Nepal Company Incorporation Checklist: Don’t Start Without These 10 Steps

Nepal’s strategic location between India and China, coupled with a growing economy, makes it attractive to foreign investors. But entering this market requires proper planning and adherence to local regulations. Nepal’s Foreign Direct Investment (FDI) inflows are increasing – reaching USD 73.8 million in 2023 (a 12.8% rise from 2022) – signaling opportunities for new businesses. This guide provides a checklist of 10 essential steps for foreign companies to successfully incorporate in Nepal. From picking the right business structure to obtaining approvals and ensuring compliance, we’ll walk through what you need to know. With this roadmap (and support from firms like Digital Consulting Ventures, which specialize in Nepal market entry), you can navigate the process confidently and set your business up for success.

Step 1: Conduct Market Research and Entry Planning

Thoroughly research the Nepali market and plan your entry strategy. Identify demand for your product or service and study local competitors. Determine if you will need a local partner or if you’ll operate independently. Nepal welcomes foreign investment in sectors like manufacturing, tourism, agriculture, and energy – understanding where your business fits is crucial. Also, familiarize yourself with cultural and consumer nuances that could affect your operations. Engaging local experts (for example, Digital Consulting Ventures can provide market insights and feasibility studies) is a good way to refine your business plan for Nepal. A solid entry plan will guide your decisions and demonstrate commitment to stakeholders and government authorities.

Step 2: Choose the Right Business Structure

Decide on the legal structure for your Nepal entity. The common options are:

• Wholly Owned Subsidiary: A new private limited company incorporated in Nepal with 100% foreign ownership. This gives you full control and limited liability. Nepal allows up to 100% foreign ownership in most permitted sectors, so you can often form a subsidiary without a local shareholder. The subsidiary is a separate legal entity that will operate under Nepali law and pay local taxes.

• Branch Office: An extension of your foreign company in Nepal (not a separate legal entity). A branch can carry out the same business activities as the parent company. Nepal’s law requires foreign companies to register a branch if they plan to do business directly in Nepal. The foreign parent is liable for all branch obligations, and a branch must register with the Company Registrar and relevant ministries. (Branches can only undertake activities that the parent company is authorized to do in its home country and that are permitted in Nepal.)

• Joint Venture (JV) Company: A company jointly owned by foreign and Nepali partners. You partner with one or more local investors and share equity in a new company. JVs can be beneficial if local expertise or connections are needed, or if the law requires a local partner in a certain sector. The JV company is incorporated in Nepal like a regular company, and both foreign and Nepali shareholders have rights according to their share percentage.

Each structure has implications for setup time, liability, and control. Consider your business goals and consult with local advisors (e.g., Digital Consulting Ventures) to choose the structure that best suits your needs.

Step 3: Check Eligibility – Investment Rules and Restricted Sectors

Before proceeding, ensure your investment meets Nepal’s criteria:

• Allowed Sectors: Verify that your business activity is open to foreign investment. Nepal prohibits or restricts FDI in a few areas (for example, small cottage industries and some sectors for national security or cultural reasons). Apart from those exceptions, most industries welcome foreign investment up to 100% ownership. Check the current negative list of industries barred to foreign investors to confirm your sector is allowed.

• Minimum Capital: Confirm you can meet the minimum foreign investment requirement. Nepal sets a minimum FDI threshold of NPR 20 million (around USD 150,000). Your investment plan should involve bringing in at least this amount as equity capital. You will need to declare this in your application and later actually remit at least NPR 20 million into Nepal (see Step 9).

• Approval Authority: Determine which government body will approve your investment. For most projects (investment up to NPR 6 billion), the application goes to the Department of Industry (DOI) under the Ministry of Industry. Very large projects (above NPR 6 billion or in certain infrastructure sectors) may be handled by the Investment Board Nepal (IBN). Knowing this upfront helps set expectations for the approval process and timeline.

By confirming the above points, you can move forward confidently. If your proposed business is in a restricted sector or you cannot meet the minimum capital, you’ll need to adjust your plans before going further. Assuming everything checks out, you’re ready to prepare your documentation and apply for approvals.

Step 4: Reserve a Company Name

Choose a unique name for your company and reserve it with the Office of the Company Registrar (OCR). The name should be distinct and not resemble existing company names. You can search the OCR database to ensure your desired name is available. Once you have a name, submit a name reservation application through the OCR’s online system or in person. The registrar will approve the name if it’s not already in use and it complies with naming guidelines (avoid any prohibited terms). You’ll receive a reservation confirmation (usually valid for 45 days), during which you must complete the company registration process using that name. For a branch office, name reservation is straightforward – the branch will typically use the same name as the foreign company with “Nepal Branch” added. Securing your company name is a quick step, but it’s important to do this before filing incorporation documents, as all those documents must match the approved name.

Step 5: Prepare Incorporation Documents

Next, prepare all the paperwork needed to register the company:

• Memorandum of Association (MOA): Draft the MOA, stating the company’s name, address, objectives, authorized capital, and initial shareholders. This document defines the company’s scope and structure.

• Articles of Association (AOA): Draft the AOA, covering the governance structure and rules for decision-making (e.g., director powers, meeting procedures, etc.).

• Shareholder and Director Details: Gather identification documents for all promoters (passport copies for foreign individuals, citizenship for Nepali individuals, or incorporation certificates for corporate investors). Also prepare a list of the intended directors with their details. Ensure documents are notarized and translated to Nepali if required.

• Foreign Investor Documents: If a foreign company is investing, include a board resolution from that company authorizing the investment in Nepal, along with notarized copies of its incorporation certificate and charter documents from its home country. You may also issue a Power of Attorney to a local representative to handle filings on your behalf, if needed.

• Authorized Capital: Decide your company’s authorized capital (the maximum equity capital the company can issue). This will determine the registration fee bracket. You don’t need to issue all authorized capital at once – you can authorize a larger amount for future expansion, but initially issue (pay up) only what you plan to invest now (at minimum, NPR 20 million to meet FDI rules).

• Joint Venture Agreement: If you have a Nepali joint-venture partner, it’s advisable to sign a JV agreement or shareholders’ agreement outlining each party’s roles, contributions, and profit share. This agreement isn’t filed with the government, but it helps prevent misunderstandings with your partner.

Double-check these documents for accuracy and completeness. Any errors can cause delays at the registration stage. It’s wise to have a local legal expert review the MOA/AOA and forms for compliance with Nepali law. Digital Consulting Ventures can assist with drafting and reviewing incorporation documents to ensure they meet all requirements. Once your documentation is ready, you can move on to seeking government approval for your investment and registering the company.

Step 6: Obtain Foreign Investment Approval

With your documents in hand, apply for approval of your foreign investment before registering the company:

• Submit Application to DOI/IBN: Prepare an application (with your draft MOA/AOA, details of investors, and a project proposal or business plan) and submit it to the Department of Industry or Investment Board Nepal, as applicable. The proposal should outline what your company will do, how much you’re investing, and the benefits (jobs, technology, etc.) it will bring.

• Government Review: The authorities will review your application for compliance with FDI policies and sector regulations. If all is in order, they will issue a Foreign Investment Approval Letter. This official letter authorizes your proposed investment (up to a certain amount) and may list any conditions or reporting requirements. Obtaining this approval typically takes a few weeks to a couple of months. (Large projects that go through IBN can take longer, up to several months.)

• NRB Registration: Once you have the approval, register your intended foreign investment with Nepal Rastra Bank (NRB), the central bank. Usually, the DOI or one-stop office assists with this. NRB will record your approved investment so that when you bring money into Nepal, it’s recognized. This step is crucial for future profit repatriation – NRB’s acknowledgment ensures you can later remit funds out legally.

After receiving the foreign investment approval, you’re cleared to incorporate the company at the OCR. The approval letter will be a required document when you file for company registration. This step is mandatory – Nepal will not register a company with foreign ownership without the prior investment approval. With this in hand, you can proceed to the next step.

Step 7: Register the Company at OCR

Now take your foreign investment approval letter and incorporation documents to the Office of the Company Registrar to formally register your company:

• File the Application: Submit the application for company registration (either online via the OCR portal or in person) along with all supporting documents. Attach the approved Name Reservation (Step 4), MOA and AOA (signed by all promoters), copies of shareholders’ IDs, proof of the registered office address, and the Foreign Investment Approval Letter from DOI/IBN.

• Pay Registration Fee: Pay the applicable registration fee based on your authorized capital (e.g. around NPR 15,000 for authorized capital up to NPR 10 million, with higher fees for larger capital amounts). Obtain the bank receipt as proof of payment.

• Receive Incorporation Certificate: The OCR will verify the application. If everything is in order, they will issue a Certificate of Incorporation for your company (or a Registration Certificate for a branch office). This certificate is the legal proof that your company now exists under Nepali law. You will also get a company registration number.

• Post-Registration Setup: Along with the certificate, OCR will provide a copy of your MOA/AOA stamped by the registrar. Keep these documents safe. At this point, your company’s board of directors (as listed in the documents) is officially in charge. Ensure you have appointed a qualified auditor for the company (even new companies must appoint an auditor under Nepali law).

Congratulations – your company (or branch) is now legally registered in Nepal! You can officially conduct business activities as per your objectives. The next steps will involve making the company operational, such as opening bank accounts and registering for taxes.

Step 8: Register for Taxes and Other Mandatory Registrations

After incorporation, complete the required registrations for your company. Obtain a PAN (Permanent Account Number) from the tax office – this is your business’s tax ID for all filings. If applicable, also register for VAT so you can charge Value Added Tax on your sales and claim credits on purchases. Next, enroll in the Social Security Fund (SSF) as an employer (this enables pension and insurance contributions for any employees). Also, register your business with the local Ward Office (municipality) where your office is located (a simple process to notify local authorities). Finally, obtain any industry-specific licenses needed for your operations (for example, an import-export code for trading, or sectoral permits for regulated industries).

Completing these registrations will keep your company fully compliant and ready to operate (you’ll have the necessary tax certificates and permits to commence business).

Step 9: Open a Bank Account and Bring in Capital

Now it’s time to inject the capital into Nepal:

• Open a Bank Account: Choose a bank in Nepal and open a corporate account in your company’s name. You will need your company registration certificate, PAN certificate, copies of directors’ IDs, and a board resolution authorizing the account opening and signatories. Once the account is open, you can use it for your company’s transactions.

• Remit the Investment Funds: From your overseas bank, wire transfer the committed capital to your Nepali company’s bank account. Send the funds in a major currency (e.g. USD or EUR) and include a clear reference that it is capital for your company under the FDI approval. The amount should meet or exceed the minimum requirement (NPR 20 million). Your bank in Nepal will convert it to Nepali Rupees and credit your account. They will also notify Nepal Rastra Bank of the foreign currency inflow.

• NRB Confirmation: After the money arrives, obtain confirmation from Nepal Rastra Bank that your company has received the foreign investment amount. Typically, the bank provides a letter or certificate showing the amount received and the investor details. This official record by NRB is important for future repatriation of profits or capital.

• Allot Shares: Once the funds are in your company account, formally allot the corresponding shares to the foreign investor. For example, if you brought in NPR 50 million and that is 100% of the equity, issue shares totaling that amount to the foreign shareholder. Update the share register and share certificates accordingly. (If your approval was for a higher amount to be brought in phases, ensure you bring in the remaining capital within the timeline given by the approval.)

For a branch office, since there are no shares, simply use the funds to cover branch expenses. Keep documentation of all remittances from the head office to the branch, as you will report these funds to NRB and use the records for any future outward remittance when closing the branch or sending back profits.

By completing Step 9, you have fulfilled the financial commitment of your investment. Your company now has capital in Nepal to commence operations – and just as importantly, your investment is officially recorded in the Nepali banking system, ensuring you can later repatriate funds when needed.

Step 10: Stay Compliant with Ongoing Requirements

Finally, ensure you maintain compliance with Nepali laws and regulations as you operate:

• Annual Corporate Filings: Every year, hold an Annual General Meeting and file an annual return (with audited financial statements) to the Company Registrar. (Branches must also submit the parent company’s statements each year.) Appoint a certified auditor and have your financials audited annually, as required by law.

• Tax Compliance: File your tax returns on time – this includes VAT returns, payroll tax withholdings, and annual income tax returns. Pay taxes due (e.g. VAT, income tax installments) promptly to avoid penalties. At fiscal year-end, obtain a tax clearance certificate to confirm all taxes are paid.

• Labor Law Compliance: If you hire employees, comply with labor laws (employment contracts, minimum wage, provident fund/SSF contributions, etc.). Ensure a safe work environment and adhere to regulations on work hours and leave. If you hire any foreign staff, secure their work permits and visas.

• Changes and Reporting: Notify authorities of any major company changes. For example, if you increase capital or change directors, inform the Company Registrar (and Department of Industry if it affects your FDI approval). Keep all your licenses and permits up to date by renewing them as required.

• Repatriation Procedures: When your company earns profits and you wish to remit dividends or repatriate capital, follow the official process. After paying the applicable taxes (e.g. a 5% tax on dividends), you can apply to Nepal Rastra Bank for approval to send the money abroad. Provide the audited accounts and tax clearance – once approved, you can remit funds in foreign currency through the banking system.

Continuous compliance is essential for smooth operations. Non-compliance can result in fines or even jeopardize your business license. Many foreign businesses use professional firms for accounting and regulatory compliance. By doing so (for instance, Digital Consulting Ventures offers ongoing compliance and accounting support), you can focus on running your business while experts handle the paperwork. Maintaining a good compliance record will also build trust with Nepali authorities and partners, ensuring your venture grows without unnecessary obstacles.

FAQ

Q1. Can a foreigner start a business in Nepal, and is a local partner required?
Yes. Foreigners can fully own companies in Nepal – a local partner is not required in most sectors Only a few small or sensitive industries are barred or need local participation.

Q2. How long does it take to register a foreign company in Nepal?
Typically around 3 to 4 months. The FDI approval process usually takes 2–3 months, and the company registration plus ancillary setup steps take a few additional weeks.

Q3. What is the minimum capital required for foreign company registration?
Nepal requires a minimum investment of NPR 20 million (about USD 150,000) for foreign investors. Your proposed company must have at least this amount in equity.

Q4. Can I repatriate profits and capital from Nepal?
Yes. Nepal allows you to remit dividends, profits, and capital back to your home country. You must pay all applicable taxes, then obtain approval from Nepal Rastra Bank – after that, you can transfer funds abroad in foreign currency without issues.