Starting a Business in Nepal: Step-by-Step Instructions for Company Creation

If you are evaluating private vs public company in Nepal, you are already asking the right question.
For foreign companies, the legal structure you choose shapes compliance, ownership, capital rules, and long-term scalability.

Nepal welcomes foreign investment, but its corporate framework follows specific statutory rules under the Companies Act.
This guide explains, in plain language, how private and public companies differ, when each makes sense, and how to register step by step.

By the end, you will know exactly which structure aligns with your investment strategy and risk appetite.

Understanding Company Structures Under Nepalese Law

Nepal recognises two primary company forms for most foreign investors.
Both are governed by the Companies Act, 2006 and administered by the Office of the Company Registrar (OCR).

What Is a Private Company in Nepal?

A private company is the most common entry vehicle for foreign businesses.
It is designed for closely held ownership and operational control.

Key characteristics

• Minimum shareholders: 1

• Maximum shareholders: 101

• Share transfer restrictions

• No public share issuance

Private companies are ideal for subsidiaries, joint ventures, and wholly foreign-owned entities.

What Is a Public Company in Nepal?

A public company is structured for large-scale capital mobilisation.
It is subject to stricter governance and disclosure rules.

Key characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Can issue shares to the public

• Enhanced regulatory oversight

Public companies suit banks, hydropower projects, and large infrastructure investments.

Private vs Public Company in Nepal: Core Legal Differences

Ownership and Shareholding Rules

Private companies limit ownership to maintain control.
Public companies enable broad ownership and potential stock exchange listing.

Foreign investors typically prefer private companies for predictability and speed.

Capital Requirements

There is no fixed minimum capital under company law.
However, foreign direct investment thresholds apply under FITTA and sectoral rules.

Capital commitments are reviewed during investment approval.

Governance and Compliance

Public companies face stricter board composition, audit, and reporting obligations.
Private companies enjoy simplified compliance and decision-making.

Comparison Table: Private vs Public Company in Nepal

This comparison alone explains why over 90 percent of foreign investors choose private companies.

Step-by-Step Company Registration Process in Nepal

Step 1: Name Reservation

Submit a proposed name to the OCR portal.
Names must not conflict with existing entities or restricted terms.

Step 2: Drafting Constitutional Documents

You must prepare:

• Memorandum of Association

• Articles of Association

These define ownership, objectives, and governance.

Step 3: Company Registration with OCR

Once approved, the OCR issues:

• Certificate of Incorporation

• Company Registration Number

At this stage, the company legally exists.

Step 4: Foreign Investment Approval

Foreign shareholders require approval under the Foreign Investment and Technology Transfer Act, 2019.

Investment approval is issued by the Department of Industry or Investment Board Nepal.

Step 5: Tax and Statutory Registrations

After incorporation, register for:

• Permanent Account Number

• VAT, if applicable

• Social Security Fund

Operational compliance begins here.

When a Private Company Makes Strategic Sense

A private company is usually the right answer if you:

• Are testing the Nepal market

• Want full operational control

• Plan service or outsourcing operations

• Need fast setup with limited disclosure

Most foreign IT, consulting, and outsourcing firms use this route.

When a Public Company Is the Right Choice

A public company becomes relevant if you:

• Need large capital mobilisation

• Operate in regulated sectors

• Plan a future IPO

• Require domestic public participation

Hydropower and banking projects often fall here.

Compliance Obligations You Must Understand

Ongoing Annual Requirements

Both company types must file:

• Annual returns

• Audited financial statements

• Board resolutions

Public companies face enhanced disclosure and regulatory audits.

Foreign Exchange and Repatriation Rules

Capital inflow and profit repatriation are regulated by the Nepal Rastra Bank.

Proper structuring ensures lawful dividend remittance.

Common Mistakes Foreign Companies Make

1. Choosing a public company unnecessarily

2. Underestimating compliance timelines

3. Ignoring sector-specific caps

4. Poorly drafted Articles of Association

Each mistake increases cost and risk.

Tax Considerations for Foreign-Owned Companies

Corporate income tax applies equally to both structures.
Current standard corporate tax is 25 percent, subject to sector incentives.

Double taxation treaties may reduce withholding taxes.

Always assess tax structuring early.

Frequently Asked Questions: Private vs Public Company in Nepal

Is a private company better for foreign investors in Nepal?

Yes. Most foreign investors prefer private companies due to simpler compliance, faster setup, and tighter control over ownership.

Can a private company convert into a public company later?

Yes. Nepalese law allows conversion, subject to shareholder approval and regulatory compliance.

Is 100 percent foreign ownership allowed?

Yes, in most sectors. Certain industries have restrictions or approval thresholds.

How long does company registration take in Nepal?

Private company registration usually takes two to four weeks, excluding foreign investment approvals.

Do public companies face more scrutiny?

Yes. Public companies must comply with stricter audits, disclosures, and regulatory supervision.

Why Professional Guidance Matters

Nepal’s company law is clear, but execution is technical.
Foreign investors benefit from advisors who understand legal, tax, and regulatory alignment.

The difference between a smooth launch and months of delay is often documentation quality.

Conclusion: Choosing Between Private vs Public Company in Nepal

Choosing between private vs public company in Nepal is a strategic decision, not just a legal formality.
For most foreign companies, a private company offers speed, control, and compliance efficiency.

Public companies serve a purpose, but only when scale demands it.

The right structure today prevents costly restructuring tomorrow.