Step-by-Step Guide to Registering Your Company in Nepal

Understanding private vs public company in Nepal is one of the first and most critical decisions foreign companies face when entering the Nepali market. The structure you choose affects ownership, capital requirements, compliance burden, fundraising ability, and long-term scalability.

Nepal welcomes foreign investment under a clear legal framework. Yet many overseas founders struggle with choosing the right entity. This guide gives you a practical, step-by-step explanation of private and public companies in Nepal, written specifically for foreign businesses seeking clarity, compliance, and confidence.

Why Company Structure Matters for Foreign Companies in Nepal

Choosing the correct structure is not a formality. It directly impacts:

• Speed of market entry

• Regulatory approvals and scrutiny

• Tax exposure and profit repatriation

• Ability to raise capital locally

• Ongoing compliance cost and risk

For most foreign investors, the debate comes down to private vs public company in Nepal.

Overview of Company Types in Nepal

Nepal primarily recognizes two incorporated company forms for commercial operations:

1. Private Limited Company

2. Public Limited Company

Both are governed by the Companies Act, 2006 and regulated by the Office of the Company Registrar.

Other structures exist, such as branch offices and liaison offices, but they are not independent legal entities. This article focuses on incorporated companies only.

What Is a Private Company in Nepal?

A private company in Nepal is the most common structure for foreign investors. It is designed for closely held businesses with limited shareholders.

Key Characteristics of a Private Company

• Minimum shareholders: 1

• Maximum shareholders: 50

• Share transfer restricted

• Cannot issue shares to the public

• Limited liability protection

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

What Is a Public Company in Nepal?

A public company in Nepal is structured for larger enterprises that intend to raise capital from the public or institutional investors.

Key Characteristics of a Public Company

• Minimum shareholders: 7

• No maximum shareholder limit

• Can issue shares publicly

• Higher disclosure and governance standards

• Mandatory regulatory oversight

Public companies are common in banking, hydropower, telecom, and infrastructure sectors.

Private vs Public Company in Nepal: Core Differences

Quick Comparison Table

This table highlights why most foreign investors begin with a private company structure.

Capital Requirements Explained

Capital requirements are a deciding factor in private vs public company in Nepal.

Private Company Capital

• No fixed minimum for domestic companies

• Foreign-invested companies must align with FDI thresholds

• Capital linked to approved foreign investment amount

Public Company Capital

• Minimum NPR 10 million paid-up capital

• Higher sector-specific thresholds apply

• Capital must be deposited before incorporation

For most foreign SMEs, private companies offer capital flexibility.

Ownership Rules for Foreign Investors

Foreign ownership is permitted in both private and public companies, subject to sector restrictions.

What Foreign Companies Should Know

• 100% foreign ownership allowed in most sectors

• Some industries require Nepali partners

• FDI approval required before incorporation

• Capital must be remitted through approved banking channels

Understanding ownership rules is essential when evaluating private vs public company in Nepal.

Step-by-Step Guide to Company Registration in Nepal

Below is a simplified process foreign companies typically follow.

1. Sector Eligibility Check

Confirm that your business activity allows foreign investment.

2. Foreign Investment Approval

Submit an FDI application with:

• Business plan

• Shareholding structure

• Capital commitment

• Promoter details

3. Name Reservation

Reserve your company name with the Company Registrar.

4. Document Preparation

Prepare constitutional documents including:

• Memorandum of Association

• Articles of Association

• Shareholder resolutions

5. Company Incorporation

Register the company with the Office of the Company Registrar.

6. Tax and Statutory Registration

Complete:

• Permanent Account Number registration

• VAT registration, if applicable

• Social Security Fund enrollment

This step-by-step approach applies to both private and public companies.

Compliance Obligations Compared

Compliance is where the difference between private vs public company in Nepal becomes clear.

Private Company Compliance

• Annual return filing

• Financial statements submission

• Board meetings as required

• Lower audit complexity

Public Company Compliance

• Mandatory annual audits

• Public disclosure obligations

• Regulatory reporting

• Corporate governance rules

Foreign companies often underestimate public company compliance costs.

Taxation Considerations

Both private and public companies are taxed similarly in Nepal.

Key Tax Points

• Corporate income tax: 25% (sector variations apply)

• Dividend tax: 5% withholding

• VAT: 13% on taxable supplies

• Withholding tax on cross-border payments

Tax treatment does not differ significantly between private and public companies, making compliance rather than tax the key differentiator.

Fundraising and Exit Strategy

Private Company Limitations

• Cannot raise funds from the public

• Capital injection via shareholders

• Ideal for controlled growth

Public Company Advantages

• Public share issuance

• Broader investor base

• Easier exits via capital markets

Your growth strategy should guide your choice in private vs public company in Nepal.

Common Mistakes Foreign Companies Make

Many foreign investors face delays due to avoidable errors.

Typical pitfalls include:

• Choosing a public company too early

• Underestimating compliance obligations

• Incorrect sector classification

• Poorly drafted constitutional documents

A private company is often the safer entry point.

Which Structure Is Right for You?

Choose a Private Company If You:

• Want fast market entry

• Plan controlled ownership

• Are testing the Nepali market

• Prefer lower compliance costs

Choose a Public Company If You:

• Need large-scale funding

• Operate in regulated sectors

• Plan IPO or public fundraising

• Have long-term institutional investors

This strategic choice defines your Nepal journey.

EEAT: Legal and Regulatory Authority

Nepal’s company framework is governed by:

• Companies Act, 2006

• Foreign Investment and Technology Transfer Act, 2019

• Industrial Enterprises Act, 2020

• Income Tax Act, 2002

According to official investment guidelines, Nepal continues to simplify procedures to attract foreign investors through predictable regulations and digital filings.

Conclusion: Private vs Public Company in Nepal

Choosing between a private vs public company in Nepal is not about prestige. It is about practicality, compliance, and long-term alignment with your business goals.

For most foreign companies, a private limited company offers speed, flexibility, and control. Public companies make sense only when scale, capital markets, and regulatory readiness justify the added complexity.

Making the right decision at incorporation saves time, money, and risk later.