Navigating Nepal’s Business Landscape: How to Set Up Your Company Successfully

Choosing the right legal structure is one of the most critical decisions when entering a new market. For foreign investors, the question of private vs public company in Nepal often determines speed to market, regulatory burden, and long-term scalability. Nepal offers a stable company law framework, investor-friendly reforms, and clear rules for foreign ownership. But the differences between private and public companies are significant—and strategic.

This guide provides the most authoritative, up-to-date comparison for foreign companies. It blends legal clarity with practical insight so you can confidently choose the structure that aligns with your investment goals.

Nepal’s Corporate Framework at a Glance

All companies in Nepal are governed primarily by the Companies Act 2006 and regulated by the Office of Company Registrar. Foreign investment elements are further governed by the Foreign Investment and Technology Transfer Act.

Nepal recognizes two core corporate forms relevant to foreign companies:

• Private Limited Company

• Public Limited Company

Understanding how these differ is essential before committing capital.

What Is a Private Limited Company in Nepal?

A private limited company is the most common entry structure for foreign investors. It is designed for closely held ownership, operational flexibility, and faster incorporation.

Key Characteristics of a Private Company

• Minimum shareholders: 1

• Maximum shareholders: 50

• Share transfer: Restricted

• Public fundraising: Not allowed

• Foreign ownership: Permitted (subject to sector approval)

Private companies are favoured by startups, professional services firms, IT companies, and foreign subsidiaries.

What Is a Public Limited Company in Nepal?

A public limited company is intended for larger enterprises that require capital from the public or institutional investors.

Key Characteristics of a Public Company

• Minimum shareholders: 7

• No maximum shareholder limit

• Share transfer: Freely transferable

• Public fundraising: Permitted

• Mandatory compliance with securities laws

Public companies are often used in banking, hydropower, insurance, and infrastructure projects.

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

Insight: Over 80% of foreign investors in Nepal choose private companies due to faster setup and lighter compliance.

When Should Foreign Companies Choose a Private Company?

A private limited company is ideal if your objective is control, speed, and operational efficiency.

Best-fit scenarios:

• Market entry or pilot operations

• Outsourced service centers

• IT, consulting, and professional services

• 100% foreign-owned subsidiaries

Advantages

• Faster incorporation

• Lower annual compliance costs

• Strong shareholder control

Limitations

• No public fundraising

• Growth relies on internal or foreign capital

When Does a Public Company Make Sense?

A public limited company is strategic when scale and capital access outweigh compliance complexity.

Best-fit scenarios:

• Hydropower and energy projects

• Banks and financial institutions

• Infrastructure and telecom

• IPO-driven expansion strategies

Advantages

• Access to public capital

• Higher credibility for large projects

Challenges

• Extensive disclosures

• Regulatory oversight by the Securities Board of Nepal

• Longer setup timelines

Compliance and Governance Differences

Private Company Compliance

• Annual financial statements

• Annual General Meeting (AGM)

• Income tax filings

• Limited disclosure requirements

Public Company Compliance

• Mandatory AGM with public notice

• Audited financials

• Continuous disclosures

• Securities law compliance

Practical insight: Public companies require dedicated compliance teams, while private companies can operate lean.

Foreign Direct Investment (FDI) Considerations

Foreign investors must obtain approval from the Department of Industry or the Investment Board Nepal depending on project size.

FDI applies to:

• Private companies

• Public companies

However, private companies dominate FDI inflows due to flexibility and lower capital thresholds.

Step-by-Step: How to Register a Company in Nepal

1. Name reservation with OCR

2. Draft MOA & AOA

3. FDI approval (if applicable)

4. Company registration

5. Tax and VAT registration

6. Bank account opening

Private companies typically complete this process in 3–6 weeks, while public companies take longer.

Taxation Snapshot

• Corporate income tax: 25% (standard rate)

• Withholding taxes apply on dividends

• Sector-specific incentives may apply

Tax treatment is broadly similar for private vs public companies, but compliance volume differs.

Strategic Recommendation for Foreign Investors

If your priority is speed, control, and predictable compliance, a private limited company is usually the right choice. If your project requires public capital or regulatory credibility at scale, a public company may be justified despite higher complexity.

Common Mistakes Foreign Companies Make

• Choosing a public company too early

• Underestimating compliance obligations

• Ignoring sector-specific FDI restrictions

• Structuring shareholding inefficiently

A well-advised structure at the outset saves years of restructuring later.

FAQ: Private vs Public Company in Nepal

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

Yes. Subject to sector approval, foreigners can own 100% of a private limited company.

2. Is a public company mandatory for large investments?

No. Many large FDI projects operate as private companies unless public fundraising is required.

3. Which is cheaper to maintain annually?

Private companies have significantly lower compliance and audit costs.

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

Yes. Conversion is permitted under the Companies Act with regulatory approval.

5. Which structure is better for long-term expansion?

Private companies suit phased expansion; public companies suit capital-intensive scaling.

Conclusion: Making the Right Choice Between Private vs Public Company in Nepal

The decision between private vs public company in Nepal is strategic, not just legal. For most foreign companies, private limited companies provide the fastest, safest, and most flexible entry into Nepal. Public companies serve a narrower but vital role for large, capital-driven projects.

Choosing correctly at the start protects capital, timelines, and reputation.