Step-by-Step Guide to Business Registration for Foreigners in Nepal

Choosing between a private vs public company in Nepal is one of the first decisions that quietly shapes everything that follows for a foreign investor. Control. Capital flexibility. Compliance burden. Exit options.

For foreign companies, this is not a theoretical debate. Nepal’s foreign investment laws make the private company the default entry vehicle in most cases. A public company structure is technically possible, but rarely practical at entry stage.

This guide gives you a clear, regulator-aligned answer. It explains what each structure really means, how foreign investment rules apply, and how to register the right entity step by step.

Why “Private vs Public Company in Nepal” Matters More for Foreign Investors

In many markets, the private vs public choice is about scale and fundraising. In Nepal, it is also about permission.

Foreign investment is governed by Nepal’s Foreign Investment and Technology Transfer framework, the Companies Act, and sector-specific approvals. Together, these rules strongly influence which structures are realistic for non-Nepali shareholders.

The result:
Most foreign investors should start with a private limited company, even if their long-term ambition is larger.

Legal Framework Governing Company Registration in Nepal

Before comparing structures, it helps to understand the legal backbone.

Foreign company registration in Nepal is shaped by:

• Companies Act, 2006
• Foreign Investment and Technology Transfer Act (FITTA), 2019
• Industrial Enterprises Act, 2020
• Income Tax Act, 2002
• Regulations and circulars issued by sector regulators and Nepal Rastra Bank

These laws collectively determine:

• Who can invest
• In what sectors
• Through which company structures
• Under what capital and compliance conditions

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.

Key Legal Characteristics

• Minimum shareholders: 1
• Maximum shareholders: 50 (excluding employees)
• Cannot offer shares to the public
• Share transfers are restricted
• Limited liability protection

Why Private Companies Are Favored for FDI

For foreign investors, private companies align best with Nepal’s approval-based investment regime.

They offer:

• Faster incorporation
• Clear ownership control
• Lower compliance intensity
• Easier regulatory interpretation for foreign capital

This is why almost all foreign-owned operating businesses in Nepal begin as private companies.

What Is a Public Company in Nepal?

A public company in Nepal is designed to raise capital from the public and operate under stricter governance norms.

Key Legal Characteristics

• Minimum shareholders: 7
• No upper limit on shareholders
• Can issue shares to the public
• Higher disclosure and reporting obligations
• Mandatory board structures and governance controls

The Practical Reality for Foreign Investors

While the law allows foreign participation in public companies, approvals are more complex.

Public companies are typically used for:

• Banks and financial institutions
• Large hydropower projects
• Infrastructure ventures with government involvement

For most foreign entrants, a public company is not the right starting point.

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

Insight:
For foreign companies, the private vs public company decision is less about ambition and more about regulatory friction.

Which Structure Do Regulators Expect Foreign Investors to Use?

This is where many guides stay vague. Regulators in Nepal generally expect foreign investors to use private companies, unless:

• The sector legally requires a public structure
• The project involves public fundraising
• There is government participation or licensing tied to public governance

Choosing a public company without a strong regulatory reason can delay approvals by months.

Step-by-Step: How Foreigners Register a Private Company in Nepal

Step 1: Sector Eligibility Check

Not all sectors are open to foreign investment. The first step is confirming:

• Whether 100% foreign ownership is allowed
• Whether prior approval is needed
• Whether any minimum capital thresholds apply

Step 2: Investment Approval (FDI Approval)

Foreign investors must obtain approval from the relevant authority before incorporation.

This approval validates:

• Investor identity
• Source of funds
• Business scope
• Proposed capital

Step 3: Name Reservation

The company name is reserved with the Office of Company Registrar.
Names must:

• Be unique
• Avoid restricted terms
• Reflect permitted activities

Step 4: Company Incorporation

Once approval is granted, incorporation documents are filed:

• Memorandum of Association
• Articles of Association
• Shareholding details

Upon approval, the company receives:

• Certificate of Incorporation
• Company Registration Number

Step 5: Capital Injection and Banking

Foreign capital must be remitted through approved banking channels and documented properly.

This step is critical for:

• Profit repatriation later
• Tax recognition
• Audit clarity

Step-by-Step: Registering a Public Company in Nepal (If Applicable)

For foreign investors who genuinely need a public structure, additional steps apply:

1. Expanded feasibility and disclosure documents
2. Higher minimum capital commitments
3. Stricter governance and board requirements
4. Sector regulator approvals, where applicable

Bottom line: Expect longer timelines and deeper scrutiny.

Tax Implications: Private vs Public Company in Nepal

Tax rates are broadly similar, but compliance differs.

Corporate Tax Considerations

• Standard corporate tax applies to both structures
• Certain sectors may enjoy incentives
• Public companies face more detailed reporting

Dividend and Repatriation Planning

Proper capital structuring at entry directly impacts:

• Dividend declarations
• Withholding tax
• Foreign exchange approvals

This is another reason private companies are favored for initial entry.

Governance, Control, and Exit Flexibility

For foreign companies, governance is not theoretical. It affects daily operations.

Private Company Advantages

• Full control over board composition
• Easier decision-making
• Cleaner exit through share transfer or liquidation

Public Company Constraints

• Mandatory governance layers
• Public disclosure obligations
• Complex exit mechanics

Common Mistakes Foreign Investors Make

Foreign companies often struggle not because Nepal is difficult, but because entry choices are rushed.

Common pitfalls include:

• Choosing a public company “to look serious”
• Overcapitalizing too early
• Misaligning business scope with approvals
• Underestimating compliance obligations

These mistakes are expensive to unwind.

Private vs Public Company in Nepal: Practical Recommendation

For most foreign companies, the answer is clear.

Start with a private company.
It provides:

• Regulatory clarity
• Faster setup
• Stronger control
• Easier scaling later

If your business later requires a public structure, conversion can be explored once operations and compliance history are established.

Conclusion

The private vs public company in Nepal decision is not about ambition. It is about fit.

Foreign investors who choose the structure regulators expect move faster, face fewer surprises, and preserve long-term flexibility. For most, that structure is a private limited company.

If you are entering Nepal, get this decision right at the start. Everything else builds on it.

FAQs: Private vs Public Company in Nepal

1. Can a foreigner register a public company in Nepal?

Yes, but only in specific sectors and with higher regulatory scrutiny. Most foreign investors start with private companies due to simpler approvals.

2. Is there a minimum investment for foreign companies in Nepal?

Yes. Minimum capital thresholds apply depending on sector and regulations. These must be met through approved banking channels.

3. Which is better for profit repatriation?

Private companies are generally easier to manage for dividend repatriation due to simpler ownership and documentation structures.

4. Can a private company be converted into a public company later?

Yes. Conversion is legally possible once compliance history, capital base, and regulatory conditions are met.

5. Do private and public companies pay different taxes in Nepal?

Corporate tax rates are similar, but public companies face higher disclosure and compliance requirements.