The Business Owner’s Roadmap to Opening a Company in Nepal

Choosing between a private vs public company in Nepal is one of the first strategic decisions foreign companies must make. It affects ownership, compliance, capital, taxation, and long-term scalability. In the first 100 days of market entry, this choice can determine speed to launch, regulatory risk, and future exits.

This guide is written for foreign founders, CFOs, and expansion leaders. It translates Nepal’s legal framework into practical decisions you can act on today.

Why Company Structure Matters for Foreign Companies in Nepal

Nepal welcomes foreign investment. But it is a law-driven market. The wrong structure can delay approvals, block repatriation, or restrict operations.

Your company type determines:

• Whether foreign shareholding is allowed

• Minimum capital requirements

• Disclosure and audit obligations

• Fundraising and exit options

• Ongoing compliance costs

Understanding private vs public company in Nepal helps you align structure with strategy.

Overview of Company Types Under Nepal Law

Nepal primarily recognizes two company forms for commercial operations.

1. Private Limited Company (Pvt. Ltd.)

The most common structure for foreign investors.

2. Public Limited Company (Ltd.)

Used for large capital-intensive ventures and listings.

Both are governed by the Companies Act, 2006, with foreign investment rules under the Foreign Investment and Technology Transfer Act, 2019 (FITTA).

What Is a Private Company in Nepal?

A private company in Nepal is a closely held entity with restricted share transfers and limited shareholders.

Key Legal Characteristics

• Maximum 101 shareholders

• Minimum 1 shareholder

• Foreign ownership permitted in approved sectors

• Shares cannot be offered to the public

• Limited liability protection

Why Foreign Companies Prefer Private Companies

Private companies are faster to register. They are easier to control. Compliance is lighter.

Most foreign subsidiaries, joint ventures, and wholly owned FDI entities choose this route.

What Is a Public Company in Nepal?

A public company is designed for large-scale capital mobilization.

Key Legal Characteristics

• Minimum 7 shareholders

• No maximum shareholder limit

• Higher paid-up capital thresholds

• Mandatory public disclosures

• Eligible for stock exchange listing

When a Public Company Makes Sense

Public companies are suitable for:

• Infrastructure projects

• Banking and financial institutions

• Hydropower and energy

• Large manufacturing ventures

For most foreign SMEs, this structure is unnecessarily complex.

Private vs Public Company in Nepal: Core Differences at a Glance

Capital Requirements: What Foreign Investors Should Know

Private Company Capital

There is no universal minimum capital. Capital depends on:

• Sector

• Project size

• FDI approval conditions

In practice, foreign investors often commit USD 50,000–200,000 equivalent.

Public Company Capital

Public companies must meet sector-specific minimum paid-up capital. These are substantially higher and often linked to regulatory approvals.

Ownership and Control Considerations

Ownership rules differ sharply in the private vs public company in Nepal comparison.

Private Company Ownership

• Share transfers are restricted

• Control stays with founders or parent company

• Ideal for 100% foreign-owned subsidiaries

Public Company Ownership

• Shares are freely transferable

• Dilution risk exists

• Governance is board-driven

Foreign companies seeking control almost always choose private companies.

Compliance and Governance Obligations Compared

Private Company Compliance

• Annual return filing

• Annual audit

• Board meetings as required

• Limited disclosures

Public Company Compliance

• Quarterly and annual disclosures

• Mandatory independent directors

• Regulatory oversight

• Public reporting obligations

For foreign businesses entering Nepal for the first time, compliance simplicity matters.

Taxation: Does Company Type Change Your Tax Burden?

Corporate tax rates are not determined by company type.

However, public companies may qualify for incentives in certain sectors.

Key Tax Points

• Standard corporate tax rate applies

• Withholding taxes apply uniformly

• VAT registration based on turnover

• Repatriation rules apply equally

The difference lies in administrative complexity, not headline tax rates.

Foreign Investment Approval Process by Company Type

Foreign investors must secure FDI approval regardless of structure.

Private Company Approval

• Faster processing

• Clear ownership mapping

• Easier capital verification

Public Company Approval

• Detailed feasibility studies

• Higher scrutiny

• Longer timelines

For speed and predictability, private companies win.

Step-by-Step: How Foreign Companies Choose the Right Structure

1. Define your Nepal activity scope

2. Confirm sector eligibility for FDI

3. Assess capital needs

4. Evaluate control requirements

5. Plan exit or expansion strategy

This structured approach avoids costly restructuring later.

Common Mistakes Foreign Companies Make

• Choosing public company for credibility alone

• Underestimating compliance costs

• Ignoring share transfer restrictions

• Overcapitalizing without approval alignment

These errors are avoidable with early advisory.

When Does a Private Company Need to Convert to Public?

Conversion may be required if you plan to:

• Raise capital from the public

• List on the stock exchange

• Cross shareholder thresholds

Conversion is possible but procedurally heavy.

Strategic Recommendation for Foreign Investors

For most foreign companies, a private limited company is the optimal entry vehicle.

Public companies should be considered only when:

• Capital requirements demand it

• Sector regulations require it

• Public fundraising is core to the model

Conclusion: Making the Right Choice Between Private vs Public Company in Nepal

The private vs public company in Nepal decision is not about prestige. It is about control, speed, and compliance.

For foreign companies, private limited companies offer flexibility, faster entry, and lower risk. Public companies serve a narrower purpose and demand long-term regulatory commitment.

Choosing wisely at the start saves years of restructuring later.