Overseas Investment in Nepal: Opportunities and Challenges

If you are evaluating Private vs public company in Nepal, you are already thinking strategically. The legal structure you choose will shape your capital access, regulatory exposure, and long-term scalability.

Nepal’s economy is opening steadily to foreign investors under the Foreign Investment and Technology Transfer Act (FITTA 2019). Company registration is governed by the Companies Act. Public market oversight sits with the Securities Board of Nepal (SEBON).

Most overseas investors do not struggle with whether to enter Nepal.
They struggle with how to structure that entry correctly.

This guide gives you a board-level breakdown of:

• Structural differences
• Capital and governance implications
• Compliance risk exposure
• Listing pathways
• Strategic use cases for foreign companies

Nepal’s Investment Climate: A Snapshot for Foreign Companies

Nepal is transitioning from a remittance-driven economy to a production-oriented growth model. Priority sectors include:

• Hydropower
• Tourism and hospitality
• IT and BPO
• Manufacturing
• Infrastructure
• Agro-processing

According to Nepal Rastra Bank reports, foreign direct investment commitments have steadily increased since FITTA 2019 simplified approval procedures.

Foreign investors benefit from:

• 100% foreign ownership in most sectors
• Repatriation rights under FITTA
• Double taxation avoidance treaties
• Sector-specific tax incentives under the Industrial Enterprises Act

Your entity structure determines how effectively you leverage these advantages.

Private vs Public Company in Nepal: Core Legal Framework

The Private vs public company in Nepal debate starts with the Companies Act 2006.

Both structures are incorporated through the Office of the Company Registrar (OCR).
But they differ fundamentally in capital raising and governance obligations.

What Is a Private Company in Nepal?

A private company is a closely held entity with restricted share transfer rights.

Key Characteristics

• Minimum 1 shareholder
• Maximum 101 shareholders
• Cannot invite the public to subscribe to shares
• Shares are privately transferable
• No mandatory public disclosure to capital markets

Why Foreign Investors Prefer It

Private companies are the most common vehicle for FDI in Nepal.

They offer:

• Operational control
• Simplified governance
• Lower compliance burden
• Faster incorporation
• Flexibility in shareholder agreements

What Is a Public Company in Nepal?

A public company may offer shares to the general public and list on the stock exchange.

Nepal’s stock exchange is the Nepal Stock Exchange (NEPSE).

Key Characteristics

• Minimum 7 shareholders
• No maximum shareholder limit
• Can issue a public offering
• Subject to SEBON oversight
• Mandatory financial disclosures

Public companies are common in:

• Hydropower
• Banking
• Large infrastructure projects

Side-by-Side Comparison: Strategic Decision Table

If your business requires domestic capital mobilization, public may unlock funding.
Otherwise, private companies provide more control.

Governance and Compliance: What Foreign Boards Must Understand

Private Company Compliance

• Annual General Meeting
• Annual return filing with OCR
• Tax compliance under the Income Tax Act
• VAT registration if applicable
• Social Security Fund registration

Public Company Compliance

In addition to the above:

• Quarterly reporting
• Public financial disclosure
• Independent board requirements
• SEBON approvals
• IPO prospectus compliance

Compliance costs increase significantly.

Capital Raising Strategy: When Public Makes Sense

A public company becomes attractive when:

1. The project requires large domestic capital pools.
2. Sector regulations expect public participation.
3. Government incentives are linked to listing.
4. There is an exit strategy via capital markets.
5. Branding visibility is strategically important.

Hydropower developers often use this model.

Tax and Repatriation Considerations

Both structures fall under Nepal’s corporate income tax regime. The standard rate is generally 25%, unless sector incentives apply.

Under FITTA:

• Dividends are repatriable
• Capital gains are repatriable
• Royalties are repatriable

Public companies face greater scrutiny in dividend announcements.
Private companies allow more flexible timing.

Operational Scenarios for Foreign Investors

Scenario 1: IT Outsourcing Subsidiary

Best fit: Private company.

Scenario 2: Large Hydropower Project

Best fit: Public company.

Scenario 3: Manufacturing for Export

Best fit: Private company.

Scenario 4: Regulated Financial Institution

Best fit: Public company.

Common Mistakes Foreign Investors Make

1. Choosing public structure prematurely.
2. Ignoring SEBON reporting obligations.
3. Underestimating compliance costs.
4. Failing to align structure with exit strategy.
5. Not drafting strong shareholder agreements.

Structure must match strategy.

Conclusion: Choosing the Right Structure

When comparing Private vs public company in Nepal, foreign investors must think beyond incorporation.

Structure affects:

• Dividend policy
• Capital strategy
• Governance burden
• Investor exit routes
• Risk exposure

For most foreign subsidiaries, private company structure offers control and flexibility.

Public company structure becomes powerful when capital scaling and market participation are strategic goals.

If you are planning overseas investment in Nepal, the right structure is your first and most important decision.

FAQ: Private vs Public Company in Nepal

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

Yes. FITTA 2019 allows 100% foreign ownership in most sectors, subject to minimum investment thresholds.

2. Can a private company convert into a public company?

Yes. Conversion is allowed under the Companies Act 2006, subject to compliance requirements.

3. Is IPO mandatory for public companies?

No. A company may register as public without immediate IPO but must follow public governance rules.

4. Are tax rates different for private and public companies?

Generally no. Corporate tax rates are similar unless sector incentives apply.

5. Which structure is better for hydropower projects?

Public company structure is commonly used for capital mobilization in hydropower.