Opening a Company in Nepal: What Every Entrepreneur Should Know

Private vs public company in Nepal is one of the first and most important decisions foreign entrepreneurs face when entering the Nepalese market.
Your choice affects ownership, capital requirements, regulatory exposure, fundraising ability, and long-term exit strategy.

Nepal welcomes foreign investment, but its company law framework is precise and rule-driven. Understanding how private and public companies differ will help you avoid structural mistakes that slow approvals or restrict growth later.

This guide explains everything foreign companies need to know, clearly and practically, before opening a company in Nepal.

Understanding Company Structures in Nepal

All companies in Nepal are governed primarily by the Companies Act, 2006, with foreign investment also regulated under the Foreign Investment and Technology Transfer Act (FITTA), 2019.

From a legal perspective, Nepal recognizes two main incorporated company types:

• Private Limited Company

• Public Limited Company

Both are registered with the Office of the Company Registrar (OCR) and acquire separate legal personality once incorporated.

What Is a Private Company in Nepal?

A private limited company is the most common and flexible structure for foreign investors entering Nepal.

Key Legal Characteristics

• Shareholders: Minimum 1, maximum 101

• Share transfer: Restricted

• Public invitation for shares: Not allowed

• Separate legal entity: Yes

Private companies are designed for controlled ownership, operational flexibility, and faster compliance.

Why Foreign Companies Prefer Private Companies

Foreign investors typically use private companies for:

• Wholly owned subsidiaries

• Joint ventures with Nepalese partners

• Back-office and shared service centers

• IT, consulting, manufacturing, and trading operations

What Is a Public Company in Nepal?

A public limited company is a more regulated entity intended for large-scale capital raising.

Key Legal Characteristics

• Shareholders: Minimum 7, no maximum

• Share transfer: Freely transferable

• Public share issuance: Allowed

• Mandatory compliance with capital thresholds

Public companies may list shares, issue debentures, and raise funds from the general public.

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

Insight: Over 90 percent of foreign direct investment entities in Nepal are registered as private companies due to regulatory efficiency.

Capital Requirements for Foreign Investors

Private Company Capital Rules

Nepal does not prescribe a fixed minimum capital for private companies.
However, for foreign investment:

• Minimum FDI threshold currently applies

• Capital must be remitted through a Nepalese bank

• Source of funds must be declared

Public Company Capital Rules

Public companies face:

• Statutory minimum paid-up capital

• Stricter disclosure requirements

• Ongoing regulatory supervision

For most foreign investors, these requirements create unnecessary complexity.

Regulatory Approval and Registration Process

Step-by-Step Overview

1. FDI approval under FITTA

2. Name reservation with OCR

3. Company incorporation filing

4. Capital inflow and bank confirmation

5. Tax and statutory registrations

Private companies typically complete registration faster than public companies.

Compliance and Governance Obligations

Private Company Compliance

• Annual returns to OCR

• Tax filings with Inland Revenue

• Audit requirements based on size

Public Company Compliance

• Mandatory audits

• Public disclosures

• Regulatory filings beyond OCR

• Shareholder meeting obligations

For foreign companies prioritizing speed and control, private companies offer lower governance friction.

Tax Treatment: Private vs Public Company in Nepal

From a tax perspective, both company types are taxed identically.

Key points:

• Corporate income tax applies uniformly

• VAT registration depends on turnover

• Dividend distribution tax applies equally

The difference lies not in tax rates, but in administrative overhead.

When Does a Public Company Make Sense?

A public company structure may be appropriate if you plan to:

• Raise capital from the Nepalese public

• List shares in the future

• Operate in regulated sectors requiring scale

For most foreign SMEs and multinational subsidiaries, this scenario is rare.

Common Mistakes Foreign Investors Make

Avoid these frequent errors:

• Choosing a public company too early

• Underestimating compliance obligations

• Structuring shareholding incorrectly

• Misaligning capital plans with FITTA

Early structural decisions are difficult to reverse.

Choosing the Right Structure: A Practical Checklist

Consider the following before deciding:

• Planned ownership structure

• Capital infusion size

• Local partner involvement

• Long-term exit or expansion plans

In most cases, a private company provides the best balance of control and compliance.

Private vs Public Company in Nepal: Final Verdict

For foreign companies, private vs public company in Nepal is not a theoretical debate.
It is a strategic choice that affects speed, cost, governance, and scalability.

Bottom line:
If you are entering Nepal for operations, services, or controlled growth, a private limited company is almost always the right starting point.