

Under the Companies Act, Nepal recognizes two primary limited liability corporate forms:

1. Private Limited Company
2. Public Limited Company

Both provide limited liability protection. But their governance and fundraising capabilities differ significantly.

Private vs Public Company in Nepal – Key Differences for FDI

Below is a practical comparison designed specifically for foreign investors.

Strategic Insight for Foreign Investors

In practice, over 90% of foreign investors entering Nepal choose a private limited company.

Public companies are typically used for:

• Hydropower projects
• Infrastructure PPP models
• Large manufacturing investments
• Companies planning stock exchange listing

What Is a Private Limited Company in Nepal?

A private limited company is the most common entry structure for foreign subsidiaries.

Core Characteristics

• Limited liability protection
• Maximum 101 shareholders
• Restrictions on share transfer
• Cannot invite public subscription
• Flexible management structure

Why Foreign Companies Prefer Private Companies

Foreign investors value:

• Control retention
• Confidential ownership
• Lower compliance burden
• Faster incorporation

This structure is ideal for:

• IT outsourcing
• Back-office operations
• Manufacturing subsidiaries
• Consulting services
• Technology ventures

What Is a Public Limited Company in Nepal?

A public limited company is designed for larger capital structures and public participation.

Core Characteristics

• Minimum 7 shareholders
• Minimum 3 directors
• Can issue shares to the public
• Can be listed on stock exchange
• Mandatory compliance with higher governance standards

Public companies face stricter regulatory scrutiny. They must comply with detailed disclosure and reporting obligations.

Capital Requirements and Investment Thresholds

Under FITTA 2019, the general minimum FDI threshold is NPR 20 million (subject to change by regulation).

However:

• Private companies may operate efficiently with tightly structured capital.
• Public companies require higher paid-up capital, especially for listing eligibility.

Foreign investors should evaluate:

• Project scale
• Funding model
• Repatriation timeline
• Exit strategy

Compliance and Governance Comparison

Private Company Compliance

• Annual audit
• Annual general meeting
• Tax filings under the Income Tax Act
• Social Security contributions
• OCR filings

Public Company Compliance

In addition to the above:

• Quarterly disclosures
• Public reporting obligations
• Board committees
• Enhanced audit standards
• Capital market supervision

Public companies operate under significantly greater transparency obligations.

Taxation Considerations for 2026

Nepal’s corporate tax regime remains competitive.

Under the Income Tax Act:

• Standard corporate tax rate: 25%
• Reduced rates for specific sectors (e.g., hydropower)
• SEZ incentives available

Tax treatment does not differ materially between private and public companies.

However, public companies may benefit from:

• Broader capital raising flexibility
• Improved institutional financing access

When Should a Foreign Investor Choose a Private Company?

Choose a private limited company if:

1. You want full foreign ownership.
2. You do not plan public fundraising.
3. You prioritize operational flexibility.
4. You are establishing a service or support center.
5. You want faster setup timelines.

For most FDI entries into Nepal, this is the optimal route.

When Should a Foreign Investor Choose a Public Company?

Choose a public limited company if:

• You are building a large infrastructure project.
• You need capital from multiple investors.
• You plan stock exchange listing.
• You require long-term institutional financing.
• You are entering a PPP framework.

Hydropower developers frequently adopt this structure.

Risk Architecture: What Most Foreign Investors Overlook

Structure selection affects:

• Repatriation documentation
• Dividend distribution ease
• Share sale exit flexibility
• Governance disputes
• Minority shareholder rights

A poorly structured public company can dilute foreign control.
A poorly drafted private company charter can restrict exit.

The legal architecture must align with your capital strategy.

Incorporation Process for Foreign Investors

The typical FDI incorporation steps include:

1. Project approval from the Department of Industry
2. Company registration at the Office of the Company Registrar
3. Tax registration
4. Bank account opening
5. Capital inflow through banking channel
6. Nepal Rastra Bank recording
7. Sector licensing (if applicable)

Private companies move faster.
Public companies require additional governance structuring.

Control vs Capital: The Strategic Trade-Off

Most foreign subsidiaries in Nepal choose control over public capital access.

Real-World FDI Patterns in Nepal

According to official government data, the majority of foreign investment approvals are for small and medium-scale enterprises.

Common sectors include:

• Information technology
• Tourism
• Manufacturing
• Hydropower
• Education services

Private limited companies dominate these registrations.

Public companies are typically linked to capital-intensive projects.

Common Mistakes Foreign Investors Make

• Choosing public structure unnecessarily
• Underestimating governance burden
• Ignoring minority shareholder risks
• Failing to plan exit strategy
• Misunderstanding dividend repatriation process

Proper structuring avoids long-term friction.

Frequently Asked Questions 

1. Can a foreigner own 100% of a private company in Nepal?

Yes. FITTA 2019 permits 100% foreign ownership in most sectors, subject to the negative list.

2. Is a public company mandatory for hydropower projects?

Not always, but many large hydropower projects adopt public company structure due to financing needs.

3. Which structure is easier to manage?

A private limited company is easier due to fewer disclosure and governance obligations.

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

Yes. Conversion is allowed under the Companies Act, subject to compliance.

5. Does taxation differ between private and public companies?

No. Corporate tax rates apply equally unless sector incentives apply.

Final Recommendation for 2026 Investors

When comparing Private vs public company in Nepal, most foreign companies entering Nepal in 2026 will benefit from a private limited company structure.

It offers:

• Control
• Flexibility
• Faster setup
• Lower governance burden
• Cleaner repatriation structure

Public companies make sense only for capital-intensive projects.

If you are evaluating market entry, structure selection should align with your investment scale, governance appetite, and long-term capital strategy.

Choosing the right structure today prevents regulatory friction tomorrow.