Starting Your Business in Nepal: A Step-by-Step Guide

If you are a foreign company exploring South Asia, private vs public company in Nepal is one of the first strategic decisions you must make. The choice affects ownership, compliance burden, capital raising, and long-term scalability.

Nepal welcomes foreign investment, but its corporate framework is rules-driven. Selecting the wrong structure can slow approvals, restrict funding, or increase regulatory risk. This guide explains everything clearly, practically, and from a foreign investor’s perspective.

Nepal’s Corporate Framework at a Glance

Company incorporation in Nepal is governed primarily by the Companies Act 2006 and administered by the Office of the Company Registrar.

Foreign investors must also comply with:

• Foreign Investment and Technology Transfer Act 2019

• Industrial Enterprises Act 2020

• Income Tax Act 2002 and sector-specific regulations

Nepal recognizes two main company types:

• Private Limited Company

• Public Limited Company

What Is a Private Limited Company in Nepal?

A private limited company is the most common entry vehicle for foreign companies.

Core Characteristics

• Minimum shareholders: 1

• Maximum shareholders: 101

• Share transfer restrictions apply

• Cannot invite the public to subscribe for shares

• Lower disclosure and compliance burden

Why Foreign Companies Prefer Private Companies

• Faster incorporation timelines

• Easier FDI approval

• Full control over ownership

• Lower audit and reporting costs

This structure is ideal for:

• Market entry

• Offshore teams

• Subsidiaries

• Service and technology companies

What Is a Public Limited Company in Nepal?

A public limited company is designed for large-scale operations and capital markets.

Core Characteristics

• Minimum shareholders: 7

• No maximum shareholder limit

• Shares are freely transferable

• Can raise capital from the public

• Subject to stricter governance

When Public Companies Make Sense

• Infrastructure projects

• Banking and financial institutions

• Telecom and hydropower ventures

• IPO-driven growth strategies

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

Insight:
Over 85% of foreign-owned companies in Nepal start as private limited entities, according to OCR registration trends.

Step-by-Step: How to Choose the Right Structure

1. Define Your Investment Objective

Ask:

• Are you testing the market or scaling aggressively?

• Will you need public capital in Nepal?

• Is operational control critical?

2. Assess Regulatory Exposure

Public companies face:

• Mandatory board committees

• Higher audit scrutiny

• Public disclosure obligations

Private companies offer regulatory agility.

3. Consider Exit and Expansion Plans

Private companies can later convert into public companies. The reverse is not possible.

Key Compliance Differences Foreign Investors Must Know

Private Company Compliance

• Annual financial statements

• Statutory audit

• Annual return filing

Public Company Compliance

• Quarterly disclosures

• Independent directors

• Enhanced corporate governance reporting

• SEBON oversight for capital markets

Foreign Direct Investment Rules and Company Type

Under FITTA 2019:

• Both private and public companies can receive FDI

• Sector caps may apply

• Repatriation rules remain identical

However:

• FDI approval is faster for private companies

• Public companies face additional scrutiny on share issuance

Taxation Considerations

Both structures are taxed identically:

• Corporate tax: generally 25%

• Withholding taxes apply

• VAT registration if applicable

Tax complexity increases with public shareholding and cross-border dividends.

Advantages and Disadvantages at a Glance

Private Company Pros

• Full ownership control

• Lower compliance cost

• Faster setup

Private Company Cons

• Limited fundraising options

• Share transfer restrictions

Public Company Pros

• Access to public capital

• Strong credibility

Public Company Cons

• Heavy compliance

• Reduced flexibility

Common Mistakes Foreign Companies Make

1. Choosing public status too early

2. Underestimating compliance costs

3. Ignoring sector-specific FDI caps

4. Structuring without exit planning

Frequently Asked Questions: Private vs Public Company in Nepal

Is a private company better for foreign investors in Nepal?

Yes. Most foreign companies choose private entities due to flexibility, speed, and control.

Can a foreigner own 100% of a Nepali company?

Yes, in approved sectors, subject to FITTA and sector regulations.

Can a private company later become public?

Yes. Conversion is legally permitted with regulatory approval.

Are public companies mandatory for large projects?

Only in regulated sectors like banking or securities.

Which structure is cheaper to maintain?

Private companies have significantly lower compliance and governance costs.