Public vs. Private: Decoding Company Types in Nepal

If you are a foreign company planning market entry, private vs public company in Nepal is one of the first decisions you must get right. The structure you choose affects ownership control, compliance burden, capital raising, and long-term scalability.

Nepal welcomes foreign investment. But its corporate framework follows strict legal definitions. Many overseas founders assume “public company” means government-owned. In Nepal, that assumption is incorrect. A public company is privately owned but regulated more heavily.

This guide explains the difference clearly. It is written for foreign investors, founders, CFOs, and expansion teams who need accuracy, not theory.

Nepal’s Corporate Framework at a Glance

Nepal’s company regime is governed primarily by the Companies Act, 2006 and overseen by the Office of the Company Registrar (OCR).

Under the Act, companies are classified mainly into:

• Private limited companies

• Public limited companies

Both structures can be foreign-invested if permitted under the Foreign Investment and Technology Transfer Act (FITTA) 2019.

What Is a Private Company in Nepal?

A private company in Nepal is the most common entry structure for foreign businesses. It is designed for controlled ownership and operational flexibility.

Key Legal Features of a Private Company

• Minimum shareholders: 1

• Maximum shareholders: 50

• Share transfer restrictions apply

• No public invitation for shares

• Can be 100 percent foreign-owned, sector permitting

Private companies are typically used for:

• Subsidiaries

• Joint ventures

• Service delivery centers

• Technology and consulting firms

What Is a Public Company in Nepal?

A public company in Nepal is structured to raise capital from the public or institutional investors.

Key Legal Features of a Public Company

• Minimum shareholders: 7

• No maximum shareholder limit

• Shares can be publicly offered

• Higher paid-up capital requirements

• Mandatory regulatory disclosures

Public companies are often used by:

• Banks and financial institutions

• Hydropower and infrastructure projects

• Large manufacturing entities

• IPO-oriented ventures

Private vs Public Company in Nepal: Core Differences

High-Level Comparison

This distinction matters greatly for foreign founders seeking control and speed.

Capital Requirements Explained

Paid-Up Capital for Private Companies

There is no fixed minimum capital under the Companies Act. However, for foreign investment:

• Minimum foreign investment threshold usually starts at NPR 20 million

• Sector-specific rules may apply

Paid-Up Capital for Public Companies

Public companies require:

• Significantly higher paid-up capital

• Additional capital adequacy rules for regulated sectors

• Approval from sector regulators

For most foreign companies, this is unnecessary at entry stage.

Compliance Burden: Private vs Public Company in Nepal

Private Company Compliance

Private companies enjoy streamlined compliance.

• Annual returns filing

• Basic financial statements

• Statutory audit

• Board resolutions

Public Company Compliance

Public companies must comply with:

• Quarterly and annual disclosures

• Shareholder meeting notices

• Public reporting standards

• Securities regulations if listed

For first-time foreign investors, this often becomes costly and slow.

Ownership Control and Share Transfer

Private Companies

Private companies offer:

• Full shareholder control

• Restricted share transfer

• Protection against hostile dilution

This is critical for foreign parents protecting IP and governance.

Public Companies

Public companies allow:

• Freely transferable shares

• Public participation

• Dilution through share issuance

This structure suits capital-intensive ventures, not early market entry.

Taxation: No Structural Difference, But Practical Impact

From a tax perspective:

• Both private and public companies are taxed under the Income Tax Act, 2002

• Corporate tax rates are generally the same

• Sector-specific incentives may differ

However, public companies face higher compliance costs in tax reporting and audits.

Foreign Investment Perspective: Which Structure Works Best?

For foreign companies, the answer is clear in most cases.

Private Company Is Ideal When:

• You want operational control

• You are entering Nepal for the first time

• You plan internal funding

• You want faster registration

Public Company Makes Sense When:

• You plan an IPO in Nepal

• You need large public capital

• You operate in infrastructure or finance

• You accept heavy regulation

Common Misconceptions Foreign Investors Have

Many foreign investors arrive with assumptions that do not apply in Nepal.

• Public company does not mean government ownership

• Private company does not mean small or informal

• Foreigners can fully own private companies

• Public companies are not required for legitimacy

Understanding these points prevents costly restructuring later.

Step-by-Step: How Foreign Companies Usually Start

Most foreign companies follow a phased approach.

1. Incorporate a private limited company

2. Operate and validate the market

3. Scale operations and revenue

4. Convert to public company only if required

This approach balances speed, control, and compliance.

Regulatory Bodies You Must Know

Foreign investors interact with multiple regulators.

• Office of the Company Registrar

• Department of Industry

• Nepal Rastra Bank

• Inland Revenue Department

Private companies face fewer layers of approval.

Advantages of Choosing a Private Company in Nepal

• Faster incorporation timelines

• Lower compliance cost

• Easier governance

• Strong shareholder control

• Better suited for foreign subsidiaries

These advantages make private companies the dominant choice.

Risks of Choosing the Wrong Structure

Selecting the wrong structure can lead to:

• Delayed approvals

• Excessive compliance costs

• Governance complexity

• Capital inefficiency

Many foreign companies regret registering as public too early.

Private vs Public Company in Nepal: Summary Comparison

FAQ: People Also Ask About Private vs Public Company in Nepal

Is a public company in Nepal government-owned?

No. A public company is privately owned. It is simply allowed to raise capital from the public.

Can a foreigner own 100 percent of a private company in Nepal?

Yes, if the sector permits foreign investment under FITTA 2019.

Is there a tax difference between private and public companies?

Corporate tax rates are similar. Public companies face higher compliance costs.

Can a private company convert into a public company later?

Yes. Conversion is allowed with regulatory approvals.

Which structure is better for startups entering Nepal?

A private company is almost always better for startups and foreign entrants.

Final Verdict: Private vs Public Company in Nepal

For foreign companies, private vs public company in Nepal is not a close contest. A private company offers speed, control, and compliance efficiency. Public companies are strategic tools, not entry vehicles.

If your goal is market entry, team building, or service delivery, start private. You can always evolve later.