Pros and Cons of Registering a Private or Public Company in Nepal

When foreign investors evaluate private vs public company Nepal, the choice goes far beyond legal formality. It directly affects ownership control, capital raising, compliance burden, exit flexibility, and long-term scalability. Nepal’s corporate framework allows both private and public companies, but each serves a very different strategic purpose.

This guide offers a practical, authoritative comparison for foreign companies planning market entry, FDI structuring, or long-term operations in Nepal. It combines legal analysis, real-world investor considerations, and compliance insights grounded in Nepal’s corporate and investment laws.

Nepal’s Legal Framework for Companies (What Foreign Investors Must Know)

Company formation in Nepal is governed primarily by:

• Companies Act, 2006

• Foreign Investment and Technology Transfer Act, 2019

• Industrial Enterprises Act, 2020

• Income Tax Act, 2002

• Nepal Rastra Bank directives on capital inflow and repatriation

Both private and public companies are incorporated through the Office of the Company Registrar (OCR). However, regulatory expectations and compliance intensity differ sharply.

What Is a Private Company in Nepal?

A private company in Nepal is the most common vehicle for foreign investors entering the market.

Core Characteristics

• Maximum 101 shareholders

• Restriction on public share subscription

• Lower minimum capital requirements

• Faster incorporation timeline

• High confidentiality and control

Why Private Companies Dominate FDI in Nepal

Over 90% of foreign-invested entities in Nepal are private companies. The reasons are practical rather than legal.

What Is a Public Company in Nepal?

A public company is designed for large-scale capital mobilization and public participation.

Core Characteristics

• Minimum 7 shareholders

• No maximum shareholder limit

• Ability to raise funds from the public

• Mandatory regulatory oversight

• Higher disclosure and audit obligations

Public companies are common in banking, insurance, hydropower, and infrastructure sectors.

Private vs Public Company Nepal: Key Structural Differences

1. Ownership and Control

Private companies offer concentrated ownership and stronger founder control. Public companies dilute ownership to enable capital access.

2. Capital Raising Ability

Private companies rely on internal funding, FDI inflows, or private equity. Public companies can raise funds via IPOs and public offerings.

3. Compliance and Governance

Public companies must meet stricter governance, audit, and reporting standards.

Comparison Table: Private vs Public Company Nepal (Investor Perspective)

Pros and Cons of a Private Company in Nepal

Advantages

• Faster setup and approvals

• Lower compliance costs

• Confidential financials

• Strong operational control

Limitations

• No public capital access

• Growth depends on private funding

• Share transfer restrictions

Pros and Cons of a Public Company in Nepal

Advantages

• Access to large capital pools

• Enhanced credibility

• Suitable for infrastructure and finance sectors

Limitations

• Heavy compliance burden

• Mandatory audits and disclosures

• Slower decision-making

Which Structure Is Better for Foreign Companies?

Choose a Private Company if you are:

1. Entering Nepal for the first time

2. Establishing a service or tech operation

3. Running a captive or outsourced team

4. Seeking operational control

Choose a Public Company if you are:

• Developing capital-intensive infrastructure

• Planning IPO or public fundraising

• Operating in regulated sectors

FDI and Capital Repatriation Considerations

Both structures permit foreign ownership under FITTA 2019. However:

• Private companies offer smoother capital repatriation

• Public companies face additional approvals from regulators

• NRB reporting obligations apply to both

Tax and Compliance Snapshot

• Corporate tax applies equally

• Withholding tax compliance is identical

• Public companies face stricter audit rules

• Private companies retain flexibility in structuring

Practical Insights from the Ground (Original Perspective)

In real deployments, foreign investors often start with a private company, then convert to a public company once:

• Revenue stabilizes

• Market presence strengthens

• Capital expansion is required

This phased approach minimizes risk while preserving growth options.

Private vs Public Company Nepal: Common Mistakes by Foreign Investors

• Choosing a public company too early

• Underestimating compliance costs

• Misjudging capital thresholds

• Ignoring exit flexibility

FAQs: Private vs Public Company Nepal

1. Can a foreigner fully own a private company in Nepal?

Yes. FITTA 2019 allows 100% foreign ownership in most permitted sectors, subject to approval.

2. Is a public company mandatory for large investments?

No. Many large investments operate successfully as private companies unless public funding is required.

3. Can a private company convert into a public company later?

Yes. Conversion is legally permitted with regulatory approvals and restructuring.

4. Which company type has lower compliance costs?

Private companies have significantly lower compliance and audit expenses.

5. Is IPO mandatory for public companies?

No. IPOs are optional, but public companies must comply with public governance standards.

Conclusion: Making the Right Choice in Private vs Public Company Nepal

Choosing between a private and public company in Nepal is a strategic decision. For most foreign companies, a private company offers flexibility, speed, and control. Public companies make sense only when scale, public capital, or regulatory requirements demand it.

The right structure depends on your sector, funding model, and long-term vision.