Stepwise Approach to Company Registration in Nepal

Choosing between a private vs public company in Nepal is one of the first strategic decisions foreign companies face when entering the Nepali market. The choice affects capital requirements, ownership flexibility, compliance burden, and long-term scalability.

Nepal welcomes foreign investment under a clear legal framework. But the wrong entity structure can slow approvals, increase costs, or block future fundraising. This guide breaks down the private vs public company in Nepal in a practical, step-by-step way, written specifically for foreign founders, CFOs, and expansion teams.

If you are planning a market entry, subsidiary, or FDI-backed operation, this article gives you the authoritative answer.

Why Entity Structure Matters for Foreign Companies

Foreign companies do not register “just a company” in Nepal. They register a legal operating vehicle that must align with:

• Foreign investment rules
• Capital repatriation planning
• Governance expectations
• Tax and compliance exposure
• Exit and expansion strategy

In Nepal, the two most relevant corporate forms are:

• Private Limited Company
• Public Limited Company

Each serves a very different purpose.

Legal Framework Governing Companies in Nepal (EEAT)

Company formation in Nepal is governed primarily by:

• Companies Act, 2006
• Foreign Investment and Technology Transfer Act (FITTA), 2019
• Industrial Enterprises Act, 2020
• Income Tax Act, 2002
• NRB Foreign Investment & Repatriation Directives

Company incorporation is administered by the Office of Company Registrar (OCR), while foreign capital approvals involve the Nepal Rastra Bank and the Department of Industry.

What Is a Private Company in Nepal?

A private limited company is the most common structure used by foreign investors entering Nepal.

Key Characteristics

• Separate legal entity
• Limited liability for shareholders
• Cannot invite public investment
• Ownership can include foreign shareholders
• Ideal for operational businesses

Ownership Rules

• Minimum shareholders: 1
• Maximum shareholders: 101
• 100% foreign ownership allowed in most sectors

Capital Requirements

• No statutory minimum capital under Companies Act
• For foreign investors, FDI minimum generally NPR 20 million (sector-dependent)

What Is a Public Company in Nepal?

A public limited company is designed for large-scale enterprises planning public fundraising or stock exchange listing.

Key Characteristics

• Can issue shares to the public
• Higher compliance and governance burden
• Suitable for infrastructure, banking, insurance, or large industrial projects

Ownership Rules

• Minimum shareholders: 7
• No maximum shareholder limit
• Foreign ownership allowed, subject to sector caps

Capital Requirements

• Minimum paid-up capital: NPR 10 million
• Additional sector-specific capital thresholds may apply

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

Insight for foreign companies:
Over 90% of foreign investors choose private companies for Nepal market entry due to speed, control, and compliance efficiency.

Stepwise Approach to Company Registration in Nepal

Step 1: Decide Between Private vs Public Company in Nepal

Ask three strategic questions:

1. Are you raising capital from the public?
2. Do you need more than 101 shareholders?
3. Is IPO or stock exchange listing part of your roadmap?

If the answer is “no” to all three, a private company is almost always the correct choice.

Step 2: Name Reservation at OCR

• Submit proposed company name to OCR
• Name must not conflict with existing entities
• Approval usually within 1–3 working days

Step 3: Draft Constitutional Documents

Key documents include:

• Memorandum of Association (MoA)
• Articles of Association (AoA)
• Shareholding structure
• Board and governance framework

Foreign companies must ensure these align with FDI approval conditions.

Step 4: Foreign Investment Approval (If Applicable)

For foreign shareholders:

• Apply to Department of Industry or IBN
• Submit investment plan, source of funds, and sector details
• Obtain approval prior to capital injection

Step 5: Company Registration Certificate

Upon approval:

• OCR issues Certificate of Incorporation
• Company becomes a legal person under Nepali law

Step 6: Capital Injection and NRB Compliance

• Capital remitted through designated Nepali bank
• NRB reporting and capital confirmation required
• Essential for future profit repatriation

Step 7: Tax and Statutory Registrations

Mandatory post-incorporation steps:

• PAN registration
• VAT (if applicable)
• Social Security Fund (SSF) employer registration
• Local municipality registration

When Should a Foreign Company Choose a Private Company?

A private company in Nepal is ideal if you are:

• Setting up a wholly owned subsidiary
• Building a cost center or back office
• Launching a technology or service business
• Testing the Nepal market before scaling

Advantages

• Faster setup
• Lower compliance costs
• Full operational control
• Easier exit or restructuring

When Does a Public Company Make Sense?

Choose a public company in Nepal only if:

• You plan to raise public capital
• Regulatory requirements mandate it
• You intend to list on NEPSE
• You are undertaking a national-scale project

For most foreign SMEs, this structure is overkill.

Compliance Differences Foreign Companies Overlook

Private Company Compliance

• Annual filings at OCR
• Annual audit
• Board meetings as per AoA

Public Company Compliance

• Stricter disclosure norms
• Mandatory independent directors
• Higher audit and reporting standards
• Regulatory scrutiny

Common Mistakes Foreign Investors Make

• Choosing public company “for credibility”
• Ignoring FDI minimum capital rules
• Poorly drafted MoA/AoA
• Missing NRB capital reporting
• Underestimating compliance costs

These mistakes delay operations and repatriation.

Tax Considerations for Private vs Public Company in Nepal

• Corporate tax rates are broadly similar
• Incentives depend on sector and location, not company type
• Public companies may face additional disclosure requirements

Tax planning should be aligned with repatriation strategy, not just incorporation.

Key Takeaway for Foreign Companies

For foreign companies, the private vs public company decision in Nepal is not about size. It is about strategy.

Conclusion: Private vs Public Company in Nepal — The Smart Choice

Understanding private vs public company in Nepal helps foreign companies enter the market faster, safer, and with fewer regulatory surprises. In practice, a private limited company offers flexibility, control, and compliance efficiency for most foreign investors.

Choosing the right structure from day one protects your capital, timeline, and exit options.

Frequently Asked Questions 

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

Yes. In most sectors, foreigners can own 100% of a private company, subject to FDI approval and sector restrictions.

2. What is the minimum investment for foreign companies in Nepal?

Generally NPR 20 million, though this varies by sector and regulatory authority.

3. Is a public company mandatory for foreign investors?

No. Public companies are required only for specific regulated sectors or public fundraising.

4. Which company type is easier to manage in Nepal?

A private company has significantly lower compliance and governance complexity.

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

Yes. Conversion is legally permitted but involves regulatory approvals and restructuring.