Small Business Registration: Simplified Steps for New Companies

If you are evaluating a private vs public company in Nepal, your first decision will shape everything that follows. Ownership. Capital. Compliance. Exit strategy. Even tax exposure.

For foreign companies entering Nepal, choosing the right legal structure is not a formality. It is a strategic move under the Companies Act 2006, Foreign Investment and Technology Transfer Act 2019 (FITTA), and the Income Tax Act 2002.

This guide simplifies the process. It explains the differences. It highlights regulatory realities. And it helps you register with clarity and confidence.

Why the “Private vs Public Company in Nepal” Decision Matters

In Nepal, companies are primarily registered under the Office of the Company Registrar (OCR). The legal form determines:

• Shareholding limits
• Capital raising ability
• Compliance burden
• Disclosure obligations
• Governance structure
• Exit flexibility

For foreign investors, it also affects FDI approval pathways through the Department of Industry and repatriation rules under Nepal Rastra Bank.

This is not just about registration. It is about long-term control and scalability.

Understanding Company Types Under Nepal’s Companies Act 2006

The Companies Act 2006 recognizes two major company categories relevant to foreign companies:

1. Private Limited Company
2. Public Limited Company

Let us break them down clearly.

What Is a Private Limited Company in Nepal?

A private company is the most common structure for small and mid-sized enterprises.

Key Features

• Minimum 1 shareholder
• Maximum 101 shareholders
• Cannot issue shares to the public
• Restricted share transfer
• “Private Limited” required in name

Most foreign investors choose this model for controlled market entry.

Why Foreign Companies Prefer It

• Faster incorporation
• Lower compliance cost
• No mandatory public disclosure
• Ideal for subsidiaries and joint ventures
• Easier governance control

For market-entry advisory clients, this is often the default structure.

What Is a Public Limited Company in Nepal?

A public company is designed for large-scale capital raising.

Core Characteristics

• Minimum 7 shareholders
• No maximum limit
• Can issue shares to the public
• Mandatory board structure
• Stricter reporting standards

Public companies are subject to securities oversight and additional compliance.

They are suitable for:

• Large infrastructure projects
• Capital-intensive industries
• Companies planning IPO

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

Here is a clear comparison tailored for foreign decision-makers.

Strategic Insight:
For 90% of foreign companies entering Nepal for operations, outsourcing, manufacturing, or tech services, a private limited company is structurally more efficient.

Legal Framework Governing Company Registration

Company registration does not happen in isolation. It is influenced by:

• Companies Act 2006
• Foreign Investment and Technology Transfer Act 2019
• Industrial Enterprises Act 2020
• Income Tax Act 2002
• NRB foreign exchange directives

Foreign equity requires:

• FDI approval
• Capital inflow via banking channel
• Share registration compliance
• Tax registration (PAN/VAT)

This regulatory layering is where most foreign companies make mistakes.

Step-by-Step: Small Business Registration in Nepal (Foreign Company Perspective)

Here is the simplified process.

1. Determine the Legal Structure

Choose between private or public company based on:

• Capital needs
• Investor base
• Exit plan
• Governance structure

2. Name Reservation

File name reservation through the OCR portal.

3. Prepare Constitutional Documents

• Memorandum of Association
• Articles of Association
• Board resolution (for foreign parent)
• Power of Attorney

4. FDI Approval (If Applicable)

Submit application to the Department of Industry.

Approval timelines vary by sector.

5. Incorporation at OCR

Submit full incorporation file to Office of the Company Registrar.

6. Tax Registration

Register with the Inland Revenue Office under the Income Tax Act 2002.

7. Bank Account & Capital Injection

Capital must enter Nepal through authorized banking channels regulated by Nepal Rastra Bank.

Capital Requirements: Is There a Minimum?

Nepal does not impose a fixed minimum capital for private companies in most sectors.

However:

• FDI projects must meet sectoral thresholds.
• Certain industries have minimum paid-up capital rules.

Always verify with the sectoral authority.

Governance Differences: Control vs Compliance

Private Company Governance

• Flexible board structure
• Fewer mandatory disclosures
• Simplified AGM compliance

Public Company Governance

• Mandatory independent directors
• Detailed financial reporting
• Prospectus requirements
• Securities regulation

Public companies are more transparent but less flexible.

Tax Implications Under the Income Tax Act 2002

Both private and public companies are taxed as corporate entities.

Standard corporate tax rate is generally 25% (sector dependent).

Additional obligations include:

• Advance tax payments
• Annual income tax filing
• Withholding tax compliance
• Transfer pricing documentation (if applicable)

The Income Tax Act 2002 requires minimum record retention of at least five years.

Compliance Burden: What Foreign Investors Should Expect

Here is a simplified compliance overview.

Annual Requirements

• Annual General Meeting
• Annual return filing
• Financial statement submission
• Tax return filing

Ongoing Compliance

• Board meetings
• Share transfer documentation
• PAN/VAT filings
• Social security contributions

Public companies face heavier disclosure obligations.

When Should a Foreign Company Choose a Public Company?

You should consider a public company if:

• You plan to raise public capital
• You require large-scale equity financing
• You intend to list shares
• Your project involves infrastructure or large industry

Otherwise, private company formation is more practical.

Common Mistakes Foreign Companies Make

1. Choosing public structure without capital strategy
2. Ignoring repatriation rules
3. Underestimating compliance timelines
4. Failing to structure shareholder agreements properly
5. Not planning exit strategy

The structure decision is strategic, not administrative.

Private vs Public Company in Nepal: Strategic Decision Matrix

Instead of asking “which is better,” ask:

• Do you need public capital?
• Do you want tight ownership control?
• Are you planning rapid scale?
• Is IPO part of your roadmap?

For most foreign subsidiaries, private limited structure offers:

• Controlled governance
• Regulatory efficiency
• Lower risk exposure
• Faster operational setup

Frequently Asked Questions (FAQ)

1. What is the main difference between private and public company in Nepal?

A private company cannot offer shares to the public and has a shareholder cap of 101. A public company can raise funds from the public and has no shareholder limit.

2. Can a foreign company register as a private limited company in Nepal?

Yes. Foreign investors commonly establish private limited subsidiaries under FITTA 2019 with DOI approval.

3. Is minimum capital required for company registration?

There is no universal minimum for private companies, but FDI sectors may have thresholds.

4. Which company type has higher compliance requirements?

Public companies face stricter disclosure, reporting, and governance standards.

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

Yes. Conversion is allowed under the Companies Act 2006, subject to regulatory compliance.

Conclusion: Making the Right Structural Choice

Choosing between a private vs public company in Nepal is not about size alone. It is about strategy.

Private companies offer control and simplicity.
Public companies offer capital access and scale.

For most foreign entrants, private limited incorporation provides operational efficiency and regulatory clarity.

If you are planning market entry, FDI structuring, or small business registration in Nepal, now is the time to align your legal structure with your long-term vision.

Ready to register your company in Nepal?
Speak with our regulatory and FDI advisory team for a tailored structure analysis and compliance roadmap.