Navigating Legal Requirements for Company Registration in Nepal

Choosing between a private vs public company in Nepal is one of the first and most critical decisions foreign companies make.
This choice determines how much capital you need, how many shareholders you must appoint, how regulated your business will be, and how easily you can scale later.

Nepal welcomes foreign investment. But its corporate framework is formal and documentation heavy. Understanding the legal distinction upfront saves time, cost, and compliance risk.

This guide breaks down the legal, strategic, and practical differences in clear terms. It is written for foreign founders, CFOs, and expansion leaders planning long-term operations in Nepal.

Understanding Company Registration in Nepal for Foreign Companies

Nepal’s corporate structure is governed primarily by the Companies Act 2006 and foreign investment rules under FITTA 2019. Every foreign investor must select a legally recognized company form at incorporation.

The two most common options are:

• Private Limited Company
• Public Limited Company

Both are separate legal entities. Both can accept foreign investment. But they serve very different business goals.

What Is a Private Company in Nepal?

A private company in Nepal is the most commonly used structure for foreign investors entering the market.

It is designed for closely held businesses. Ownership is restricted. Compliance is manageable. Control remains concentrated.

Legal Characteristics of a Private Company

A private company must meet these conditions:

1. Minimum 1 shareholder

2. Maximum 101 shareholders

3. Share transfer is restricted

4. No public invitation to subscribe shares

5. Can be wholly foreign owned in permitted sectors

This structure is ideal for foreign subsidiaries, joint ventures, and operating companies.

Why Foreign Companies Prefer Private Companies

Most foreign companies choose this structure because:

• Faster incorporation
• Lower capital requirements
• Easier governance
• Lower disclosure obligations

It allows foreign founders to focus on operations instead of regulatory burden.

What Is a Public Company in Nepal?

A public company in Nepal is designed for large enterprises that plan to raise capital from the public.

It is highly regulated. Governance standards are strict. Reporting obligations are extensive.

Legal Characteristics of a Public Company

A public company must meet these conditions:

1. Minimum 7 shareholders

2. No maximum shareholder limit

3. Shares freely transferable

4. Can issue shares to the public

5. Mandatory higher paid-up capital

Public companies are subject to additional oversight from capital market regulators.

When Does a Public Company Make Sense?

A public company is suitable if you plan to:

• Raise capital from Nepali investors
• List on Nepal Stock Exchange in the future
• Operate at national infrastructure or utility scale

For most foreign entrants, this is not the starting structure.

Private vs Public Company in Nepal: Legal Comparison Table

This comparison alone explains why private companies dominate foreign investment registrations.

Capital Requirements for Private vs Public Company in Nepal

Private Company Capital Expectations

Nepal does not mandate a fixed minimum capital for private companies.
However, for foreign investment approval, capital expectations are assessed by regulators based on:

• Sector
• Business model
• Staffing plan
• Revenue projections

In practice, foreign investors often register with NPR 5 million to NPR 50 million.

Public Company Capital Requirements

Public companies must meet significantly higher paid-up capital thresholds.
This makes them impractical for early-stage market entry.

Compliance and Governance Obligations Compared

Private Company Compliance

A private company must:

• File annual returns
• Maintain statutory registers
• Submit audited financial statements
• Renew business licenses

Board meetings and shareholder meetings are flexible.

Public Company Compliance

A public company must additionally:

• Appoint independent directors
• Publish financial disclosures
• Follow strict corporate governance codes
• Undergo enhanced audits

For foreign companies, this adds cost and operational complexity.

Taxation Does Not Change Between Private and Public Companies

Many investors assume taxation differs.
It does not.

Both private and public companies are subject to:

• Corporate income tax
• VAT if applicable
• Withholding taxes
• Payroll taxes

The difference lies in reporting intensity, not tax rates.

Foreign Direct Investment Rules and Company Type

Foreign investors must obtain FDI approval before registration.

Private companies align better with FDI requirements because:

• Ownership is clear
• Capital injection is traceable
• Governance is simple

Public companies are reviewed more critically due to public interest considerations.

Sector Suitability: Which Structure Fits Which Business?

Private Company Is Best For

• IT and software services
• Outsourcing and shared services
• Consulting and professional services
• Manufacturing with controlled ownership
• Regional headquarters

Public Company Is Best For

• Banking and finance
• Insurance
• Hydropower and energy
• Telecom infrastructure

If your goal is controlled growth, private wins.

Strategic Scalability: Start Private, Go Public Later

Many successful companies in Nepal follow this path:

1. Register as a private company

2. Build operations and revenue

3. Expand shareholder base

4. Convert to public company later

Nepalese law allows conversion.
This makes private companies a strategic entry vehicle, not a limitation.

Key Advantages of Choosing a Private Company in Nepal

• Faster setup
• Lower compliance cost
• Full foreign control
• Easy exit and restructuring

For foreign companies testing the Nepal market, this flexibility is critical.

Common Mistakes Foreign Companies Make

• Choosing public structure too early
• Overcapitalizing unnecessarily
• Underestimating compliance workload
• Ignoring sector restrictions

The private vs public company decision should be strategic, not symbolic.

Step-by-Step: Choosing the Right Structure

1. Define your business objective

2. Identify capital needs

3. Confirm sector eligibility

4. Evaluate compliance tolerance

5. Choose private or public structure

Most foreign companies stop at step 3 and choose private.

FAQ: Private vs Public Company in Nepal

Is a private company in Nepal allowed 100 percent foreign ownership?

Yes. In permitted sectors, private companies can be fully foreign owned with FDI approval.

Can a private company later become a public company in Nepal?

Yes. Conversion is legally allowed once requirements are met.

Is a public company mandatory for foreign investors?

No. Most foreign investors operate as private companies.

Which structure is cheaper to maintain?

Private companies have significantly lower compliance and governance costs.

Does company type affect profit repatriation?

No. Profit repatriation depends on tax clearance, not company type.

Conclusion: Private vs Public Company in Nepal for Foreign Investors

For most foreign companies, the private vs public company in Nepal decision is clear.

Start private.
Stay compliant.
Scale intentionally.

Public companies serve a purpose, but not at market entry.

The right structure reduces risk, cost, and regulatory friction.