The Ultimate Guide to Registering a New Firm: Key Steps and Tips

If you are deciding between a private vs public company in Nepal, you are making one of the most important strategic choices for your market entry.

For foreign companies, this decision shapes taxation, compliance exposure, capital-raising ability, and governance obligations. It also affects regulatory approvals under the Companies Act 2006 and the Foreign Investment and Technology Transfer Act 2019.

This comprehensive guide breaks down the legal, structural, and commercial differences. It also walks you through the full registration process.

If your goal is compliance, scalability, and risk mitigation, this article will help you choose correctly.

Understanding the Legal Framework in Nepal

Before comparing a private vs public company in Nepal, it is essential to understand the regulatory environment.

Company registration and governance fall under:

• Companies Act 2006
• Foreign Investment and Technology Transfer Act 2019 (FITTA 2019)
• Income Tax Act 2002
• Office of the Company Registrar (OCR)
• Department of Industries (for FDI approval)

According to OCR data, most foreign investors choose the private limited structure due to flexibility and lower compliance exposure.

Let’s explore why.

What Is a Private Company in Nepal?

A private company (Private Limited – “Pvt. Ltd.”) is the most common business structure for foreign companies entering Nepal.

Key Characteristics

Under the Companies Act 2006:

• Minimum 1 shareholder
• Maximum 101 shareholders
• Cannot publicly invite share subscriptions
• Restricted share transfer
• “Private Limited” must appear in the company name

Why Foreign Investors Prefer Private Companies

Private companies offer:

• Faster incorporation
• Lower regulatory scrutiny
• Simplified compliance
• Full foreign ownership permitted (subject to sector approval)
• Strong control structure

For FDI-backed entities, this structure aligns well with FITTA 2019 approval processes.

What Is a Public Company in Nepal?

A public company is designed for larger enterprises seeking broader capital access.

Key Characteristics

Under the Companies Act 2006:

• Minimum 7 shareholders
• No maximum shareholder limit
• May invite public share subscriptions
• Stricter governance requirements
• Mandatory board structure

Public companies are regulated more heavily. They may also fall under additional securities oversight if listed.

Private vs Public Company in Nepal: Side-by-Side Comparison

Here is a strategic comparison tailored for foreign investors:

Insight:
For 90% of foreign companies entering Nepal, a private limited company is strategically superior in early stages.

When Should You Choose a Private Company?

A private company works best when:

• You are entering Nepal as a subsidiary.
• You want operational control.
• You are not raising capital publicly.
• You want faster incorporation.
• You prefer simplified governance.

This structure is ideal for:

• IT outsourcing firms
• Manufacturing subsidiaries
• Consulting branches
• Australian mortgage support back offices
• Representative-to-subsidiary conversions

When Does a Public Company Make Sense?

Consider a public company if:

1. You plan large-scale capital mobilization.
2. You are building infrastructure projects.
3. You expect institutional investors.
4. You require IPO readiness.
5. You operate in sectors demanding public transparency.

Public companies are often used in hydropower, banking, and large industrial investments.

Step-by-Step: Registering a Private or Public Company in Nepal

Step 1: Name Reservation

Submit name application through OCR’s portal.
Approval typically takes 1–3 working days.

Step 2: Draft Constitutional Documents

Prepare:

• Memorandum of Association (MOA)
• Articles of Association (AOA)

Public companies require more detailed governance clauses.

Step 3: Capital Structure Planning

Determine:

• Authorized capital
• Issued capital
• Paid-up capital

Foreign investors must align this with FITTA approval thresholds.

Step 4: FDI Approval (If Applicable)

Apply to the Department of Industries under FITTA 2019.

Documents include:

• Board resolution
• Feasibility study
• Investor KYC
• Power of attorney

Step 5: Company Registration with OCR

Submit incorporation file.
Receive:

• Certificate of Incorporation
• Company Registration Number

Step 6: PAN and Tax Registration

Register under the Income Tax Act 2002.
Obtain PAN certificate.

Step 7: Sector-Specific Licenses

Depending on activity:

• VAT registration
• Industry registration
• Labor registration
• Social Security Fund registration

Taxation: Private vs Public Company in Nepal

Under the Income Tax Act 2002:

• Standard corporate tax: 25%
• Certain sectors receive incentives
• Special Economic Zone (SEZ) entities may enjoy holidays

Taxation does not differ significantly between private and public companies.

However:

• Public companies often face stricter audit transparency.
• Dividend compliance requirements are closely monitored.

Governance and Compliance Differences

Private Company Governance

• Minimum 1 director
• Flexible board structure
• Fewer disclosure obligations

Public Company Governance

• Minimum 3 directors
• Mandatory annual general meeting
• Detailed reporting requirements
• Enhanced audit scrutiny

Public companies must maintain stricter record transparency.

Compliance Calendar Snapshot

All companies must comply with:

• Annual return filing (OCR)
• Tax return submission
• Audit report submission
• Shareholder meeting records

Public companies face expanded disclosure duties.

Conversion: Can You Switch Later?

Yes.

A private company can convert into a public company by:

• Increasing shareholder count
• Amending MOA/AOA
• Filing conversion application

However, reverting from public to private is complex.

Strategic planning at entry stage is critical.

Common Mistakes Foreign Investors Make

• Choosing public structure prematurely
• Underestimating compliance cost
• Ignoring FDI thresholds
• Poorly drafted MOA clauses
• Not structuring capital properly

The right structure reduces long-term risk exposure.

Strategic Recommendation for Foreign Companies

If you are entering Nepal:

• Start as a private limited company.
• Structure for scalability.
• Include share transfer flexibility.
• Design governance with conversion readiness.

A well-structured private entity allows future IPO potential.

FAQ: Private vs Public Company in Nepal

1. Which is better for foreign investors in Nepal?

A private company is usually better. It offers flexibility and lower compliance. Most FDI entities choose this route.

2. Can a foreign company own 100% of a Nepal company?

Yes. FITTA 2019 allows full foreign ownership in most sectors, subject to approval.

3. Is taxation different for private and public companies?

No. Both are taxed under the Income Tax Act 2002. Standard corporate rate applies unless sector incentives exist.

4. How long does registration take?

Private companies typically take 2–4 weeks including FDI approval. Public companies may take longer due to documentation.

5. Can a private company issue shares to the public?

No. Only public companies may invite public share subscriptions.

Conclusion: Choosing Between Private vs Public Company in Nepal

Selecting between a private vs public company in Nepal determines your regulatory exposure, compliance burden, and growth flexibility.

For most foreign companies, a private limited company provides the optimal balance of control and scalability.

However, capital-intensive projects may justify a public structure.

If you want structured guidance, regulatory mapping, and compliant incorporation support, consult experienced advisors before filing.

Making the right decision at the start prevents costly restructuring later.