Public vs Private Limited Company Nepal: Formation Process Compared

Choosing the right legal structure is one of the most critical entry decisions for foreign investors. The debate around private vs public company Nepal is not just legal. It affects control, cost, timelines, compliance burden, and long-term scalability.

Many foreign companies assume a public company signals credibility. In Nepal, that assumption can be costly.

This guide gives you the most authoritative, practical comparison available. It is written specifically for foreign companies evaluating Nepal as a market, outsourcing base, or investment destination.

Why company structure matters for foreign companies in Nepal

In Nepal, company type determines:

• Whether foreign investment is permitted
• How capital is injected and repatriated
• Ongoing regulatory exposure
• Speed to operational readiness
• Exit and restructuring flexibility

The wrong structure can delay operations by months.

The right one can accelerate market entry.

Overview of company types under Nepal law

Nepal recognises two main corporate vehicles for commercial operations:

• Private Limited Company
• Public Limited Company

Both are governed by the Companies Act, 2006 and administered by the Office of the Company Registrar.

Foreign investment is additionally regulated under FITTA 2019 and NRB directives.

What is a Private Limited Company in Nepal

A Private Limited Company is the most common structure used by foreign companies entering Nepal.

Key features

• 1 to 101 shareholders
• Shares not offered to the public
• Faster incorporation
• Lower compliance burden
• Ideal for wholly owned subsidiaries and joint ventures

Foreign investors can own up to 100 percent, subject to sector eligibility.

Typical use cases

• Offshore delivery centres
• Outsourcing and shared service hubs
• Technology and IT companies
• Consulting, professional services, and BPOs

What is a Public Limited Company in Nepal

A Public Limited Company is designed for large-scale capital mobilisation.

Key features

• Minimum 7 shareholders
• Can issue shares to the public
• Higher paid-up capital expectations
• Mandatory regulatory disclosures
• Longer formation timelines

This structure is rarely used by first-time foreign entrants.

Typical use cases

• Banks and financial institutions
• Insurance companies
• Hydropower and infrastructure projects
• Companies planning an IPO in Nepal

Private vs public company Nepal: formation process compared

Incorporation timeline

Private companies reach operational readiness significantly faster.

Capital and ownership requirements

Private Limited Company

• No statutory minimum capital for most sectors
• Capital aligned to business plan
• Flexible capital injection phases

Public Limited Company

• Higher capital thresholds
• Sector-specific minimums
• Upfront capital scrutiny

For foreign companies, capital flexibility matters.

Governance and compliance burden

Private Limited Company compliance

• Annual return filing
• Annual audit
• Tax filings
• Social Security Fund compliance

Governance is straightforward and cost-efficient.

Public Limited Company compliance

• Mandatory board committees
• Public disclosures
• Enhanced audit standards
• SEBON oversight where applicable

Compliance costs can be 3 to 5 times higher.

Foreign investment and regulatory exposure

Foreign investment rules apply to both structures, but exposure differs.

Private companies

• Simpler FITTA approval process
• Easier NRB capital repatriation
• Fewer reporting layers

Public companies

• Higher regulatory scrutiny
• Public interest oversight
• Limited flexibility on restructuring

Most foreign investors prioritise predictability.

Control and decision-making

Private companies offer stronger founder and parent-company control.

Public companies introduce:

• Minority shareholder protections
• Disclosure obligations
• Board independence requirements

For strategic operations, control is critical.

Tax treatment comparison

Corporate tax rates are broadly similar.

The difference lies in:

• Withholding complexity
• Dividend declaration formalities
• Transfer pricing scrutiny

Private companies allow cleaner tax planning during early growth.

When does a public company make sense

A public company may be appropriate if:

1. The project requires large local capital mobilisation

2. The sector legally mandates a public structure

3. An IPO is part of the core strategy

4. The project has national infrastructure impact

If none apply, private is usually superior.

Private vs public company Nepal: strategic decision framework

Ask these five questions:

1. Is public fundraising required in Nepal

2. Is the sector regulated for public ownership

3. How quickly must operations start

4. How much control is non-negotiable

5. What is the exit timeline

For most foreign companies, the answers point to private incorporation.

Common mistakes foreign companies make

• Choosing public structure for credibility
• Overestimating IPO readiness
• Underestimating compliance cost
• Ignoring capital repatriation mechanics
• Not aligning structure with exit strategy

These errors are expensive and avoidable.Legal framework and authority references

This analysis aligns with:

• Companies Act, 2006
• Foreign Investment and Technology Transfer Act, 2019
• Income Tax Act, 2002
• Nepal Rastra Bank Foreign Exchange Directives

All data reflects current regulatory practice

FAQs: People also ask

Is a private limited company allowed 100 percent foreign ownership in Nepal

Yes. Most sectors allow full foreign ownership under FITTA 2019, subject to approval and sector eligibility.

Can a private company convert into a public company later

Yes. Conversion is permitted but involves regulatory approval, capital restructuring, and compliance upgrades.

Is a public company mandatory for foreign investors

No. Public companies are mandatory only for specific regulated sectors such as banking and insurance.

Which structure is better for outsourcing operations

A private limited company is faster, cheaper, and offers full operational control for outsourcing.

How long does incorporation take for foreign companies

Private companies typically take 2–3 weeks. Public companies can take 6–10 weeks or more.

Conclusion

The private vs public company Nepal decision should be driven by strategy, not perception.

For most foreign companies, a private limited company delivers speed, control, and compliance efficiency.

Public companies make sense only when scale and regulation demand it.