Shareholding and Governance: Contrasting Public and Private Companies in Nepal

Choosing between a private vs public company in Nepal is one of the most strategic decisions a foreign investor will make. The choice shapes ownership control, governance structure, compliance burden, capital access, and long-term exit options. Within the first year, many foreign founders realize that governance rules, not just tax rates, define success in Nepal.

This guide offers a clear, authoritative breakdown of private vs public company in Nepal, with a sharp focus on shareholding, governance, and investor realities. It is written for foreign companies planning market entry, expansion, or restructuring.

Understanding Company Types Under Nepalese Law

Nepal’s corporate framework is governed primarily by the Companies Act, administered by the Office of the Company Registrar (OCR). For foreign companies, two incorporated forms dominate.

What Is a Private Company in Nepal?

A private company in Nepal is a closely held entity with restricted share transfers and a limited number of shareholders. It is the default choice for foreign direct investment.

Key characteristics include:

• Shareholders capped at a statutory limit

• No public invitation to subscribe shares

• Simplified governance and disclosure

What Is a Public Company in Nepal?

A public company is designed for large-scale capital mobilization. Shares may be offered to the public and listed on the Nepal Stock Exchange.

Key characteristics include:

• Higher minimum capital thresholds

• Mandatory public disclosures

• Stronger regulatory oversight

Shareholding Structure: Private vs Public Company in Nepal

Private Company Shareholding Rules

Private companies emphasize ownership control and confidentiality. Shareholding is intentionally restrictive.

Typical features:

• Share transfers require board or shareholder approval

• Foreign shareholders can retain majority or full ownership, subject to sector rules

• No obligation to dilute equity for public participation

This structure is ideal for:

• Foreign subsidiaries

• Joint ventures with defined partners

• Long-term operational control

Public Company Shareholding Rules

Public companies prioritize liquidity and transparency.

Typical features:

• Shares freely transferable

• Mandatory minimum public shareholding

• Ownership dispersed across retail and institutional investors

This structure is ideal for:

• Large infrastructure projects

• Banks, insurers, and hydropower companies

• Businesses seeking public capital and exits

Governance Framework: Where the Real Difference Lies

Governance is where private vs public company in Nepal diverges most clearly.

Governance in a Private Company

Private companies enjoy governance flexibility.

Common governance traits:

• Smaller board size

• Directors often overlap with shareholders

• Faster decision-making cycles

This suits foreign founders who value speed and strategic confidentiality.

Governance in a Public Company

Public companies operate under strict governance norms.

Key governance requirements:

• Independent directors

• Board committees for audit and risk

• Regular reporting to regulators and shareholders

This ensures accountability but increases compliance cost and complexity.

Board of Directors: Composition and Accountability

Private Company Boards

In a private company:

• Board composition is flexible

• Foreign directors are permitted

• Fewer statutory meetings are required

Decision-making authority remains concentrated.

Public Company Boards

In a public company:

• Board composition is regulated

• Independent directors are mandatory

• Meeting frequency and documentation are strictly monitored

Board accountability extends beyond founders to public investors.

Capital Raising and Investment Flexibility

Capital in a Private Company

Private companies raise capital through:

1. Parent company funding

2. Strategic investors

3. Shareholder loans

Advantages include:

• No public scrutiny

• Negotiated valuations

• Flexible capital structuring

Capital in a Public Company

Public companies raise capital through:

• Initial public offerings

• Rights issues

• Debenture issuance

Advantages include:

• Access to large pools of capital

• Enhanced corporate credibility

• Liquidity for early investors

Compliance and Disclosure Obligations

Private Company Compliance

Private companies face lighter compliance obligations.

Typical requirements:

• Annual filings with OCR

• Tax returns and audits

• Limited public disclosures

This reduces administrative overhead for foreign firms.

Public Company Compliance

Public companies face extensive compliance.

Typical requirements:

• Quarterly and annual disclosures

• Continuous reporting obligations

• Regulatory audits and inspections

Compliance costs are significantly higher.

Comparative Table: Private vs Public Company in Nepal

This comparison highlights why most foreign companies choose private incorporation initially.

Foreign Ownership and Sector Restrictions

Foreign ownership is regulated by Nepal’s foreign investment framework. While many sectors permit 100 percent foreign ownership, others require joint ventures or are restricted.

Private companies offer:

• Easier compliance with foreign investment approvals

• Clear control structures

• Simplified repatriation planning

Public companies face:

• Additional scrutiny on foreign shareholding

• Sector-specific caps

• Increased regulatory interaction

Tax and Financial Transparency Considerations

Tax rates are generally consistent across company types. The difference lies in transparency.

Private companies:

• Maintain confidentiality of financials

• Disclose only to regulators

Public companies:

• Publish audited financial statements

• Face market and media scrutiny

For foreign groups, confidentiality often drives the decision toward private companies.

Strategic Growth Path: Start Private, Go Public Later

Many foreign companies adopt a phased approach:

1. Enter Nepal as a private company

2. Build operational scale and compliance history

3. Convert to a public company when capital needs to justify it

This approach balances control with future scalability.

Common Mistakes Foreign Companies Make

Foreign investors often underestimate governance implications.

Common mistakes include:

• Choosing a public company too early

• Underestimating compliance costs

• Misaligning shareholding with long-term strategy

Understanding private vs public company in Nepal upfront prevents costly restructuring.

Which Structure Is Right for You?

Choose a private company if:

• You value control and speed

• Your funding comes from internal or strategic sources

• Confidentiality matters

Choose a public company if:

• You require large-scale public capital

• You operate in regulated sectors

• Liquidity and public credibility are priorities

Conclusion: Private vs Public Company in Nepal

For most foreign investors, the private vs public company in Nepal decision clearly favors private incorporation at entry. It offers governance flexibility, ownership control, and manageable compliance. Public companies play a vital role, but only when scale, capital markets, and regulatory readiness align.

Making the right choice early protects capital, reputation, and long-term growth.

Frequently Asked Questions 

Is a private company better than a public company in Nepal for foreign investors?

Yes, in most cases. Private companies offer greater control, lower compliance costs, and easier foreign ownership management.

Can a foreigner fully own a private company in Nepal?

Yes, subject to sector eligibility and foreign investment approval requirements.

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

Yes. Conversion is legally permitted once capital, governance, and disclosure requirements are met.

Do public companies pay higher taxes in Nepal?

No. Corporate tax rates are similar. Public companies face higher compliance and disclosure costs.

Is public company registration mandatory for large projects?

Only in specific regulated sectors. Most large projects can operate as private companies