Private vs Public Company Nepal: What Entrepreneurs Need to Know

Choosing between a private vs public company Nepal is one of the first strategic decisions foreign entrepreneurs face when entering the Nepali market. This choice affects everything: ownership control, regulatory burden, capital raising, compliance cost, and long-term exit options.

Many foreign investors assume a public company is “bigger” or “better.” In Nepal, that assumption can be costly. The legal framework treats private and public companies very differently. For most foreign companies, a private limited company is the default and often the most efficient route.

This guide gives you a clear, authoritative comparison so you can decide with confidence.

Why the Private vs Public Company Nepal Decision Matters for Foreign Investors

In Nepal, company type is not just a formality. It determines how regulators, banks, employees, and investors interact with your business.

Your choice directly impacts:

• Speed of incorporation

• Capital flexibility

• Compliance intensity

• Governance expectations

• Future fundraising and exit options

Getting this wrong can slow market entry or create unnecessary regulatory exposure.

Legal Framework Governing Companies in Nepal

Company formation and operations in Nepal are primarily governed by:

• Companies Act, 2006

• Securities Act, 2007

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

• Industrial Enterprises Act, 2020

• Income Tax Act, 2002

• Labour Act, 2017

• Social Security Act, 2017

These laws define what a private and public company can and cannot do, especially when foreign shareholding is involved.

What Is a Private Company in Nepal?

A private limited company in Nepal is a closely held corporate entity designed for controlled ownership and operational flexibility.

Key Characteristics of a Private Company

• Limits the number of shareholders

• Restricts share transfers

• Cannot invite the public to subscribe to shares

• Suitable for wholly or partly foreign-owned businesses

Ownership Rules

• Minimum shareholders: 1

• Maximum shareholders: 50 (excluding employees)

• Can be 100% foreign-owned in approved sectors

Typical Use Cases

• Foreign subsidiaries

• Joint ventures

• Professional services firms

• IT, outsourcing, and trading companies

What Is a Public Company in Nepal?

A public limited company is designed for large-scale capital mobilisation and public investment.

Key Characteristics of a Public Company

• Can offer shares to the public

• Subject to securities regulation

• Higher governance and disclosure standards

• Often listed or list-ready

Ownership Rules

• Minimum shareholders: 7

• No maximum shareholder limit

• Foreign ownership permitted only in specific contexts

Typical Use Cases

• Banks and financial institutions

• Insurance companies

• Hydropower and infrastructure projects

• Large manufacturing ventures

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

This distinction alone explains why most foreign investors choose private companies.

Incorporation Process: Private vs Public Company Nepal

Private Company Incorporation

1. Name reservation with OCR

2. MOA and AOA preparation

3. FDI approval (if applicable)

4. Company registration

5. Tax, SSF, and labour registration

Average timeline: 3 to 6 weeks

Public Company Incorporation

1. Name reservation

2. Prospectus preparation

3. Regulatory approvals

4. MOA and AOA registration

5. Public subscription process

6. Post-issue compliance

Average timeline: 3 to 6 months

Capital Requirements and Fundraising

Private Company Capital Structure

• No statutory minimum capital (except sector-specific rules)

• Capital injected privately

• Flexible future capital increases

Public Company Capital Structure

• Higher minimum capital norms

• Mandatory disclosure of capital plans

• Regulated share issuance

For foreign companies testing the Nepal market, capital flexibility is a major advantage of private entities.

Compliance and Governance Obligations

Private Company Compliance

• Annual returns to OCR

• Tax filings with IRD

• SSF and labour compliance

• Board meetings as per internal rules

Public Company Compliance

• Quarterly and annual disclosures

• Independent directors

• Audit committee requirements

• Securities reporting obligations

Public companies face significantly higher ongoing compliance costs.

Taxation: Is There Any Difference?

From an income tax perspective, private vs public company Nepal taxation is largely similar.

Key points:

• Corporate tax generally 25%

• Withholding tax applies to dividends and payments

• Sector-specific incentives may apply

The real difference lies in audit scrutiny and reporting depth.

Foreign Investment Considerations

Foreign investors must align company type with FITTA approvals.

Private Companies and FDI

• Most FDI approvals are structured for private companies

• Faster approval cycles

• Easier profit repatriation planning

Public Companies and FDI

• Often sector-restricted

• Additional regulatory layers

• More complex exit mechanisms

When Does a Public Company Make Sense?

A public company structure is justified only when:

• Large capital mobilisation is required

• Public trust and visibility are critical

• Sector regulations demand it

• IPO or institutional investment is planned

For most foreign entrepreneurs, this stage comes later, not at market entry.

Private vs Public Company Nepal: Which Should Foreign Companies Choose?

In Most Cases, Choose a Private Company If You:

• Are entering Nepal for the first time

• Want speed and control

• Need regulatory predictability

• Plan phased investment

Consider a Public Company Only If You:

• Require large-scale public funding

• Operate in regulated infrastructure sectors

• Have a long-term listing strategy

Common Mistakes Foreign Investors Make

Foreign companies often:

• Overestimate the benefits of public companies

• Underestimate compliance costs

• Ignore sector-specific ownership caps

• Choose structure before strategy

A structure should support your business model, not complicate it.

Practical Decision Checklist

Before deciding, ask yourself:

• How much capital is needed in year one?

• Will ownership change frequently?

• Is public fundraising essential?

• How complex can governance realistically be?

If unsure, private is usually the safer starting point.

Frequently Asked Questions: Private vs Public Company Nepal

Is a private company better than a public company in Nepal?

For most foreign investors, yes. Private companies offer faster setup, lower compliance, and greater ownership control, making them ideal for market entry.

Can a private company convert into a public company in Nepal?

Yes. Subject to Companies Act requirements, shareholder approvals, and regulatory filings, a private company can be converted into a public company.

Can foreigners own 100% of a private company in Nepal?

Yes, in sectors approved under FITTA. Many foreign subsidiaries in Nepal are wholly foreign-owned private companies.

Are taxes different for private and public companies in Nepal?

No major difference. Corporate tax rates are generally the same, though reporting and audit scrutiny is higher for public companies.

Do startups in Nepal need to be public companies?

No. Almost all startups, including foreign-backed ones, operate as private companies in Nepal.

Conclusion: Private vs Public Company Nepal in One Sentence

For foreign entrepreneurs, the private vs public company Nepal decision almost always starts with a private company, with a public structure reserved for scale, regulation, or capital-market expansion.

Choosing the right structure early reduces risk, saves time, and keeps your Nepal expansion on track.