The Entrepreneur’s Guide to Creating a Company in Nepal: A Comprehensive Overview

Choosing between a private vs public company in Nepal is one of the first strategic decisions foreign companies must make.
It affects ownership control, compliance burden, fundraising options, timelines, and long-term exit strategies.

Nepal welcomes foreign investment, but its corporate framework follows clear legal distinctions.
Understanding these differences early prevents delays, compliance risks, and costly restructuring later.

This guide gives foreign founders a clear, practical, and authoritative comparison so you can choose confidently.

Nepal’s Corporate Framework at a Glance

Company registration in Nepal is governed mainly by:

• Companies Act, 2006

• Foreign Investment and Technology Transfer Act (FITTA), 2019

• Industrial Enterprises Act, 2020

• Income Tax Act, 2002

Under this framework, companies are primarily classified as private companies or public companies.

What Is a Private Company in Nepal?

A private company in Nepal is the most common entry vehicle for foreign investors.
It is designed for closely held ownership and operational control.

Key Characteristics of a Private Company

• Minimum shareholders: 1

• Maximum shareholders: 101

• Share transfer restrictions apply

• Cannot publicly invite share subscriptions

• Faster incorporation timeline

Private companies suit foreign firms testing the market or building operational teams.

What Is a Public Company in Nepal?

A public company in Nepal is structured for large-scale operations and public fundraising.

Key Characteristics of a Public Company

• Minimum shareholders: 7

• No maximum shareholder limit

• Can issue shares to the public

• Subject to stricter governance and disclosures

• Mandatory regulatory approvals before incorporation

Public companies are typically chosen for infrastructure, banking, hydropower, or capital-intensive projects.

Private vs Public Company in Nepal: Core Legal Differences

1. Ownership and Shareholding Structure

Private companies offer tight ownership control.
Public companies allow broad ownership and investor participation.

2. Capital Requirements

Nepal does not impose a universal minimum paid-up capital.
However, sectoral regulators may require thresholds for public companies.

3. Fundraising Capability

• Private companies raise capital privately

• Public companies raise capital through IPOs and public offerings

Private vs Public Company in Nepal: Compliance and Governance

Compliance Burden Compared

Private companies enjoy lighter compliance.
Public companies face ongoing regulatory scrutiny.

Private company compliance typically includes:

• Annual general meeting

• Annual return filing

• Tax compliance

Public company compliance additionally includes:

• Prospectus approval

• Securities board oversight

• Independent directors

• Mandatory audits and disclosures

Comparison Table: Private vs Public Company in Nepal

This table highlights why most foreign companies start private.

Which Structure Is Better for Foreign Companies?

For most foreign investors, the answer is clear.

A Private Company Is Ideal If You:

• Want quick market entry

• Need operational flexibility

• Plan to scale gradually

• Prefer limited disclosure

A Public Company Is Better If You:

• Require large capital inflows

• Plan public fundraising

• Operate in regulated sectors

• Target IPO or mass investment

Private vs Public Company in Nepal for FDI Purposes

Foreign Direct Investment is allowed in both structures.
However, private companies dominate FDI inflows due to simplicity.

Foreign investors must:

1. Obtain FDI approval

2. Register the company

3. Inject capital through banking channels

4. Comply with reporting obligations

Private companies streamline this process.

Taxation Differences Between Private and Public Companies

Tax rates are broadly similar.
However, public companies often face additional compliance costs.

Key tax considerations include:

• Corporate income tax

• Withholding taxes

• Dividend distribution tax

Tax planning is simpler in private companies due to fewer stakeholders.

Common Mistakes Foreign Companies Make

Many foreign firms misunderstand Nepal’s corporate landscape.

Avoid these mistakes:

• Choosing public structure too early

• Underestimating compliance costs

• Ignoring sector-specific approvals

• Misjudging shareholder limits

Strategic planning upfront avoids restructuring later.

Step-by-Step: How Foreign Companies Should Decide

Follow this practical decision path:

1. Define your investment size

2. Assess fundraising needs

3. Evaluate compliance capacity

4. Consider exit strategy

5. Select private or public structure

Most foreign companies reach the same conclusion: start private.

Growth Strategy: Can You Convert Later?

Yes.
A private company can convert into a public company in Nepal.

This approach offers flexibility:

• Start lean

• Validate the market

• Convert when scale demands

This staged approach reduces early-stage risk.

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Frequently Asked Questions: Private vs Public Company in Nepal

Is private or public company better for foreign investors in Nepal?

Private companies are better for most foreign investors due to lower compliance, faster registration, and greater control.

Can a foreigner fully own a private company in Nepal?

Yes. Subject to sector eligibility, foreigners can hold 100 percent ownership in a private company.

How long does company registration take in Nepal?

Private company registration typically takes 2–4 weeks once approvals are in place.

Do public companies face more regulatory scrutiny?

Yes. Public companies must comply with securities laws, audits, and disclosure obligations.

Can a private company later become public?

Yes. Nepalese law allows conversion from private to public when requirements are met.

Why Expert Guidance Matters

Nepal’s laws are clear, but execution matters.
Foreign companies benefit from advisors who understand:

• Regulatory sequencing

• Investment approvals

• Tax structuring

• Long-term scalability

The right structure at the start saves time and cost.

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

Choosing between a private vs public company in Nepal shapes your entire investment journey.
For most foreign companies, a private company offers speed, flexibility, and control.

Public companies serve a specific purpose but are rarely the right starting point.

A strategic, informed decision ensures compliance today and scalability tomorrow.