Strategic Investment Planning for Nepal: A 2026 Forecast

If you are evaluating private vs public company in Nepal, your decision will shape tax exposure, control, capital raising, and long-term scalability. For foreign companies entering Nepal in 2026, this is not a paperwork choice. It is a strategic investment decision.

Nepal’s regulatory framework has evolved under the Companies Act 2006, Foreign Investment and Technology Transfer Act 2019 (FITTA), and the Industrial Enterprises Act 2020. These laws define ownership thresholds, reporting standards, public issuance rules, and foreign capital approvals.

This guide breaks down:

• Structural differences
• Regulatory approvals
• Tax implications
• Governance obligations
• Capital raising pathways
• 2026 investment outlook

By the end, you will know which structure aligns with your Nepal entry strategy.

Nepal’s 2026 Investment Climate: Why Structure Matters

Nepal is positioning itself as a competitive South Asian investment destination. The government continues reforms through:

• Digitization of the Office of Company Registrar
• Streamlined DOI approval processes
• SEZ incentives
• Infrastructure expansion under regional trade corridors

According to data from the Department of Industry, foreign investment commitments have steadily increased in hydropower, IT services, tourism, and manufacturing.

But here is the reality:
Your entry structure determines control, compliance cost, and investor perception.

Choosing between a private and public company affects:

1. Ability to issue shares publicly
2. Share transfer restrictions
3. Disclosure requirements
4. Corporate governance obligations
5. Capital market access

Let’s define both structures clearly.

What Is a Private Company in Nepal?

Under the Companies Act 2006, a private company:

• Limits shareholders (maximum 101)
• Restricts share transfer
• Cannot invite the public to subscribe to shares
• Requires at least 1 director
• May be formed with minimum 1 shareholder

This is the most common structure for foreign investors.

Key Features of a Private Limited Company

• Faster incorporation
• Lower compliance burden
• Greater ownership control
• Flexible shareholder agreements
• Ideal for subsidiaries or joint ventures

Foreign investors typically register a private limited company after DOI approval under FITTA.

What Is a Public Company in Nepal?

A public company:

• Has minimum 7 shareholders
• Has minimum 3 directors
• Can issue shares to the public
• Must comply with securities regulations
• Requires higher paid-up capital

Public companies intending to list must comply with rules of the Nepal Securities Board (SEBON) and listing requirements of the Nepal Stock Exchange (NEPSE).

Public companies are generally used for:

• Large infrastructure projects
• Banking and financial institutions
• Capital-intensive hydropower ventures
• Large-scale manufacturing

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

Here is a strategic comparison relevant for foreign companies.

Strategic Insight

For 80% of foreign investors entering Nepal, a private company offers optimal balance between control and compliance efficiency.

Public company structures are justified only when:

• You plan an IPO
• You need large public capital
• You operate in regulated sectors like banking

Legal Framework Governing Both Structures

Both company types operate under:

• Companies Act 2006
• Foreign Investment and Technology Transfer Act 2019
• Income Tax Act 2002
• Labour Act 2017
• Social Security Act 2018

If foreign equity is involved, prior approval from the Department of Industry is mandatory.

Tax Implications in 2026

Corporate income tax in Nepal generally stands at:

• 25% for most industries
• 20% for special industries
• Concessions available in SEZs

Dividends are subject to withholding tax.

There is no tax difference between private and public companies in basic corporate rate. However:

Public companies incur higher audit and reporting expenses.

Governance and Compliance Requirements

Private Company Compliance

• Annual General Meeting
• Annual return filing
• Tax return submission
• Audit requirement
• Board resolutions

Public Company Additional Compliance

• Quarterly reporting
• SEBON disclosures
• Prospectus approval
• Public audit transparency
• Independent directors

This significantly increases compliance cost.

Capital Raising: Private Equity vs IPO

If your growth plan includes foreign private equity, venture capital, or reinvested earnings, a private company works perfectly.

If your strategy includes:

• Domestic retail investors
• Public bond issuance
• Large infrastructure fundraising

Then a public company may be justified.

Sector-Specific Recommendations (2026 Outlook)

1. IT & BPO Services

Private company recommended.
Lower capital intensity.
Foreign ownership common.

2. Hydropower

Often public company model.
IPO common post-construction.

3. Manufacturing (SEZ)

Private company preferred initially.
Public conversion possible later.

4. Tourism & Hospitality

Private company ideal.
Flexibility in JV structures.

When Should You Convert from Private to Public?

Conversion is strategic when:

1. Business reaches large scale.
2. Expansion requires public funds.
3. Governance transparency becomes a branding tool.
4. Exit strategy involves public listing.

Conversion is legally permitted under the Companies Act.

Decision Matrix: Which Structure Fits You?

Consider the following criteria:

• Do you need public capital?
• Is control a priority?
• Is compliance cost sensitivity high?
• Is IPO part of long-term strategy?
• Is the sector regulated?

If you answer “no” to public capital and IPO plans, a private company is optimal.

Common Mistakes Foreign Investors Make

• Choosing public structure too early
• Ignoring compliance cost
• Overestimating IPO feasibility
• Not structuring shareholder agreements properly
• Failing to align entry model with repatriation strategy

Always align structure with:

• Exit planning
• Dividend repatriation
• Governance comfort
• Regulatory risk

FAQs: Private vs Public Company in Nepal

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

Yes, unless the sector is restricted. FITTA permits 100% foreign ownership in most industries.

2. Is minimum capital required for a private company?

No fixed statutory minimum, but sectoral regulations may apply.

3. Can a private company later become public?

Yes. Conversion is permitted under the Companies Act 2006.

4. Are tax rates different for public companies?

Generally no. Corporate tax rates are the same.

5. Is IPO common in Nepal?

IPO activity is common in hydropower and financial sectors.

Final Recommendation: Private vs Public Company in Nepal

For most foreign companies entering Nepal in 2026, the answer to private vs public company in Nepal is clear:

Start private. Scale strategically. Convert only if capital markets demand it.

A private structure offers:

• Greater control
• Lower compliance cost
• Faster approvals
• Strategic flexibility

Public structure suits only capital-intensive or regulated sectors.