Step-by-Step Guide to Business Registration for New Entrepreneurs

If you are evaluating private vs public company in Nepal, you are already thinking like a serious investor. The structure you choose determines ownership control, capital flexibility, disclosure obligations, and long-term exit strategy.

For foreign companies entering Nepal, this decision is not cosmetic. It directly affects regulatory approvals, compliance costs, and governance standards under the Companies Act 2006, the Foreign Investment and Technology Transfer Act 2019 (FITTA), and the Income Tax Act 2002.

This guide breaks down:

• The difference between private and public companies in Nepal
• Legal thresholds and regulatory implications
• A step-by-step registration process
• Compliance obligations for foreign investors
• Strategic insights for capital raising and scaling

If you are planning market entry, expansion, or FDI structuring, this is the decision framework you need.

Understanding Private vs Public Company in Nepal

Under the Companies Act 2006, Nepal recognizes two primary company types:

1. Private Limited Company
2. Public Limited Company

Both are separate legal entities. Both offer limited liability. But they operate very differently.

What Is a Private Company in Nepal?

A private limited company:

• Restricts share transfers
• Cannot invite the public to subscribe to shares
• Has a limited number of shareholders (as prescribed by law)
• Requires at least one director

This is the most common structure for:

• Foreign subsidiaries
• Joint ventures
• Tech startups
• Service firms
• Manufacturing FDI entities

It offers control, flexibility, and lower compliance complexity.

What Is a Public Company in Nepal?

A public limited company:

• Can invite the public to subscribe to shares
• Has no maximum shareholder limit
• Requires at least three directors
• Must meet higher paid-up capital thresholds
• Faces stricter disclosure requirements

Public companies are typically used for:

• Large infrastructure projects
• Banks and financial institutions
• Companies planning IPOs
• Large-scale manufacturing

Private vs Public Company in Nepal: Key Comparison Table

Below is a strategic comparison designed specifically for foreign investors:

Insight:
For 90% of foreign investors entering Nepal, a private company offers optimal control and regulatory efficiency.

Step-by-Step Guide to Business Registration in Nepal

Whether you choose private or public, the registration pathway follows a structured process.

Step 1: Determine Investment Structure

Before registration, foreign investors must:

• Identify sector eligibility under FITTA 2019
• Confirm minimum capital requirements
• Assess whether DOI or Investment Board approval is required

The Department of Industry (DOI) handles most FDI approvals.

Step 2: Name Reservation

Apply to the Office of the Company Registrar (OCR) to reserve a company name.

Key considerations:

• Must be unique
• Cannot resemble existing registered companies
• Must comply with naming directives

Approval usually takes a few working days.

Step 3: Prepare Constitutional Documents

Prepare:

• Memorandum of Association (MOA)
• Articles of Association (AOA)
• Share structure details
• Director and shareholder details
• Board resolution (for foreign parent entities)

For foreign companies, documents must be:

• Notarized
• Apostilled or authenticated
• Translated (if required)

Step 4: Foreign Investment Approval (If Applicable)

Under the Foreign Investment and Technology Transfer Act 2019, foreign investors must secure approval before injecting capital.

Required documents include:

1. Project proposal
2. Financial commitment letter
3. Parent company documents
4. Board resolution authorizing investment

Approval timelines vary by sector.

Step 5: Company Registration at OCR

Submit:

• Approved FDI documents (if foreign-owned)
• MOA & AOA
• Director consent forms
• Registered office details
• Capital structure information

Upon approval, OCR issues:

• Certificate of Incorporation
• Company Registration Number

Step 6: PAN and Tax Registration

Register with the Inland Revenue Department (IRD).

Obtain:

• Permanent Account Number (PAN)
• VAT registration (if applicable)

Corporate income tax in Nepal is governed by the Income Tax Act 2002.

Standard corporate tax is generally 25%, though sectoral rates vary.

Step 7: Bank Account and Capital Injection

Open a bank account in Nepal.

Foreign investment must be routed through formal banking channels under Nepal Rastra Bank directives.

Capital must match the approved FDI amount.

Step 8: Post-Registration Compliance

After incorporation, companies must:

• Maintain statutory registers
• Conduct annual general meetings
• File annual returns at OCR
• File tax returns annually
• Comply with Social Security Fund contributions

When Should a Foreign Company Choose a Private Company?

A private company is ideal when:

• You want full ownership control
• You do not plan an IPO
• You are testing market entry
• You prefer lower compliance cost
• You operate in service, tech, or consulting

Most foreign subsidiaries fall into this category.

When Does a Public Company Make Strategic Sense?

Choose a public company if:

• You require large capital raising
• You plan future stock exchange listing
• You operate in capital-intensive sectors
• You require public credibility for large tenders

Public companies face stricter transparency rules.

Regulatory Considerations for Foreign Investors

1. Sector Restrictions

FITTA restricts certain sectors. Always verify eligibility.

2. Repatriation Rules

Profits can be repatriated subject to:

• Tax clearance
• Auditor certification
• Central bank compliance

3. Record Retention

Under tax laws, companies must retain records for the statutory period prescribed by the Income Tax Act.

4. Director Liability

Directors have fiduciary duties under the Companies Act.

Compliance Burden: What Foreign Companies Often Underestimate

Public companies require:

• More frequent disclosures
• Enhanced auditing standards
• Larger governance framework
• Greater reporting obligations

Private companies offer leaner compliance.

Common Mistakes Foreign Investors Make

• Choosing a public company without IPO plans
• Underestimating tax compliance
• Failing to secure proper FDI approval
• Poorly drafting MOA scope of activities
• Ignoring sector-specific licensing

Structure determines long-term tax exposure and operational flexibility.

Strategic Recommendation Framework

Ask yourself:

1. Do we plan to raise public capital?
2. How many shareholders will we have?
3. Is regulatory simplicity a priority?
4. What is our five-year exit plan?

If capital markets are not in your plan, private structure is typically optimal.

Frequently Asked Questions 

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

A private company restricts share transfer and cannot invite public investment. A public company can offer shares to the public and has stricter compliance obligations.

2. Can a foreigner own 100% of a private company in Nepal?

Yes, in most sectors permitted under FITTA 2019, foreign investors can own 100% equity subject to approval.

3. Is a public company mandatory for large investments?

Not necessarily. Many large FDI projects operate as private companies unless public fundraising is planned.

4. How long does company registration take in Nepal?

If documents are complete, registration may take several weeks, depending on FDI approval timelines.

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

Yes. The Companies Act allows conversion subject to compliance and regulatory approval.

Final Thoughts: Private vs Public Company in Nepal

Choosing between a private vs public company in Nepal is a structural decision. It affects governance, taxation, disclosure, and capital flexibility.

For most foreign companies, a private company delivers:

• Greater control
• Lower compliance burden
• Faster setup
• Strategic flexibility

Public companies are powerful tools. But they suit capital-intensive or IPO-oriented strategies.

If you are planning entry into Nepal, structure it correctly from day one. The right decision now prevents costly restructuring later.