Private Limited vs. Public Company Incorporation in Nepal: Which Is Right for You?

Introduction: Expanding into Nepal’s market requires understanding the local business structures available. For foreign companies planning a company incorporation in Nepal, the key decision is often choosing between a Private Limited Company and a Public Limited Company. Both structures offer limited liability and a separate legal entity, but they differ in ownership, capital, compliance, and flexibility. In this comprehensive guide, we’ll break down the company types in Nepal, compare Private Limited vs. Public Company side by side, and examine which is better suited for your business goals in 2025. We’ll also cover Nepal business registration steps, foreign investment rules, and recent legal updates to Nepal’s Companies Act and FDI laws that impact foreign company setup in Nepal. By the end, you should have a clear idea of which structure aligns with your strategy and the latest regulatory requirements. 

Overview of Company Types in Nepal

Nepal’s Companies Act, 2063 (2006) – with recent amendments up to 2025 – governs the incorporation and operation of companies in Nepal. The main for-profit company categories are Private Limited Companies and Public Limited Companies, along with a Company not distributing profit (non-profit company) and branch or liaison offices for foreign companies. All companies are registered with the Office of the Company Registrar (OCR), which oversees compliance and regulation nationwide. Below is an overview of the two primary company types:

• Private Limited Company (Pvt. Ltd.): A privately held company where shares are owned by a close group of individuals (founders, family, or select investors). Shares cannot be offered to the general public, and there is a cap on the number of shareholders (traditionally up to 50 members, though law allows around 100 in modern practice). This is the most common entity for Nepal business registration, favored by small and medium enterprises for its simpler requirements and control.

• Public Limited Company (PLC or Ltd.): A company whose shares can be offered to the public and traded – typically via an Initial Public Offering (IPO) and listing on the Nepal Stock Exchange (NEPSE). It requires at least 7 shareholders to incorporate (no upper limit on shareholders). Public companies are suited for larger operations that intend to raise capital from the public or have broad ownership.

Other forms like sole proprietorships and partnerships exist in Nepal, but these are not separate legal entities and are generally not used by foreign investors due to unlimited liability and size limitations. For most foreign businesses entering Nepal, the choice comes down to Private Ltd vs. Public Ltd company, so our focus will remain on these two structures.

What is a Private Limited Company in Nepal?

A Private Limited Company in Nepal is a company privately owned by a limited number of shareholders with restricted share transferability. It is a separate legal entity with limited liability for its owners – meaning shareholders are only liable up to the amount they invested in shares. This structure is designed for closely-held businesses and is governed by the Companies Act and related regulations.

Key features of a Nepalese Private Limited Company include:

• Limited Shareholders: Can be formed with a minimum of 1 shareholder (one-person companies are allowed) and can have up to a statutory maximum (e.g. 101 shareholders, according to 2025 laws) without inviting public investment. In practice, many private companies keep membership well under 50 for simplicity.

• Restricted Share Transfer: Shares cannot be freely traded or sold to the general public. Any transfer of shares typically requires approval of the company’s Board or consent of other shareholders. This ensures the ownership remains closely held.

• Lower Capital Requirements: There is no hefty minimum capital mandated by law for a private company. You can register a small company with as low as NPR 100,000 (about $800) as paid-up capital. This makes it easy for startups to incorporate. (Note: Foreign-owned companies must still meet the FDI minimum investment – discussed later – but domestically there’s no large capital floor for private companies.)

• Simpler Compliance: Private companies face relatively fewer disclosure obligations and simpler governance rules under Nepali law. For instance, while they must maintain proper accounts and file annual reports, they generally have less strict regulatory scrutiny compared to public companies. They are not required to publish financial statements to the public.

• Immediate Commencement: A private company can commence business immediately upon incorporation. Once you obtain the company registration certificate from the OCR, the company is legally recognized and can start operations without needing further approval to commence business.

• Management Structure: They are managed by a Board of Directors (which can even be a single director if there is only one shareholder). Corporate decisions are easier to make with a small group. Annual general meetings (AGMs) are required, but a private company with a single shareholder or a small group can fulfill many requirements via written resolutions or simpler procedures.

Typical uses and advantages of Private Ltd companies: This structure is ideal for close-knit or family-owned ventures, joint ventures between a foreign investor and local partner, and startups/SMEs entering Nepal. Private Ltd companies allow you to maintain control and privacy, since ownership is not dispersed among the public. Administrative burdens are lower, which makes day-to-day operation and compliance more manageable for a small team. Foreign investors often choose a private limited company when they want a straightforward entry with full ownership control and are not looking to raise capital from the Nepali public in the short term.

Pros: Easy and quick to incorporate, lower fees and lower minimum capital, full control stays with a small group, less public disclosure (more privacy), and easier decision-making due to flexible governance. Even foreign investors who want 100% ownership in most sectors can use a private ltd structure (Nepal permits 100% foreign shareholding in many industries, subject to approvals).

Cons: Inability to publicly trade shares or easily bring in a large number of investors. Expansion capital must come from private sources (e.g. your own funds, venture capital, or private equity) rather than public shareholders. There is a cap on shareholder count, which might limit how much you can expand ownership. Additionally, while compliance is easier than a public company, a private company in Nepal still must conduct annual audits and follow tax filing requirements just like any other company.

What is a Public Limited Company in Nepal?

A Public Limited Company in Nepal is a company that offers its shares to the public and can be listed on the stock exchange. Public companies have the ability to raise equity by issuing shares, debentures, or other securities to general investors. They tend to be larger businesses and are subject to stricter regulations to protect shareholders and the public interest.

Key features of a Nepalese Public Limited Company:

• Minimum Shareholders: A public company requires at least 7 shareholders to incorporate. These can be individuals or corporate entities. (In practice, promoters often bring in friends, family, or subsidiary firms to meet this requirement if a single group is setting up the company.) There is no maximum limit on shareholders – after incorporation, the company can offer shares to potentially thousands of public investors, making the ownership base unlimited.

• Public Share Offering: Public companies can issue shares, bonds, or other securities to the general public to raise capital. They can also be listed on NEPSE, which provides liquidity as their shares can be freely traded on the stock market. This access to public investment is a primary reason to choose a public company structure for large projects.

• Higher Capital Requirement: To register a public limited company, Nepalese law requires a significant minimum paid-up capital (currently NPR 10 million is the general minimum). In practice, specific sectors may require even higher capital – for example, banks or insurance companies have their own statutory capital minimums well above NPR 10 million. By contrast, a private company can register with just NPR 100k as noted. So the bar is set higher for public companies to ensure they have enough fund base.

• Certificate of Commencement: Importantly, even after incorporation, a public company must obtain a Certificate of Commencement from the OCR before starting business operations. This typically involves meeting the minimum capital subscription (ensuring the initial shares are fully taken up and paid) and other formalities. Only after receiving this approval can the public company legally commence business activities. This step is an extra safeguard not required for private companies.

• Stricter Governance and Reporting: Public companies in Nepal are subject to rigorous governance standards. They must have a formal Board of Directors (often with at least 3 directors, and potentially independent directors if listed), hold Annual General Meetings every year, and comply with extensive disclosure requirement. Financial statements need to be audited and typically published or made available to all shareholders. Regulatory bodies like the Securities Board of Nepal (SEBON) oversee public offerings and trading, adding another layer of compliance. Overall, there is greater transparency expected from public companies to protect shareholder interests.

• Unlimited Growth Potential: With the ability to draw capital from the public, a public limited company can undertake large-scale projects and expansions more easily. There’s no cap on how many shareholders or how much investment it can accumulate (aside from sectoral limits), which suits enterprises aiming for big growth. Sectors like banking, infrastructure, energy, and telecommunications often operate as public companies, as they require substantial capital and may even be legally mandated to go public after a certain growth (for instance, many Nepali banks and hydropower companies issue IPOs to involve public investors).

Pros: Access to significant capital by tapping public investors – you can finance large projects by issuing shares or bonds. Being a public company can enhance credibility and public profile; customers and partners may view a publicly-traded company as more transparent or stable. Shares are liquid, meaning original investors or founders can eventually exit or dilute ownership by selling shares on the market. Moreover, public companies can spread risk among a large pool of shareholders and have potentially unlimited shareholder growth.

Cons: Much higher compliance burden and cost. Public companies must adhere to strict reporting standards (quarterly reports, annual reports, mandatory audits) and corporate governance rules. There is less privacy – financial and operational information becomes more open to scrutiny by shareholders, regulators, and media. Decision-making can be slower or constrained, as major changes often require board and shareholder approval (through AGMs). The process of issuing shares (IPO) is heavily regulated, requiring preparation of a prospectus, regulatory approvals, and time. Formation is more complex: you need at least 7 promoters and a large initial capital outlay (≥ NPR 10 million) to even register. For a foreign investor, assembling 7 different shareholders and meeting the capital requirement is a significant hurdle unless you are partnering with others or structuring multiple entities to act as shareholders. In summary, the public route, while powerful, comes with significant responsibilities and initial requirements.

Private Limited vs. Public Limited: Key Differences at a Glance

To highlight the distinctions between a private and public company in Nepal, the table below compares their key attributes side by side:

Sources: The above comparisons are based on Nepal’s Companies Act and regulations official requirements from OCR, and industry practices. Public companies have significantly higher obligations but enable access to public capital, whereas private companies are easier to set up and manage for foreign investors seeking control and simplicity.

Legal and Regulatory Requirements for Incorporation (2025 Update)

Establishing a company in Nepal involves meeting both the general company law requirements and the foreign investment regulations if you’re a foreign investor. Here we outline the key legal requirements for each structure and highlight the 2025 updates to laws that impact incorporation:

Private Company Incorporation Requirements

To register a private limited company in Nepal, you must apply to the Office of the Company Registrar. Key steps and requirements include:

• Name Reservation: You propose a unique company name (e.g. XYZ Nepal Pvt. Ltd.). The OCR will not allow duplicate or confusingly similar names to existing companies.

• Charter Documents: Draft a Memorandum of Association (MOA) and Articles of Association (AOA) defining the company’s business objectives, share structure, and internal rules. Standard templates (Schedule 1, 2, 3 of regulation) are often used. These documents, along with an application form, must be submitted to the OCR.

• Shareholders and Directors: Provide details of shareholders (at least one, who can be a foreign individual or entity) and directors. A private company can have a single director. Notarized ID copies (passport or citizenship for Nepali nationals) of founders are required.

• Registered Office: You need a local registered address in Nepal for the company. This is where official communications will be sent.

• Minimum Capital: As noted, the legal minimum paid-up capital for a local private company is only NPR 100,000. However, if the company has foreign investment, a much higher minimum applies under FDI rules (NPR 20 million). For domestic-only companies, you simply declare whatever capital is suitable for your business (there’s no maximum, and many companies register with modest capital and can increase it later as needed).

• Government Fees: Pay the registration fee (for example, NPR 1,000 for minimum capital companies, and higher fees for higher authorized capital). The fee is scaled with the amount of authorized capital.

• Approval and Certificate: The OCR typically processes company registration within about 5–15 days if all documents are in order. Once approved, you receive a Certificate of Incorporation (Registration Certificate), after which your private company is legally formed and can start business. Unlike a public company, no separate “business commencement” approval is needed for a private firm – the incorporation certificate is sufficient to begin operations.

For a foreign investor setting up a private company, there are additional steps: you must obtain approval for your investment from the Department of Industry (or the Investment Board Nepal for large projects) under the Foreign Investment and Technology Transfer Act (FITTA). This involves submitting a detailed investment proposal. As of 2025, Nepal has streamlined this process with an automatic approval route for certain sectors and investment sizes – for example, investments up to NPR 100 million in priority sectors are to be auto-approved within 7 days. Once the investment is approved, you can inject capital into the company’s bank account, register the company, and then register the foreign investment with Nepal Rastra Bank (the central bank) for foreign currency regulation compliance. Every foreign-owned company also needs to register with the local tax office (Inland Revenue Department) to obtain a PAN/VAT number before commencing business transactions.

2025 Legal Updates (Private Companies): Nepal’s government has introduced reforms to make doing business easier. Recent amendments to the Companies Act (through an Ordinance in 2025) have simplified business registration and compliance. Notably, the law now explicitly recognizes single-person companies, meaning one individual can form a company and enjoy limited liability without needing a second shareholder. (Previously one-person companies existed de facto, but now they have clearer legal provisions, such as no mandatory board meetings for a single-shareholder company.) The amendments also allow innovative share structures – for instance, companies can issue shares for non-cash contributions like intellectual property or technical know-how (often called "sweat equity") to founders or key personnel. Furthermore, Employee Stock Option Plans (ESOPs) have been introduced, enabling private companies to grant stock options to employees as part of compensation. These changes align Nepal’s corporate framework with global startup practices and can benefit foreign tech companies or startups incorporating as private entities. Another update is the allowance of Non-Resident Nepali (NRN) individuals to act as promoters/shareholders in Nepal companies easily. This draws diaspora investment and does not directly impact non-Nepali foreign investors, but it demonstrates Nepal’s intent to broaden participation in private companies. Overall, the trend in 2025 is toward easier incorporation and more flexibility for private companies – good news if you’re looking to register a business in Nepal.

Public Company Incorporation Requirements

Incorporating a public limited company in Nepal has additional layers of requirements aimed at protecting public shareholders and ensuring sufficient capital:

• Promoters: You need at least 7 promoters/shareholders to apply. Their names will be listed as the initial shareholders in the Memorandum of Association. Promoters must agree to buy a certain number of initial shares (collectively meeting the minimum capital). These can be all foreign, all Nepali, or a mix, depending on your investment structure and sectoral ownership rules.

• Charter Documents: Similar to a private company, a public company needs an MOA and AOA, but the contents will reflect a public company’s provisions (e.g. inclusion of public share issuance clauses). You also prepare a prospectus or information memorandum if you intend to issue shares to the public right after incorporation, which must comply with SEBON regulations.

• Minimum Capital and Subscription: You must show at least NPR 10 million paid-up capital to register. Practically, the promoters have to purchase shares worth at least this amount. Often, a public company at incorporation will only be subscribed by the promoters for the minimum required capital. Any plan to offer additional shares to the public (via an IPO) usually comes after incorporation and requires separate approval from SEBON. If the company is being set up with foreign investment, remember that the FDI minimum of NPR 20 million applies here as well – so a foreign-public company would actually start with at least NPR 20 million (which inherently satisfies the NPR 10M Companies Act requirement).

• Government Fees: Higher registration fees are applicable. For instance, at NPR 10 million capital, the registration fee is around NPR 16,000, and it increases for larger authorized capital. These must be paid to OCR.

• Approval to Commence Business: After submitting all documents, the OCR will incorporate the company and issue an Incorporation Certificate. However, a public company cannot start business yet. It must fulfill the conditions of section 63 of the Companies Act which require obtaining an “Approval for Commencing Business.” To get this, the public company typically must: (a) have the minimum capital subscribed (promoters have paid for their shares), (b) if it plans an IPO, submit the prospectus and get it approved, and (c) hold a statutory meeting of the promoters. Once the regulator is satisfied, a Certificate of Commencement is issued. Only then can the public company formally begin operations, enter contracts, or borrow money in its own name. This process ensures the company is adequately capitalized and structured before it engages with the public.

• Post-Incorporation Compliance: A newly formed public company in Nepal is required to hold its first Annual General Meeting within one year of commencing business, and then annual meetings every year within six months of the fiscal year end. It must also constitute any mandatory committees (for example, larger public companies or listed companies need an Audit Committee, etc.). If the company will be immediately seeking public investment, coordination with SEBON is required for the IPO process (including vetting of the prospectus, setting an IPO subscription period, etc.). If the company is not immediately going for an IPO, it can remain unlisted, but it still operates under public company compliance standards.

For foreign investors, forming a public company means you’re likely planning a big venture. The process will involve FDI approval as well, similar to a private company, but possibly with more scrutiny if the sector is regulated. You must still register your investment with Nepal Rastra Bank and abide by any foreign ownership limits. Nepal allows 100% foreign ownership in most sectors even in public companies, but certain industries (like airlines, telecommunications, banking) have foreign ownership caps or require local shareholding per government policy. Always check if your sector has specific rules – for example, domestic aviation businesses have a 49% foreign ownership cap (meaning you’d need 51% local shareholders in that case, even if your company is public).

2025 Legal Updates (Public Companies): The recent amendments and ordinance changes also affect public companies. The introduction of sweat equity and ESOPs applies to all companies, meaning public companies can also issue shares to founders or employees for non-cash contributions now– a tool that might be used by public tech companies or joint ventures. Corporate governance norms have been strengthened: for instance, the 2025 ordinance emphasizes the role of AGMs and special resolutions for key decisions, ensuring greater shareholder participation in public companies. Additionally, there is a push for digitalization and speed – the government is moving toward online registration systems and quicker regulatory approvals, which should benefit public company setup too. One noteworthy change: the minimum FDI investment threshold was reduced to NPR 20 million from the earlier NPR 50 million. This doesn’t change the Companies Act capital requirement for public companies, but it means foreign investors can now start slightly smaller ventures than before (USD ~$150k instead of $400k minimum) – potentially encouraging more public company formations with foreign capital in medium-scale projects.

Overall, the legal environment in 2025 is aiming to be more business-friendly. Nepal’s reforms signal that while public companies will remain well-regulated, procedures should become faster and clearer. For example, the government has indicated that foreign investments up to NPR 100 million could be approved in a one-week automated process, making it more convenient to get your public company’s investment clearance. This pro-investment stance, combined with clarified laws, makes establishing a public company for large projects a more navigable process than in the past.

Advantages and Disadvantages for Foreign Investors

From a foreign investor’s perspective, choosing between a private and public company in Nepal depends on the scale and objectives of your investment. Here we break down the pros and cons of each structure specifically for foreign companies:

Why a foreign investor might choose a Private Limited Company:

• Full Ownership and Control: You can own 100% of a private company as a foreign investor in most sectors (Nepal imposes no joint-venture requirement in many industries). This means you retain complete control over business decisions and equity – a priority for many companies expanding abroad.

• Simpler Setup and Operation: Incorporating a private company is faster and involves less bureaucracy. There’s no need to find local partners to meet a 7-shareholder rule (you can even register with one shareholder who could be your home company’s Nepal subsidiary). Fewer regulatory approvals are needed upfront compared to a public company. Compliance and ongoing administration are also lighter, which is helpful if you’re not familiar with local paperwork.

• Lower Costs: The capital requirement for a private company is modest (aside from the FDI minimum) and administrative costs (e.g. regulatory fees, cost of holding AGMs) are lower. You won’t need to produce extensive public reports or hire as many compliance officers as a public company would.

• Privacy and Flexibility: As a private entity, your financial statements and strategic moves are not under public scrutiny. This privacy can be advantageous in a competitive market. You also have flexibility to restructure, bring in new investors privately, or even convert to a public company later when you’re ready. (Yes, Nepal allows a Private Limited to convert into a Public Limited later if needed) Starting private gives you a controlled environment to establish your business, and you can “go public” down the road once the business is proven and requires larger investment.

Potential disadvantages of a Private Limited for foreigners:

• Limited Capital Raising Ability: If your expansion strategy in Nepal requires substantial capital beyond what you and perhaps a few co-investors can inject, a private company might feel limiting. You cannot raise money from Nepali citizens or institutions through a stock offering. While you could bring foreign partners or borrow from banks, those avenues have limits. For large infrastructure or nationwide projects, the inability to tap into Nepal’s capital market or offer shares publicly could constrain growth.

• Perception and Scale: In certain sectors, operating as a private company might be seen as a small-scale venture. For example, if you’re in banking or insurance, customers and regulators might expect a publicly listed entity. In fact, some sectors have implicit expectations or regulations to broaden ownership. Many foreign investors in the hydropower sector, for instance, start as private companies but later convert to public and float shares to locals as part of community involvement or legal requirements. Not being public could mean missing out on such opportunities or even failing to comply with sector norms in the long term.

• Exit Strategy: If you plan to eventually sell your business or bring in a large strategic partner, doing so via a private sale can be more complex than selling shares on the stock exchange. Public listing offers an exit route for investors by selling stock, whereas exiting a private company might require finding a buyer for the whole company or transferring shares in a negotiated deal. This is something to consider if you intend to divest your stake in the future.

Why a foreign investor might choose a Public Limited Company:

• Access to Public Capital: The biggest draw is the ability to fundraise from the public. If your project needs, say, $10 million, you might prefer to put in $5 million yourself and raise the rest by issuing shares to Nepali investors. A public company lets you do that through an IPO or rights issue. Nepal’s financial market is growing and can provide substantial capital for attractive ventures – recent IPOs in sectors like hydropower and telecom have been oversubscribed. Going public can thus leverage local funds and spread investment risk.

• Local Market Credibility: Being a publicly traded company can enhance your brand in Nepal. It signals commitment to the local market and transparency, which can be beneficial for businesses dealing with the public or government. For example, a foreign-invested bank or insurance company usually operates as a public company – this builds trust with customers (their money is literally invested in the company) and complies with regulatory expectations. Public companies also often have better access to local credit markets and government contracts, as they are perceived as more permanent and accountable.

• Shared Ownership with Locals: Foreign investors sometimes want to involve local partners or the public for strategic reasons. Offering shares to Nepali individuals or institutional investors (like mutual funds or pension funds) can create a broad base of support and alignment with the local community. It might also be a political or social advantage – large projects that share wealth with the population (through share ownership) can gain goodwill. If your goal is to establish a high-profile venture embedded in Nepal’s economy, a public company structure facilitates that shared ownership.

• Regulatory or Sector Requirements: Certain regulated sectors may effectively require a public company format. For instance, Nepal Rastra Bank (NRB) guidelines for banking might require banks to have a diversified ownership and list on the stock exchange within a few years of operation (this has been a practice to ensure banks are not closely held). If you are investing in such a sector, starting as a public company or planning to become one is necessary for compliance. Likewise, larger infrastructure projects under public-private partnerships could mandate forming a public company so that project stakeholders (like local residents or government entities) can hold shares.

Potential disadvantages of a Public Limited for foreigners:

• Complex Initial Setup: As discussed, meeting the 7-shareholder minimum can be tricky if you are a single foreign entity – you may need to create a consortium or bring in nominee shareholders. Ensuring NPR 10+ million capital and navigating the extra step of obtaining a business commencement certificate adds time and cost to your setup. The process with regulatory bodies (OCR, SEBON, NRB for FDI approval) is more cumbersome when you choose the public route.

• Ongoing Compliance Cost: Maintaining a public company will require a dedicated compliance team or hiring legal/accounting advisors in Nepal. You’ll have to produce quarterly financial reports, facilitate annual shareholder meetings (with potentially thousands of shareholders), manage investor relations, and comply with any corporate governance codes. The penalties for non-compliance can include fines or even suspension of trading of your shares, which is a serious risk. For a foreign company used to private operations, this can be a steep learning curve and a continuous obligation.

• Dilution of Control: Once you go public, you will likely dilute your ownership stake to some extent by issuing shares to others. If you end up with, say, 60% foreign ownership and 40% public, your control is still strong but not absolute. Major decisions will need ordinary or special resolutions in shareholder meetings. There’s also the theoretical risk of hostile takeovers or activist investors, though in Nepal’s context this is uncommon due to the still-maturing market. Nonetheless, as a foreign promoter, you would need to manage relationships with other significant shareholders and comply with any requirements to maintain a certain public float percentage.

• Market Risks: Choosing the public route exposes your business to stock market fluctuations. If the market sentiment is negative or if Nepal’s economy faces challenges, your company’s share value and ability to raise additional capital might suffer regardless of your business’s intrinsic performance. Private companies are shielded from market volatility in that sense (their valuation is whatever the owners agree it to be), but a public company’s value is determined by the market daily.

In summary, for most foreign investors starting in Nepal with a moderate-scale venture, a Private Limited Company is the go-to choice due to ease and control. It allows you to establish a foothold, understand the local market, and remain agile. On the other hand, if you have a large-scale project or plan to involve public financing from the outset, a Public Limited Company could be appropriate, or even required. Some foreign investors use a phased approach: begin with a private company and later convert to a public company when the business has grown and needs greater capital infusion – this approach is feasible in Nepal.

2025 Updates: Companies Act and FDI Law Changes

It’s important to touch on how the regulatory landscape has evolved up to 2025, as Nepal has introduced reforms that affect company incorporation and foreign investment:

• Amendments to Companies Act (2023–2025): Nepal introduced an ordinance in late 2024 (often referred to as the Companies (Second Amendment) Ordinance 2025) that updated the Company Act 2006 to improve the business climate. Key changes include recognition of NRNs (Non-Resident Nepalis) as company promoters (making it easier for the Nepali diaspora to invest), the introduction of One Person Companies (explicit legal status for single-shareholder companies), and facilitation of sweat equity and ESOPs as mentioned earlier. The aim is to foster startups and innovation in Nepal’s economy. These changes mean foreign investors have a more flexible framework – for example, if you partner with an NRN investor, they can directly be a co-promoter now; or if you start a tech venture, you have legal means to compensate talent with shares. Compliance processes were also simplified – e.g., removing the requirement of three years of audited accounts to issue shares at a premium, which helps new companies raise capital more easily. Overall, the 2025 Act amendments align Nepal’s corporate laws closer with international standards, making incorporation and growth easier for companies.

• Foreign Investment (FDI) Law Updates: The Foreign Investment and Technology Transfer Act (FITTA) was overhauled in 2019, and subsequent regulations have adjusted thresholds and procedures. One major update relevant in 2025 is the minimum FDI investment requirement. Initially, Nepal had raised the minimum investment to NPR 50 million in 2019, but later recognized this was too high for many investors. In 2022, the threshold was reduced to NPR 20 million (approximately USD 150,000). This is a significant change – it means foreign investors can set up companies in Nepal with a smaller investment than before, opening the door to more small and medium foreign enterprises. (For context, prior to 2019 the minimum was NPR 5 million, then it jumped to 50 million, and now it’s 20 million after the correction.) As of 2025, any foreign-owned company must bring at least NPR 20 million in equity – whether you choose private or public company. There are some exceptions (e.g. certain IT and software companies might be exempt from the minimum under an automatic route to encourage tech startups, but generally budget about $150k or more for your Nepal venture. Another update is streamlined approval processes: the government has committed to faster processing of FDI approvals (even mentioning automatic approval for investments up to NPR 100 million in the 2022 budget), and introduced online systems at the Department of Industry to track application status. Nepal has also updated its negative list of industries where FDI is not allowed – for example, retail trading, small cottage industries, and a few others remain off-limits to foreigners. Make sure your business activity is in a permitted sector (most manufacturing, IT, services, and tourism sectors are open). In permitted sectors, foreign investors can typically own 100% of the company, as noted, with some caps in areas like aviation (international airlines max 80% foreign, domestic airlines 49% foreign etc.) The repatriation of profits and dividends is allowed, but you must get clearance from Nepal Rastra Bank and have paid all due taxes before remitting money out – this rule hasn’t changed, but it’s a reminder to plan for an extra step when sending returns on investment back home.

In essence, Nepal in 2025 is more welcoming to foreign companies than ever. Lower investment barriers, modernized company laws, and proactive government initiatives (like one-stop service centers for investors) are making it smoother to incorporate and operate. That said, as a foreign investor, staying compliant with the laws – both old and new – is critical. Engaging a local legal consultant or corporate service provider when you incorporate can save you time and ensure you benefit from all the new provisions (for instance, using the automatic route for approval if eligible, or structuring your share capital to take advantage of flexibility in the law).

Which Structure Is Right for You?

Choosing between a private limited and a public limited company in Nepal comes down to your business objectives, capital strategy, and timeline:

• If your priority is ease of setup, full control, and confidentiality, and your funding can be secured through your own resources or private investors, then a Private Limited Company is likely the right choice. This is especially true for initial market entry. For example, if you are establishing a 100% foreign-owned software development center or a trading office in Kathmandu, a private company lets you start operations quickly and with minimal hassle. You can always bring in a venture capital investor privately or convert to public later if needed. Many foreign SMEs prefer the private route to test the waters in Nepal before committing to broader ownership.

• If your project inherently requires significant capital or public participation – perhaps you are building a hydroelectric plant, setting up a new bank, or any venture above, say, $5-10 million – you should consider a Public Limited Company. This structure will enable you to raise funds through an IPO or subsequent public offerings as your project grows. It can also be beneficial if you need to comply with sector regulations (e.g. a banking license might require public ownership within a few years). Public company status could align with a strategy to involve local investors and stakeholders, thereby distributing risk and fostering goodwill. Just ensure you are prepared for the compliance load and have local advisors to guide you through the IPO and governance processes.

• Long-term vision matters: If you eventually envision listing on the stock exchange or want the option of broad ownership, starting as a public company (or transitioning to one at the right time) is a prudent plan. Conversely, if you foresee your Nepal business staying relatively contained (e.g. a branch office equivalent, serving a support function, or a pilot operation), there is no need to go public – a private company will serve you perfectly and spare you unnecessary obligations.

In some cases, your decision might also be influenced by local partners or joint venture agreements. If you have a reputable Nepali partner who is bringing in numerous other investors, a public company might naturally emerge as the preferred vehicle so everyone can hold defined shares. On the flip side, if you’re going solo, a private company is the obvious path.

Recommendation: For most foreign companies entering Nepal in 2025, start with a Private Limited Company. It provides a fast, flexible, and fully-controlled platform to establish your presence. Focus on getting your business running and navigating the local market first. If and when you reach a stage where tapping into Nepal’s capital markets is advantageous – perhaps to scale up – you can initiate conversion to a Public Limited Company. Nepal’s laws allow private companies to convert to public status by fulfilling the necessary requirements (such as increasing shareholder count and paid-up capital). This staged approach lets you grow organically and only take on the public compliance burden when it becomes necessary and beneficial.

Of course, every business is unique. Consider consulting with local legal and financial advisors to weigh the specifics of your situation. Factors like the industry sector, investment size, time horizon, and exit strategy all play into this decision. By doing due diligence and leveraging the improved regulatory environment Nepal offers, you can confidently choose the structure that propels your Nepali venture toward success. In summary, align the company type with your capital needs and control preferences: choose Private Limited for simplicity and agility, or Public Limited for expansive growth and public fundraising. With Nepal’s evolving business landscape in 2025, both paths are viable – it’s all about which is right for you.

Sources:

1. Nepal Companies Act, 2063 and recent Ordinance amendments – key provisions on private vs public companies.

2. Office of the Company Registrar – guidelines on company incorporation, capital requirements, and documentation.

3. Foreign Investment and Technology Transfer Act (FITTA) 2019 and 2021/22 updates – FDI threshold and approval process.

4. Digital Consulting Ventures Insight – “Private vs. Public Limited Companies in Nepal: Which Is Right for You?” (Dec 2024) – comparative analysis of company structures.

5. Kathmandu Post (Oct 14, 2022) – “Minimum foreign investment amount cut to Rs 20 million” – news on FDI policy change.

6. Nepal Economic Forum (2022) – “Overview of Foreign Direct Investment in Nepal” – context on FITTA and investment climate.