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.
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.
This section addresses the core comparison most foreign investors search for when evaluating private vs public 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.
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.
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 structure is often the deciding factor.
Minimum shareholders: 1
Maximum shareholders: 101
Foreign ownership permitted, subject to sector approval
Share transfers require board and shareholder consent
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.
There is no fixed statutory minimum capital. However, foreign investment approvals typically require a declared minimum investment threshold as per prevailing regulations.
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.
This is where the difference between private vs public company in Nepal becomes operationally significant.
Annual financial statements
Annual return filing
Board meetings as per articles
No mandatory public disclosure
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.
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.
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.
Foreign investors should plan exits before entry.
Share sale to strategic buyer
Buyback arrangements
Conversion to 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.
| Factor | Private Company | Public Company |
|---|---|---|
| Minimum shareholders | 1 | 7 |
| Maximum shareholders | 101 | Unlimited |
| Public share offering | Not allowed | Allowed |
| Compliance burden | Low to moderate | High |
| Capital raising | Private investors | Public markets |
| Governance complexity | Simple | Complex |
| Ideal for foreign entry | Yes | Rarely |
Want operational control
Are entering Nepal for the first time
Do not need public capital
Prefer lower regulatory exposure
Operate in a regulated sector
Need large-scale capital
Plan stock exchange listing
Can manage high compliance costs
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.
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.
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.
Yes. Full foreign ownership is permitted in many sectors, subject to foreign investment approval and sectoral restrictions.
No. Most foreign investments are made through private companies unless the sector requires public ownership.
Yes. Nepalese law allows conversion after meeting capital, shareholder, and compliance requirements.
A private company is significantly cheaper due to lower compliance, audit, and reporting obligations.
In some sectors yes, but many regulated industries impose foreign ownership caps.