The Do's and Don'ts of Foreign Investment in Nepal's Industries

Foreign investors exploring Nepal often ask the same question early on: Private vs public company in Nepal what actually works for foreign investment?
It is a smart question. The answer shapes ownership, control, compliance risk, and exit options.

Within the first 100 days of entry, the wrong company structure can quietly lock in years of friction. Banking delays. Regulatory interpretations. Repatriation headaches.

This guide cuts through that noise. It explains private vs public company in Nepal from a foreign-investor lens, grounded in Nepal’s legal framework, sector rules, and lived market realities.

No fluff. No theory. Just what foreign companies need to know before committing capital.

Why “Private vs Public Company in Nepal” Matters More for Foreign Investors

For local entrepreneurs, the private vs public decision is often about fundraising.
For foreign companies, it is about regulatory survivability.

Nepal’s foreign investment regime is governed primarily by:

• Foreign Investment and Technology Transfer Act
• Companies Act
• Department of Industry
• Nepal Rastra Bank (NRB)

These frameworks do not treat all company types equally.

Your structure determines:

• Whether FDI approval is smooth or stalled
• How capital enters and exits Nepal
• How regulators interpret your activities
• How easily you can scale or unwind

This is why private vs public company in Nepal is not a cosmetic choice for foreigners. It is a risk architecture decision.

Understanding Company Types Under Nepal’s Companies Act

Nepal recognizes two main company forms relevant to foreign investors.

1. Private Limited Company in Nepal

A private limited company is the default entry vehicle for most foreign businesses.

Core features:

• Minimum shareholders: 1
• Maximum shareholders: 101
• Share transfer restrictions apply
• Cannot invite the public to subscribe to shares

This structure is favored by regulators for foreign investment because it offers clarity, control, and containment.

2. Public Limited Company in Nepal

A public limited company is designed for broad capital participation.

Core features:

• Minimum shareholders: 7
• No upper shareholder limit
• Can issue shares to the public
• Higher disclosure and governance thresholds

For foreign investors, this structure introduces complexity that often outweighs benefits.

Private vs Public Company in Nepal: A Foreign Investor Comparison

Original insight:
In Nepal, public companies amplify regulatory interpretation risk for foreigners. Each regulator reads your structure differently.

Why Most Foreign Companies Choose Private Companies in Nepal

Over 90% of approved FDI entities in Nepal are private limited companies. This is not accidental.

The private structure aligns with how Nepal regulates foreign capital.

Key reasons include:

• Easier DOI approval under FITTA
• Clear NRB capital inflow documentation
• Simpler board and shareholder control
• Lower compliance surface area

For foreign groups treating Nepal as a cost center, platform market, or strategic extension, private companies work best.

When a Public Company Might Make Sense for Foreigners

Public companies are not banned for foreign investors. They are just rarely optimal.

A public company may be considered if:

• The project is infrastructure-heavy
• Local public shareholding is mandatory
• The sector requires wide capital participation
• The government is a direct stakeholder

Even then, foreign sponsors often start private and convert later.

Sector Rules That Override the Private vs Public Debate

Some industries in Nepal impose restrictions regardless of company type.

Sectors Restricted or Prohibited for Foreign Investment

Under FITTA and sectoral policies, foreigners cannot invest in:

• Small retail trading
• Personal service businesses
• Cottage industries below capital thresholds
• Certain media and cultural activities

Always check sector notifications issued by the Department of Industry before finalizing structure.

The Do’s of Foreign Investment in Nepal

Foreign investors who succeed in Nepal tend to follow these rules.

Do this before incorporation

1. Validate sector eligibility under FITTA
2. Choose a private limited company unless justified otherwise
3. Map capital inflow with NRB documentation
4. Define shareholder control clearly
5. Align activities strictly with approved objectives

Do this after incorporation

• Maintain clean statutory filings
• Keep banking and capital records audit-ready
• Document intercompany transactions clearly
• Renew approvals and visas on time

Nepal rewards predictability. Regulators remember clean actors.

The Don’ts That Create Long-Term Problems

Foreign investors usually fail quietly, not dramatically.

Avoid these mistakes

• Using nominee shareholders informally
• Mismatching approved activities and actual operations
• Under-documenting capital inflows
• Choosing public companies for “prestige”
• Assuming rules work like India or China

Once a precedent is set with regulators, it is hard to reverse.

Private vs Public Company in Nepal and Profit Repatriation

This is where structure matters most.

Private companies:

• Clear dividend declaration process
• Straightforward NRB approval
• Cleaner exit documentation

Public companies:

• Additional disclosures
• Public shareholder considerations
• More regulatory checkpoints

If profit repatriation matters, private wins.

Governance Expectations for Foreign-Owned Companies

Even private companies face governance expectations.

Foreign investors should prepare:

• Board resolutions aligned with Nepal law
• Shareholder agreements adapted locally
• Statutory audits under Nepal standards

Public companies multiply these obligations.

Tax Considerations Foreign Companies Overlook

Nepal’s corporate tax rate is generally 25%, with variations by sector.
Public companies do not enjoy special tax breaks by default.

What changes is:

• Compliance intensity
• Disclosure thresholds
• Audit scrutiny

Structure affects how tax risk is experienced, not just the rate.

Choosing the Right Structure: A Decision Framework

Ask these questions before deciding private vs public company in Nepal.

• Is Nepal a core revenue market or a support hub
• Will you raise capital locally within 3 years
• Do you need tight foreign control
• Is exit clarity critical

If you answer “yes” to control and exit, private is your answer.

FAQs: Private vs Public Company in Nepal

Is a private company better for foreign investment in Nepal?

Yes. Most foreign investors use private companies due to easier approvals, clearer control, and simpler repatriation.

Can foreigners own 100% of a private company in Nepal?

Yes, in eligible sectors. FITTA allows full foreign ownership unless sector-restricted.

Are public companies mandatory for large investments?

No. Size alone does not require a public company. Sector rules matter more.

Can a private company convert into a public company later?

Yes. Conversion is allowed under the Companies Act, subject to approvals.

Which structure do regulators prefer for FDI?

Regulators consistently prefer private limited companies for foreign investors.

Final Takeaway: Private vs Public Company in Nepal

For foreign companies, private vs public company in Nepal is not a branding choice.
It is a control, compliance, and exit decision.

In most cases:

• Private companies reduce risk
• Public companies increase friction

Choose structure early. It determines everything that follows.

If you want clarity before committing capital, speak to professionals who understand both law and lived practice in Nepal.