Overview of All Company Types in Nepal Under the Company Act

Understanding the types of companies in Nepal is the first and most critical step for any foreign company planning market entry. Nepal’s legal framework offers multiple incorporation and presence options. Each serves a distinct business objective, risk profile, and compliance burden. Choosing the wrong structure can delay approvals, restrict profit repatriation, or increase regulatory exposure.

This guide provides the most comprehensive and practical overview of all company types in Nepal under the prevailing Company Act. It is written specifically for foreign companies, investors, and founders evaluating Nepal as an expansion destination.

Legal Framework Governing Company Types in Nepal

All company structures in Nepal are governed primarily by:

• Companies Act, 2006 (with amendments)

• Foreign Investment and Technology Transfer Act (FITTA), 2019

• Industrial Enterprises Act, 2020

• Income Tax Act, 2002

• Labour Act, 2017

• Social Security Act, 2018

The Office of the Company Registrar (OCR) administers company incorporation and compliance. Foreign investment approvals are overseen by the Department of Industry (DOI) or Investment Board Nepal (IBN) depending on project size.

Why Company Type Selection Matters for Foreign Companies

Selecting the correct structure affects:

• Eligibility for foreign direct investment (FDI)

• Ability to generate revenue locally

• Profit repatriation and dividend remittance

• Tax exposure and withholding obligations

• Hiring, payroll, and social security compliance

• Exit flexibility and future restructuring

For foreign companies, structure selection is not just a legal formality. It is a strategic decision.

Overview: Types of Companies in Nepal

Under Nepalese law, companies and business presences fall into the following broad categories:

1. Private Limited Company

2. Public Limited Company

3. Non-Profit (Not-for-Profit) Company

4. Branch Office

5. Liaison (Representative) Office

6. Foreign Company Registration (Cross-Border Presence)

Each is explained in depth below.

Private Limited Company in Nepal

What Is a Private Limited Company?

A private limited company is the most common and flexible structure for foreign investors. It is a separate legal entity with limited liability and perpetual succession.

Key Characteristics

• Minimum 1 shareholder, maximum 101

• Can be 100% foreign-owned (sector permitting)

• Shares are not publicly tradable

• Suitable for commercial and revenue-generating activities

Why Foreign Companies Choose This Structure

• Full operational control

• Eligible for FDI under FITTA

• Can hire local and expatriate staff

• Can repatriate dividends and capital

• Favoured by banks, regulators, and clients

Typical Use Cases

• IT and software companies

• Outsourcing and shared service centres

• Manufacturing and trading entities

• Consulting and professional services firms

Public Limited Company in Nepal

What Is a Public Limited Company?

A public limited company is designed for large-scale enterprises intending to raise capital from the public.

Key Characteristics

• Minimum 7 shareholders

• No maximum shareholder limit

• Mandatory 3 directors

• Shares may be listed on the stock exchange

• Higher disclosure and governance standards

Suitability for Foreign Investors

This structure is usually appropriate only when:

• Significant capital mobilisation is required

• Public share issuance is planned

• The business is regulated or infrastructure-heavy

Practical Insight

Most foreign companies do not start with a public company. They typically convert from private to public once scale is achieved.

Non-Profit Company in Nepal

What Is a Non-Profit Company?

A non-profit company is incorporated for social, educational, charitable, or research purposes. Profits cannot be distributed to members.

Key Characteristics

• No dividend distribution

• Income must be reinvested in objectives

• Often eligible for tax exemptions

• Subject to strict oversight

Common Use Cases

• International NGOs

• Foundations

• Social enterprises without profit motive

• Educational and research institutions

Foreign Participation

Foreign involvement is permitted but requires additional approvals and reporting obligations.

Branch Office of a Foreign Company in Nepal

What Is a Branch Office?

A branch office is an extension of a foreign parent company. It is not a separate legal entity in Nepal.

Key Characteristics

• 100% owned by the foreign parent

• Can conduct commercial activities

• Profits are taxable in Nepal

• Parent company bears full liability

When a Branch Office Makes Sense

• Short- to medium-term projects

• Contract-based operations

• Engineering, EPC, or infrastructure work

Key Limitation

A branch office is closely regulated and often viewed as less flexible than a private limited company.

Liaison (Representative) Office in Nepal

What Is a Liaison Office?

A liaison office is a non-commercial presence established solely for coordination and market research.

What a Liaison Office Can Do

• Market research

• Promotion and relationship management

• Parent company coordination

What It Cannot Do

• Generate revenue

• Sign commercial contracts

• Issue invoices locally

Best Use Case

Foreign companies exploring Nepal before committing to full investment.

Foreign Company Registration (Without Local Entity)

What This Means

Certain foreign companies operate in Nepal without incorporating a local entity, typically through:

• Cross-border service provision

• Short-term contracts

• Government or donor-funded projects

Regulatory Reality

This model is highly restricted and usually requires:

• Project-specific approval

• Tax registration

• Withholding tax compliance

It is not suitable for long-term operations.

Comparison Table: Types of Companies in Nepal

How Foreign Companies Should Choose the Right Structure

Consider the following factors:

1. Nature of activities

2. Investment size

3. Sector restrictions

4. Timeline

5. Exit and scalability plans

Practical Rule of Thumb

• Long-term commercial operations → Private Limited Company

• Market testing only → Liaison Office

• Contractual project work → Branch Office

Compliance and Ongoing Obligations

Foreign-owned entities must comply with:

• Annual filings with OCR

• Tax filings and audits

• Labour and social security registration

• FDI reporting and renewals

• Dividend and royalty remittance approvals

Professional support is strongly recommended.

Common Mistakes Foreign Companies Make

• Choosing a liaison office when revenue is required

• Underestimating FDI approval timelines

• Ignoring sectoral restrictions

• Poor tax and payroll structuring

Avoiding these mistakes saves months and significant cost.

Frequently Asked Questions: Types of Companies in Nepal

Can a foreigner own 100% of a company in Nepal?

Yes. Foreigners can own up to 100% of a private limited company, subject to sector eligibility under FDI regulations.

What is the most common company type for foreign investors?

A private limited company is the most widely used and flexible option for foreign companies in Nepal.

Is a branch office better than a private limited company?

Not usually. Branch offices are suitable for temporary or project-based work. Private companies offer more flexibility and long-term stability.

Can a liaison office earn revenue in Nepal?

No. A liaison office is strictly prohibited from conducting revenue-generating activities.

How long does company registration take in Nepal?

Incorporation typically takes 7–14 working days, excluding FDI approval timelines.

Conclusion

Choosing the correct types of companies in Nepal is foundational to a successful market entry. Nepal’s legal framework offers flexibility, but each structure carries distinct legal, tax, and operational implications. For most foreign companies, a private limited company provides the optimal balance of control, compliance, and scalability.

Expert guidance ensures your structure aligns with your business goals from day one.

Call to Action

Planning to enter Nepal?
Speak with our Nepal incorporation and FDI specialists to identify the right company structure, manage approvals, and stay fully compliant from incorporation to operations.