The Future of Business in Nepal: Investment Insights for Entrepreneurs

If you are evaluating Private vs public company in Nepal, you are already asking the right question. The legal structure you choose will define your capital strategy, tax exposure, governance burden, and exit options.

For foreign companies entering Nepal, this decision is not administrative. It is strategic.

Nepal’s regulatory framework anchored in the Companies Act 2006, the Foreign Investment and Technology Transfer Act 2019 (FITTA), and capital market rules under the Securities Board of Nepal (SEBON) offers clear pathways. But the implications differ sharply between a private limited company and a public limited company.

In this guide, we break down the legal, financial, and strategic differences. You will see when to choose each structure. And more importantly, how to align it with your long-term investment strategy in Nepal.

Nepal’s Corporate Landscape: Why Structure Matters

Nepal is transitioning from a frontier market to a structured investment destination. Hydropower, ICT, tourism, and manufacturing are expanding.

Foreign investors can:

• Establish a private limited company
• Incorporate a public limited company
• Register a branch or liaison office
• Form joint ventures with Nepali shareholders

However, when comparing private vs public company in Nepal, the choice depends on:

1. Capital raising ambitions
2. Regulatory tolerance
3. Governance expectations
4. Timeline to scale
5. IPO or listing intent

Let us break this down properly.

What Is a Private Limited Company in Nepal?

Under the Companies Act 2006, a private company:

• Limits the right to transfer shares
• Restricts public subscription of shares
• Has 1 to 101 shareholders
• Cannot invite the public to invest

It is the most common vehicle for FDI.

Key Characteristics

• Minimum 1 shareholder
• Minimum 1 director
• No minimum paid-up capital required (except sector-specific rules)
• Shares cannot be publicly traded
• Faster incorporation process

Foreign investors typically prefer this structure for:

• IT services
• Back-office operations
• Manufacturing units
• Consulting firms
• Technology transfer arrangements

It offers flexibility and tighter ownership control.

What Is a Public Limited Company in Nepal?

A public limited company is designed for capital markets.

It can:

• Offer shares to the public
• Have unlimited shareholders
• List on the Nepal Stock Exchange (NEPSE)
• Raise capital via IPO

Minimum requirements include:

• At least 7 shareholders
• At least 3 directors
• Higher compliance obligations
• Mandatory statutory audits
• Corporate governance disclosures

This structure is typically used by:

• Banks
• Insurance companies
• Hydropower developers
• Large manufacturing groups
• Infrastructure projects

Private vs Public Company in Nepal: A Detailed Comparison

Here is a strategic comparison tailored for foreign companies.

Original Insight:
Most foreign investors start as private companies and convert to public only when preparing for IPO or sector-mandated listing (e.g., hydropower licensing requirements).

Legal Framework Governing Both Structures

Understanding compliance is critical.

1. Companies Act 2006

Defines incorporation, governance, reporting, and shareholder rights.

2. FITTA 2019

The Foreign Investment and Technology Transfer Act 2019 governs:

• Foreign equity investment
• Profit repatriation
• Technology transfer
• Sector restrictions

3. Income Tax Act 2002

Corporate tax rate generally stands at 25%, with variations for banks and special industries.

4. SEBON Regulations

Public companies must comply with disclosure, reporting, and listing norms enforced by the Securities Board of Nepal.

Capital Raising: Private Equity vs IPO

The biggest difference in private vs public company in Nepal lies in capital access.

Private Company Capital Options

• Foreign direct investment
• Promoter equity
• Bank loans
• Private placements

Public Company Capital Options

• Initial Public Offering (IPO)
• Further Public Offering (FPO)
• Debentures
• Public bonds

If your project requires mass retail participation, public structure becomes necessary.

Governance and Compliance Differences

Public companies face stricter oversight.

Public Company Obligations

• Independent directors
• Audit committees
• Quarterly disclosures
• Public reporting standards
• SEBON compliance audits

Private companies operate with:

• Annual general meetings
• Statutory audit
• OCR filings

For foreign subsidiaries, lower compliance complexity often makes private companies preferable.

Strategic Decision Framework for Foreign Companies

Here is a simple decision logic:

1. Do you need public capital within 3–5 years?
2. Is your sector regulated for public listing?
3. Do you want full ownership control?
4. Are you comfortable with quarterly disclosure obligations?
5. Is your project capital-intensive above NPR 1–2 billion?

If most answers favor control and flexibility, choose private.

If scaling via public participation is central, consider public.

When Should You Convert from Private to Public?

Conversion is possible under the Companies Act.

Companies typically convert when:

• Preparing for IPO
• Required by licensing authority
• Seeking broader capital base
• Planning stock exchange listing

Conversion requires:

• Special resolution
• Amended Articles
• SEBON approval
• Capital restructuring

Sector-Specific Observations

Hydropower

Often structured as public companies due to IPO norms.

IT and Outsourcing

Prefer private structures for agility.

Banking and Insurance

Mandated public structure under sector laws.

Advantages of Private Limited Company in Nepal

• Faster setup
• Lower compliance costs
• Better ownership control
• Easier restructuring
• Confidentiality in financial reporting

Advantages of Public Limited Company in Nepal

• Access to public capital
• Enhanced credibility
• Brand visibility
• Liquidity for shareholders
• Long-term scalability

Risks and Practical Considerations

Foreign companies must also consider:

• Profit repatriation process under FITTA
• Dividend tax withholding
• Exchange control approvals
• Sectoral FDI caps
• Governance expectations

The right structure reduces friction later.

Investment Outlook: The Future of Business in Nepal

Nepal’s capital market is expanding. Retail investor participation is growing. Hydropower IPOs are frequently oversubscribed.

However, private companies remain dominant for foreign-owned subsidiaries.

The debate of private vs public company in Nepal will increasingly depend on capital strategy rather than compliance alone.

Frequently Asked Questions 

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

Yes. FITTA 2019 allows 100% foreign ownership in most sectors, subject to negative list restrictions.

2. Is a public company mandatory for hydropower projects?

In many cases, yes. Licensing frameworks often require public share issuance before project completion.

3. What is the minimum capital for a public company?

The Companies Act does not mandate fixed minimum capital, but sectoral regulators may impose thresholds.

4. Can a private company later become public?

Yes. Conversion is allowed through shareholder resolution and regulatory approval.

5. Which structure is better for foreign subsidiaries?

Most foreign subsidiaries prefer private companies for flexibility and control.