Navigating the Investment Landscape in Nepal: A Foreign Investor's Guide

If you are evaluating Private vs public company in Nepal, you are already thinking strategically.

Your company structure determines tax exposure, compliance burden, fundraising flexibility, and long-term exit options. It also affects how regulators such as the Office of Company Registrar and the Department of Industry review your investment.

Nepal is positioning itself as an emerging South Asian investment destination. GDP growth has averaged around 4–5% in recent years, with strong remittance inflows and infrastructure expansion. The legal framework is governed primarily by the Companies Act, 2063 (2006) and the Foreign Investment and Technology Transfer Act, 2019 (FITTA).

In this guide, you will learn:

• The legal difference between private and public companies in Nepal
• FDI implications for foreign shareholders
• Compliance and reporting obligations
• Tax treatment and governance requirements
• Strategic considerations for 2026 and beyond

Let’s break it down clearly and practically.

Understanding the Legal Framework in Nepal

Before comparing structures, foreign investors must understand Nepal’s regulatory environment.

Key legislation includes:

• Companies Act, 2063 (2006)
• Foreign Investment and Technology Transfer Act, 2019 (FITTA)
• Income Tax Act, 2002
• Securities Act, 2007
• Regulations issued by the Office of Company Registrar (OCR)
• Oversight by the Securities Board of Nepal (SEBON)

Foreign investment approval is typically processed through the Department of Industry for most sectors.

Minimum FDI threshold under FITTA is NPR 20 million per investor.

Private vs Public Company in Nepal: Core Structural Differences

This is where strategic decisions begin.

1. Ownership and Shareholding

Private Company:

• Minimum 1 shareholder
• Maximum 101 shareholders
• Shares cannot be offered to the public
• Transfer of shares is restricted

Public Company:

• Minimum 7 shareholders
• No maximum limit
• Can issue shares to the public
• Mandatory listing if capital exceeds regulatory thresholds

Private companies are controlled entities. Public companies are capital market vehicles.

2. Capital Requirements

Under the Companies Act:

• Private company: No statutory minimum capital requirement
• Public company: Minimum paid-up capital required (varies by sector; typically NPR 10 million or higher)

Public companies must comply with SEBON and listing requirements if publicly offered.

3. Governance and Board Structure

Private company:

• Minimum 1 director
• Fewer mandatory disclosures
• Less rigid governance rules

Public company:

• Minimum 3 directors
• Independent director requirements
• Audit committee obligations
• Stricter corporate governance framework

Public structures are transparency-driven. Private structures are control-driven.

Compliance Comparison Table for Foreign Investors

Below is a simplified strategic comparison:

Strategic Insight:
For 90% of foreign SMEs entering Nepal, a private company structure is more efficient and lower risk.

FDI Considerations for Foreign Companies

Under FITTA 2019:

• Foreign investors can own up to 100% equity in most sectors
• Certain sectors remain restricted or require special approval
• Minimum investment threshold applies
• Profit repatriation is permitted subject to NRB approval

Key FDI Steps

1. Sector approval from Department of Industry
2. Company incorporation with OCR
3. Capital inflow through banking channel
4. NRB approval for repatriation
5. PAN registration with Inland Revenue Department

Private companies simplify this process.

Public companies introduce additional regulatory layers.

Taxation: Private vs Public Company in Nepal

Under the Income Tax Act, 2002:

• Corporate Income Tax standard rate: 25%
• Banking and financial institutions: 30%
• Special industries may qualify for incentives

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

However:

• Public companies incur higher compliance and audit costs
• Dividend distribution tax applies equally

If your objective is operational efficiency, private companies are leaner.

When Should Foreign Investors Choose a Private Company?

A private company is ideal when:

• You want full ownership control
• You are entering Nepal for the first time
• Your capital needs are moderate
• You do not require public fundraising
• You want simplified compliance

Most foreign subsidiaries, branch conversions, and joint ventures begin as private companies.

When Should You Consider a Public Company?

A public company makes sense when:

• You intend to raise capital from Nepali investors
• You plan to list on Nepal Stock Exchange
• Your project is infrastructure-heavy
• Banking regulations require public status
• You seek long-term liquidity

Public structure is strategic, not default.

Risk Assessment Framework for 2026

Foreign investors often overlook risk layers.

Consider these four dimensions:

• Regulatory risk
• Capital mobility risk
• Governance exposure
• Exit flexibility

Private companies reduce governance exposure and complexity.

Public companies increase transparency but limit control.

Decision Matrix for Foreign Investors

Ask yourself:

1. Do I need local capital participation immediately?
2. Am I comfortable with public disclosure obligations?
3. Is my sector capital-intensive?
4. Is IPO a realistic medium-term plan?
5. Do I need full operational control?

If most answers favor control and efficiency, choose private.

Common Misconceptions About Company Structures in Nepal

Myth 1: Public companies are required for foreign investors.
False. Private companies are widely used by FDI entities.

Myth 2: Public companies offer tax advantages.
False. Corporate tax rates are largely identical.

Myth 3: Private companies limit future expansion.
False. You can convert from private to public later.

Conversion is permitted under the Companies Act.

Practical Example: Foreign Manufacturing Investor

Scenario:

An Indian textile manufacturer plans to establish a production unit in Nepal.

Strategic path:

• Incorporate private limited company
• Apply for FDI approval
• Acquire land and licenses
• Scale operations
• Consider public conversion only if capital expansion demands it

This staged approach reduces regulatory exposure.

Conversion from Private to Public Company

If your business scales, conversion is possible.

Requirements include:

• Special resolution
• Increase in shareholders
• Amendments to Articles
• Capital restructuring
• SEBON compliance

Conversion should be driven by strategy, not prestige.

Regulatory Bodies Foreign Investors Must Know

• Office of Company Registrar
• Department of Industry
• Nepal Rastra Bank
• Inland Revenue Department
• Securities Board of Nepal

Early regulatory mapping prevents delays.

Frequently Asked Questions

1. Can a foreign investor fully own a private company in Nepal?

Yes. FITTA 2019 allows 100% foreign ownership in most permitted sectors. Certain restricted sectors require local participation or are prohibited.

2. Is there a minimum capital requirement for private companies?

The Companies Act does not mandate a fixed minimum capital for private companies. However, FITTA requires minimum foreign investment of NPR 20 million per investor.

3. Are public companies mandatory for large projects?

Not necessarily. Many large infrastructure projects operate as private companies. Public structure is required mainly for capital market participation.

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

Yes. The Companies Act permits conversion subject to shareholder approval and regulatory compliance.

5. Which structure is easier for profit repatriation?

Repatriation rules apply equally. However, private companies generally face fewer governance layers during dividend approvals.

Conclusion: Choosing the Right Structure in Private vs Public Company in Nepal

When evaluating Private vs public company in Nepal, the right answer depends on your capital strategy and governance appetite.

For most foreign companies entering Nepal in 2026:

• A private company offers control
• Lower compliance burden
• Faster decision-making
• Reduced regulatory exposure

Public companies are powerful tools for scale, but they require readiness for transparency and capital market discipline.

If you are serious about entering Nepal, structure comes first. Everything else follows.