If you are evaluating a private vs public company in Nepal, you are making one of the most important strategic decisions for your market entry. The choice affects control, taxation, disclosure, fundraising, and exit flexibility.
For foreign companies entering Nepal, this is not just a structural choice. It is a long-term governance decision governed primarily by the Companies Act 2006 and the Securities Act 2007.
This guide provides a complete breakdown of:
If you are planning FDI under the Foreign Investment and Technology Transfer Act 2019 (FITTA), this article will help you choose the right vehicle.
Nepal recognizes two primary corporate forms for commercial enterprises:
Both are incorporated through the Office of the Company Registrar (OCR).
However, their governance, capital structure, and disclosure requirements differ significantly.
Under the Companies Act 2006:
| Criteria | Private Company | Public Company |
|---|---|---|
| Governing Law | Companies Act 2006 | Companies Act 2006 + Securities Act 2007 |
| Minimum Shareholders | 1 | 7 |
| Maximum Shareholders | 101 | Unlimited |
| Public Share Offering | Not allowed | Allowed |
| IPO Eligibility | No | Yes |
| Disclosure Level | Moderate | High |
| Compliance Cost | Lower | Higher |
| Board Requirements | Flexible | Structured governance required |
| Suitable For | FDI, subsidiaries, SMEs | Large enterprises, capital markets |
This structural difference defines long-term flexibility.
Over 90% of foreign direct investments in Nepal use the private limited structure.
Why?
Because it provides:
For wholly owned subsidiaries, a private company is typically optimal.
A public limited company is ideal when:
Public companies operate under oversight from the Securities Board of Nepal (SEBON).
There is no universal minimum capital for private companies except sector-specific rules.
However, public companies issuing shares must comply with capital thresholds prescribed by regulators.
For IPO listing, minimum paid-up capital is mandated under NEPSE rules.
Governance sophistication is significantly higher.
Public companies must:
Private companies have fewer mandatory disclosures.
Under the Income Tax Act 2002, corporate tax rates apply equally.
Standard corporate tax: 25% (subject to sectoral variation).
Dividend distribution tax currently applies to both forms.
However, public companies may benefit from:
Taxation itself does not determine structure.
Under FITTA 2019:
However, foreign investors usually prefer private structures for:
If your long-term strategy includes public fundraising, public conversion may be required.
Yes.
A private company may convert into a public company by:
This pathway is common before IPO planning.
Public companies dilute ownership.
Public companies face higher scrutiny.
Financial data becomes public.
Ongoing audit and reporting costs increase.
Private companies minimize these exposures.
Ask yourself:
If control and flexibility matter most, private is ideal.
If scale and capital markets matter, public wins.
Best Structure: Private Company
Reason: 100% ownership, service model, no public funding needed.
Best Structure: Public Company
Reason: Large capital needs and IPO eligibility.
Best Structure: Private initially
Conversion possible later.
Understanding regulator interplay is essential.
| Process Stage | Private | Public |
|---|---|---|
| Name Reservation | 1–2 days | 1–2 days |
| Document Filing | 3–5 days | 5–10 days |
| Regulatory Review | Moderate | Extensive |
| Total Estimated Time | 1–2 weeks | 3–6 weeks |
Timelines vary based on sector.
For most foreign companies entering Nepal, the optimal path is:
Start as a private limited company.
Scale operations.
Then evaluate public conversion only if:
This staged approach reduces risk.
Choosing between a private vs public company in Nepal is not simply legal compliance. It is strategic architecture.
Private companies offer control, flexibility, and efficiency.
Public companies offer scale, capital, and visibility.
For foreign investors under FITTA, private limited remains the dominant structure.
However, long-term capital strategy should guide the final decision.
If you are planning market entry, IPO preparation, or FDI structuring in Nepal, professional advisory support is critical.
A private company cannot invite public investment and is limited to 101 shareholders. A public company can issue shares to the public and list on NEPSE.
Yes, subject to sector restrictions under FITTA 2019 and approval from the Department of Industry.
No. Both are generally taxed at 25% under the Income Tax Act 2002.
Yes. By amending constitutional documents and meeting regulatory requirements.
No. A company may register as public without immediately issuing shares publicly.