The Shareholder Spectrum: Navigating Public and Private Ownership in Nepal

If you are a foreign company planning market entry, choosing the right legal structure is the single most important decision you will make. Private vs public company in Nepal is not just a technical distinction. It directly affects ownership control, compliance cost, fundraising ability, timelines, and exit flexibility.

This guide is written for international founders, CFOs, and expansion leaders who need clarity without legal jargon. Within the first few minutes, you will know which structure fits your strategy today and how it impacts your options tomorrow.

What is a Company in Nepal?

Under Nepal’s Companies Act, a company is a separate legal person with perpetual succession. It can own assets, hire employees, sue, and be sued.

Nepal recognizes two core corporate forms for standard commercial operations:

• Private Limited Company

• Public Limited Company

Both can be incorporated by foreign shareholders, subject to foreign investment laws.

Understanding Private vs. Public Company in Nepal

This section addresses the core comparison most foreign investors search for when evaluating private vs public company in Nepal.

Private Limited Company in Nepal

A private limited company is the most common structure for foreign-owned businesses in Nepal.

Key characteristics

• Limits the number of shareholders

• Restricts share transferability

• Cannot invite the public to subscribe to shares

• Operates with lighter compliance

Private companies are typically used for subsidiaries, joint ventures, service centers, technology firms, and long-term operating businesses.

Public Limited Company in Nepal

A public limited company is designed for larger ventures that may raise capital from the public.

Key characteristics

• Requires a higher minimum number of shareholders

• Shares can be offered publicly

• Subject to stricter disclosure and governance standards

• Can be listed on the Nepal Stock Exchange

Public companies are often used for banks, hydropower projects, insurance companies, and large infrastructure ventures.

Legal Framework Governing Companies in Nepal

Foreign companies often worry about regulatory uncertainty. Nepal’s framework is well-defined and statute-driven.

The main laws include:

• Companies Act, 2006

• Foreign Investment and Technology Transfer Act, 2019

• Industrial Enterprises Act, 2020

• Securities Act and SEBON regulations for public companies

These laws clearly differentiate private vs public company in Nepal in terms of formation, governance, and reporting.

Ownership and Shareholding Rules Compared

Ownership structure is often the deciding factor.

Private Company Ownership

• Minimum shareholders: 1

• Maximum shareholders: 101

• Foreign ownership permitted, subject to sector approval

• Share transfers require board and shareholder consent

Public Company Ownership

• Minimum shareholders: 7

• No maximum limit

• Foreign ownership allowed, often capped by sector regulators

• Shares are freely transferable, subject to listing rules

Strategic insight:
Foreign investors seeking control and confidentiality almost always prefer private companies at entry stage.

Capital Requirements and Fundraising Ability

Capital in a Private Company

There is no fixed statutory minimum capital. However, foreign investment approvals typically require a declared minimum investment threshold as per prevailing regulations.

Capital in a Public Company

Public companies must meet higher paid-up capital requirements. Additional capital can be raised through:

• Initial public offerings

• Rights issues

• Public debentures

This makes public companies suitable for capital-intensive projects.

Compliance and Governance Burden

This is where the difference between private vs public company in Nepal becomes operationally significant.

Private Company Compliance

• Annual financial statements

• Annual return filing

• Board meetings as per articles

• No mandatory public disclosure

Public Company Compliance

• Quarterly and annual disclosures

• Mandatory audits with higher scrutiny

• SEBON reporting

• Shareholder meetings with statutory notice periods

Cost reality:
Public company compliance can cost three to five times more annually than a private company.

Taxation Differences Explained

From a corporate income tax perspective, both private and public companies are taxed similarly under the Income Tax Act.

However, indirect cost differences arise due to:

• Audit intensity

• Regulatory filings

• Transfer compliance

For most foreign companies, tax efficiency does not justify public incorporation at entry stage.

Sector-Specific Considerations for Foreign Companies

Certain sectors influence whether private or public incorporation is viable.

Common private company sectors

• IT and software development

• Business process outsourcing

• Consulting and professional services

• Trading and distribution

Common public company sectors

• Hydropower and energy

• Banking and finance

• Insurance

• Telecommunications

Sector regulators may mandate public company status.

Exit, Transfer, and Long-Term Flexibility

Foreign investors should plan exits before entry.

Exit from a Private Company

• Share sale to strategic buyer

• Buyback arrangements

• Conversion to public company

Exit from a Public Company

• Market sale through stock exchange

• Strategic acquisition

• Easier liquidity, but lower control

Key insight:
Many successful public companies in Nepal began as private companies.

Private vs. Public Company in Nepal – Side-by-Side Comparison

When Should a Foreign Company Choose Each Option?

Choose a Private Company if you:

• Want operational control

• Are entering Nepal for the first time

• Do not need public capital

• Prefer lower regulatory exposure

Choose a Public Company if you:

• Operate in a regulated sector

• Need large-scale capital

• Plan stock exchange listing

• Can manage high compliance costs

Common Mistakes Foreign Investors Make

Avoid these frequent errors:

• Assuming public companies are more “prestigious”

• Underestimating compliance costs

• Choosing structure without exit planning

• Ignoring sector-specific rules

A private structure with conversion readiness is often the smartest approach.

Practical Recommendation for Foreign Companies

For over 80 percent of foreign investors, a private limited company offers the best balance of control, compliance, and flexibility. Public company incorporation should be strategic, not aspirational.

Conclusion

The decision between private vs public company in Nepal shapes your legal risk, operating cost, and growth trajectory. Private companies dominate foreign investment for good reason. Public companies serve a purpose, but only when scale, regulation, or capital markets demand it.

If you are entering Nepal, start private, structure smart, and keep conversion options open.

Frequently Asked Questions

1. Can a foreigner own 100 percent of a private company in Nepal?

Yes. Full foreign ownership is permitted in many sectors, subject to foreign investment approval and sectoral restrictions.

2. Is a public company mandatory for foreign investment in Nepal?

No. Most foreign investments are made through private companies unless the sector requires public ownership.

3. Can a private company convert into a public company later?

Yes. Nepalese law allows conversion after meeting capital, shareholder, and compliance requirements.

4. Which company type is cheaper to maintain in Nepal?

A private company is significantly cheaper due to lower compliance, audit, and reporting obligations.

5. Can a public company be fully foreign-owned?

In some sectors yes, but many regulated industries impose foreign ownership caps.