Choosing between a private vs public company in Nepal is one of the most important legal decisions a foreign business will make when entering the Nepali market. The choice affects ownership, capital structure, compliance burden, taxation exposure, and long-term scalability.
Many foreign companies rush into incorporation without understanding these differences. That mistake often leads to regulatory friction, capital repatriation issues, and restructuring costs later. This guide is written to prevent that.
In this article, you will find a clear, legally grounded, and practical comparison tailored specifically for foreign companies exploring Nepal as a market or delivery base.
Foreign investors often assume corporate structures work the same everywhere. Nepal is different. The Companies Act 2006, Foreign Investment and Technology Transfer Act 2019 (FITTA), and sector-specific regulations create unique obligations.
Your choice between a private and public company directly impacts:
How much capital you must commit upfront
Whether shares can be freely transferred
Disclosure and audit requirements
Ability to raise local or foreign capital
Exit and repatriation flexibility
Understanding this distinction early protects both your capital and timeline.
Nepal recognizes several business forms. However, for foreign investors, two dominate.
Private Limited Company
Public Limited Company
Other forms such as branch offices, liaison offices, and partnerships exist, but they operate under different legal frameworks and are not substitutes for incorporation.
This article focuses exclusively on private vs public company in Nepal from an incorporation and compliance perspective.
A private company in Nepal is designed for closely held ownership. It is the most common structure used by foreign investors entering Nepal for the first time.
Shareholders limited to 101 persons
Restriction on public share issuance
Shares are not freely transferable
Can be fully foreign-owned, subject to FITTA approval
Nepalese law does not impose a fixed minimum paid-up capital for all private companies. However, foreign investment thresholds apply, depending on sector and approval category.
A private company requires:
At least one director
A company secretary is optional
Board meetings are flexible
This simplicity makes private companies attractive for foreign founders.
A public company in Nepal is intended for large-scale operations, capital markets access, and broad shareholder participation.
Minimum seven shareholders
Shares can be offered to the public
Stricter disclosure and reporting requirements
Mandatory company secretary
A public company must meet higher minimum capital thresholds. In practice, this structure is suitable only for well-funded ventures or regulated industries.
Public companies must maintain:
A formal board structure
Statutory committees
Enhanced audit and disclosure controls
For most foreign SMEs, this level of governance is unnecessary.
| Criteria | Private Company | Public Company |
|---|---|---|
| Minimum shareholders | 1 | 7 |
| Maximum shareholders | 101 | Unlimited |
| Public share offering | Not allowed | Allowed |
| Capital requirement | Lower | Significantly higher |
| Compliance burden | Moderate | High |
| Best for foreign SMEs | Yes | Rarely |
| Regulatory scrutiny | Standard | Intensive |
This table alone explains why over 90 percent of foreign investors choose private companies when entering Nepal.
Faster incorporation timelines
Lower setup and compliance costs
Easier ownership control
Flexible exit planning
A public company may make sense if you plan to:
Raise capital from Nepali investors
Operate in regulated sectors requiring public status
List on Nepal Stock Exchange in the future
For most foreign companies, a public company introduces complexity without proportional benefit.
Name reservation with the Office of Company Registrar
Preparation of Memorandum and Articles of Association
Foreign investment approval under FITTA
Company registration certificate issuance
Tax registration and banking setup
Each step requires careful alignment between corporate law and foreign investment regulations.
Both private and public companies must comply with Nepalese law. However, the depth of compliance differs significantly.
Annual returns filing
Statutory audit
Tax filings with Inland Revenue Department
Foreign currency reporting to Nepal Rastra Bank
Public companies face additional layers of scrutiny, disclosures, and penalties.
Foreign investors often underestimate Nepal’s regulatory environment.
Here are frequent errors:
Choosing a public company without capital strategy
Ignoring foreign investment approval sequencing
Assuming nominee structures are allowed
Underestimating reporting obligations
Avoiding these mistakes can save months of delay.
Tax rates are generally consistent across structures. However, administrative exposure differs.
Private companies enjoy simpler tax administration and fewer public disclosures. Public companies are subject to deeper audit scrutiny and reputational exposure.
For most foreign founders, simplicity equals efficiency.
Some industries in Nepal impose structural requirements.
Examples include:
Banking and finance
Insurance
Hydropower
Telecommunications
In these cases, public company status may be mandatory. Always verify sector regulations before deciding.
Private company: 3 to 6 weeks, excluding foreign investment approval
Public company: 6 to 10 weeks or longer
Foreign approvals, document legalization, and banking timelines can extend this.
| Cost Category | Private Company | Public Company |
|---|---|---|
| Incorporation cost | Lower | Higher |
| Legal drafting | Standard | Extensive |
| Compliance cost | Moderate | High |
| Audit complexity | Basic | Advanced |
This cost gap widens over time, not just at setup.
This article is based on:
Nepal Companies Act 2006
Foreign Investment and Technology Transfer Act 2019
Industrial Enterprises Act 2020
Practical incorporation experience with foreign investors
The goal is not theory. It is real-world clarity.
For most foreign companies, yes. Private companies offer lower compliance, faster setup, and easier control while remaining legally robust.
Yes, subject to foreign investment approval under FITTA and sector eligibility.
Public companies require significantly higher paid-up capital than private companies, depending on sector regulations.
Yes. Conversion is allowed but requires regulatory approvals and restructuring.
A private company is almost always the preferred structure for foreign outsourcing and service delivery operations.
The private vs public company in Nepal decision should be driven by strategy, not assumptions.
For most foreign companies, a private limited company offers the right balance of legal certainty, cost efficiency, and operational control. Public companies are powerful tools, but only when scale and capital strategy demand them.
Making the right choice at incorporation saves years of friction later.