The Ultimate Guide to Company Registration in Nepal

Choosing between a private vs public company in Nepal is one of the most strategic decisions a foreign investor will make.
It impacts ownership control, compliance burden, capital raising, and long-term exit options.

Nepal’s legal framework is foreign-investment friendly but highly procedural.
Understanding how private and public companies differ helps you avoid costly restructuring later.

This guide is written for foreign companies exploring Nepal as a destination for operations, back-office, technology, manufacturing, or regional expansion.
We break down legal rules, practical realities, and investor-grade insights so you can decide with confidence.

Nepal’s Legal Framework for Company Registration

Company formation in Nepal is governed primarily by the Office of the Company Registrar (OCR) under the Companies Act 2006.

For foreign investors, incorporation is closely linked with:

• Department of Industry approval
• Foreign investment rules under Foreign Investment and Technology Transfer Act 2019
• Banking and capital inflow oversight by Nepal Rastra Bank

Both private and public companies operate under the same Act, but with very different obligations.

What Is a Private Company in Nepal?

A private company is the most common structure chosen by foreign investors.

Key Characteristics

• Minimum 1 shareholder, maximum 101 shareholders
• Share transfer restricted by Articles of Association
• Cannot issue shares to the public
• Limited liability structure
• Faster incorporation and lower compliance

Why Foreign Companies Prefer Private Companies

Most foreign companies use Nepal as:

• A back-office or cost center
• A technology development hub
• A manufacturing or sourcing base
• A regional service entity

For these use cases, private companies offer speed, control, and flexibility.

What Is a Public Company in Nepal?

A public company is designed for large-scale capital raising and public ownership.

Key Characteristics

• Minimum 7 shareholders, no maximum
• Can issue shares to the public
• Mandatory compliance with securities regulations
• Higher disclosure and governance standards
• Often used for IPOs or regulated industries

When Public Companies Make Sense

Public companies are typically used when:

• Large capital needs exist
• Public listing is planned
• Infrastructure or banking sectors are involved
• Long-term domestic fundraising is critical

For most foreign investors entering Nepal, this structure is unnecessarily complex at the entry stage.

Private vs Public Company in Nepal: Core Differences

Side-by-Side Comparison

Ownership and Control: What Foreign Investors Should Know

Private Company Ownership

Foreign shareholders enjoy:

• Direct equity control
• Clear shareholder agreements
• Easier exit via share transfer
• Less public disclosure

This structure is ideal when control matters more than fundraising.

Public Company Ownership

Public companies require:

• Dilution planning
• Independent directors
• Shareholder voting protocols
• Market disclosures

This suits mature businesses, not early-stage foreign entrants.

Capital Requirements and Fundraising Options

Private Companies

• Capital is defined by shareholders
• No statutory minimum for most sectors
• Ideal for phased investment
• FDI inflows tracked by Nepal Rastra Bank

Public Companies

• Capital thresholds often higher
• Subject to securities approval
• Suitable for mass capital mobilization

Foreign investors usually begin with a private company and convert later if needed.

Compliance and Reporting Obligations

Private Company Compliance

• Annual returns to OCR
• Tax filings with Inland Revenue
• Statutory audit
• Limited disclosure obligations

Public Company Compliance

• Enhanced audits
• Public disclosures
• Governance committees
• Securities regulations

For foreign companies managing compliance remotely, private companies are far easier to maintain.

Taxation Differences That Matter

Tax treatment is largely similar, but complexity differs.

Common Taxes

• Corporate income tax
• VAT (if applicable)
• Withholding taxes
• Payroll taxes

Practical Reality

Public companies face higher audit scrutiny and documentation expectations.
Private companies allow smoother tax compliance, especially during early operations.

Sector-Specific Restrictions for Foreign Companies

Not all sectors allow public companies or foreign ownership equally.

Foreign investors must review:

• Restricted sectors list
• Minimum capital thresholds
• Approval authority requirements

Private companies provide more flexibility to navigate sector-specific approvals during setup.

When Should a Foreign Company Choose a Private Company?

Most foreign investors should choose a private company when:

1. Entering Nepal for the first time
2. Operating as a cost or service center
3. Retaining strategic control is critical
4. Capital will be injected gradually
5. Exit flexibility matters

This covers over 90 percent of foreign incorporations in Nepal.

When Does a Public Company Make Sense?

A public company may be justified if:

• You plan a Nepal IPO
• You require public capital locally
• You operate in regulated infrastructure sectors
• You already have scale in Nepal

Even then, many investors start private and convert later.

Registration Process Overview

Typical Steps for a Private Company

1. Name reservation at OCR
2. Drafting MOA and AOA
3. Foreign investment approval
4. Company incorporation
5. Tax and bank registration

Public companies follow similar steps but add securities approvals and governance layers.

Cost and Timeline Considerations

Private Company

• Lower setup cost
• Faster approval cycles
• Predictable timelines

Public Company

• Higher legal and advisory fees
• Longer approval timelines
• Ongoing governance costs

For ROI-focused foreign companies, private structures win early.

Strategic Insight: Start Private, Scale Smart

A common strategy among foreign investors is:

• Phase 1: Private company incorporation
• Phase 2: Operational stabilization
• Phase 3: Capital expansion or conversion if required

This approach minimizes risk while preserving future flexibility.

Common Mistakes Foreign Companies Make

Avoid these pitfalls:

• Choosing a public company too early
• Underestimating compliance obligations
• Ignoring future exit planning
• Not aligning structure with business model

Proper structuring at entry saves years of friction.

Final Verdict: Private vs Public Company in Nepal

For most foreign companies, the answer is clear.

A private company offers:

• Faster market entry
• Lower compliance risk
• Better control
• Easier exits

A public company is a strategic tool, not a default choice.

Understanding private vs public company in Nepal ensures your investment structure supports growth, not complexity.

Frequently Asked Questions

Is a private company better than a public company in Nepal for foreign investors?

Yes. Most foreign investors choose private companies due to lower compliance, faster setup, and greater control. Public companies suit large-scale fundraising, not early entry.

Can a private company in Nepal be converted into a public company later?

Yes. Nepalese law allows conversion from private to public company once requirements are met, including shareholder thresholds and regulatory approvals.

What is the minimum capital for a private company in Nepal?

There is no universal minimum. Capital depends on the sector and foreign investment rules applicable to the business.

Are foreign shareholders allowed in public companies in Nepal?

Yes, subject to sectoral restrictions and foreign investment approvals. Compliance requirements are significantly higher than for private companies.

How long does company registration take in Nepal?

A private company typically takes a few weeks after approvals. Public companies take longer due to additional regulatory layers.