Top 7 Mistakes to Avoid During Private Limited Company Registration in Nepal

Expanding to Nepal can be exciting, but registering a business there involves unique hurdles. Even with a local broker, foreign companies often stumble on specific legal and procedural requirements. Mistakes during private limited company registration in Nepal can trigger delays or compliance headaches. Nepal’s government has reformed its laws to encourage investment: the 2019 Foreign Investment and Technology Transfer Act (FITTA) provides a welcoming FDI framework, and nearly all sectors allow 100% foreign ownership. FITTA even guarantees no nationalization of your investment. Nevertheless, the process still has pitfalls. We break down the top 7 mistakes to avoid so you can complete your Nepal company incorporation confidently and legally.

Mistake 1: Skipping Essential Regulatory Approvals

Foreign investment in Nepal is not just paperwork. (If your company were 100% Nepalese-owned, you would only file at the OCR. Once any foreign investor is involved—even a 5% share—the FDI approval rules kick in.) In fact, Nepal’s foreign investment laws are explicit about pre-registration approvals. Under the updated Foreign Investment and Technology Transfer Act (FITTA 2019), any foreign equity, loan, or reinvestment must first get clearance. That means if any shareholder or capital is foreign, you must obtain an FDI approval from the Department of Industry (for smaller projects) or the Investment Board Nepal (for large projects). These approvals must be obtained before company registration. Similarly, Nepal Rastra Bank clearance is required for any inbound foreign funds. NRB will issue a Foreign Investment Registration Certificate (FIRC) to certify your capital inflow. Without this, you cannot legally bring money into the country.

For example, if your company brings in $100,000 in equity, the NRB must verify the source and register it. If you incorporate first, OCR will demand proof of that FIRC later, delaying your setup. Another common oversight is not checking Nepal’s negative investment list: a few industries are restricted or capped for foreign participation. For instance, real estate development projects and certain ride-sharing services have foreign ownership limits (51% or 70%). Nepal even has an OSSC (One-Stop Service Center) for FDI approvals and investor visas. DCV can assist you with OSSC filings to streamline approvals. For context, any investment over about NPR 2 billion must be approved by the Investment Board, whereas smaller investments go through DOI. DCV can help you determine the correct approval route.

In short, verify FITTA requirements at the outset. Create a pre-filing approvals checklist (covering OCR, DOI/IBN, NRB, IRD, etc.) tailored to your project. This step-by-step mapping of required forms, fees, and timelines is often skipped by unprepared founders, but is essential for staying on track. 

Mistake 2: Incomplete or Incorrect Documentation

Nepal’s OCR has become fully paperless, but it is unforgiving about completeness and accuracy. A very common mistake is submitting an incomplete set of documents or those with errors. Remember:

• Constitutional documents: The Memorandum and Articles of Association must be in Nepali (नियमावली and प्रबन्धपत्र) with precise business objectives. Do not upload English originals – OCR will reject them.

• Notarization and legalization: Any document signed abroad (e.g., Powers of Attorney, board resolutions) must be notarized and legalized (apostilled) before submission. OCR will not accept unverified foreign signatures.

• Certified KYC: Each shareholder and director must provide a certified ID (passport or citizenship) and address proof. Missing even one ID or a mismatch in names/dates will trigger a rejection.

• Power of Attorney: If you appoint a local agent, ensure you have a notarized and legalized power of attorney from each foreign founder. Without it, the agent cannot legally file on your behalf.

• Foreign corporate docs: If a foreign company is investing, prepare its Certificate of Incorporation and Board Resolution (both legalized). OCR often requires these; forgetting them causes delays.

• Correct OCR forms: Ensure you select the right form for each detail. For example, foreign shareholders use Form 9 (Nepalese use Form 8). Using the wrong form will cause OCR to reject your application.

• Document quality: Upload only clear, color scans. Faded or handwritten forms often get bounced. Double-check that company names and dates are consistent across all pages.

Required documents include:

• MoA & AoA (in Nepali)

• Notarized IDs: Copies of all promoters’ passports or citizenship certificates.

• Board resolutions/consents: If a corporate investor is involved, a board resolution authorizing the investment.

• Registered address proof: Lease agreement and a recent utility bill for the office. 

• Digital Signatures: Nepal mandates that at least one authorized signatory use a Digital Signature Certificate (DSC) for the online filing.

Tip: Prepare more documents than you think you need, and have them verified well in advance. For example, if you have a Nepali co-founder, get their marriage certificate or spouse’s citizenship ready (sometimes required for their share). Also, ensure any corporate IDs (in English) have a Nepali translation attached, since OCR officers may request one.

For example, one client had to redo the registration because the founder’s name was spelled differently on the passport and in the MoA. Such inconsistencies trigger OCR rejections and delays.

Tech tip: Use the OCR’s online CAMIS portal correctly. Upload PDFs of your documents (ideally PDF/A format). The portal rejects corrupt or unsupported files. Ensure your scans (MoA, IDs, etc.) are clear and within size limits to avoid technical rejections.

Statutory clauses: Ensure your MoA includes all mandatory provisions required by Nepal law (e.g. director indemnity, share transfer restrictions, voting rules). OCR will flag missing or non-standard clauses, so it’s best to use a compliant template.

Mistake 3: Misaligning Company Name or Objectives

Choosing your company name and objectives may sound trivial, but errors here cause big delays. The OCR will reject any name that conflicts with existing companies or includes disallowed words (like “Nepal” or “National” without permission). Always prepare several backup names and check them on the OCR portal in advance. Avoid vague or overly broad names; stick to the core of your business.

Similarly, ensure your business objectives in the MoA/AoA match exactly what you plan to do. A common OCR objection is “objects do not match activities.” For instance, if you declare manufacturing as an object but actually plan only to export software, OCR will pause the application until you clarify. Be as specific as possible. If you receive a query, you will have to revise and resubmit the MoA, adding weeks to your timeline.

For example, DCV assisted an IT startup whose initial name was rejected for sounding too generic. We suggested three new names, one of which cleared OCR after a second attempt. Another client had to amend their objectives to include consulting services after the OCR flagged a mismatch. These extra rounds of filings could have been avoided with proper upfront planning.

Pro tip: Even if OCR clears your company name, check Nepal’s trademark database to avoid infringing on an existing brand. A later trademark dispute can cause business complications.

Mistake 4: Choosing the Wrong Entity Structure

Foreign companies sometimes pick the wrong legal form and regret it later. The main choices are:

• Private Limited (Subsidiary): A Nepal-registered company. It can conduct full business operations (selling, hiring, contracting) and has limited liability. Foreigners can own 100% and serve as directors.

• Branch Office: Not a separate legal entity, but an extension of the parent. It has a limited scope (only parent-approved activities) and requires extra approvals. Branch profits in Nepal are taxed, and repatriating those profits requires NRB approval. By law, a branch must also obtain a foreign company license under Section 154 of the Companies Act and a relevant ministry’s approval.

• Liaison Office: A non-trading presence for research or marketing. No invoicing or contracts allowed. It is simpler to set up, but it cannot generate revenue.

Confusing these can backfire. For example, one client formed a branch office thinking it was simpler, but later discovered a hydropower branch required clearance from multiple ministries. That delayed their contracts. On the other hand, setting up a liaison when you intend to sell led us to convert one liaison to a subsidiary mid-way, incurring extra costs and approvals.

Looking ahead: Note that a Nepalese private limited company cannot offer shares to the public or be listed on an exchange. If you plan an IPO or public fundraising, you would need to convert to a Public company under Nepali law (with higher capital and disclosure requirements). Plan your exit and expansion strategy accordingly.

DCV’s advice: Determine your business goals first. If you plan full operations (sales, hiring, contracting), a subsidiary is usually best. If you only need market research or representation, a liaison office may suffice. Think ahead: switching from a branch to a subsidiary later means re-incorporating from scratch. We can help you weigh pros and cons to pick the structure that fits your strategy and compliance needs.

Mistake 5: Underestimating Capital and Banking Requirements

Many entrepreneurs consider authorized capital just a formality, but in Nepal, it’s more than a number. Even the OCR fee structure reflects this scaling: NPR 100,000 capital costs only about NPR 750 in fees, whereas NPR 10 million costs roughly NPR 75,000. You must declare a capital amount that matches your planned scale, and then actually arrange that funding. If you underestimate, you might struggle to meet bank requirements; if you overestimate, you pay extra fees.

Equally important is coordinating with your bank and NRB for foreign capital. Nepal’s banks require you to open a special capital-in account for incoming FDI. Before you can deposit, the NRB must approve the amount and purpose (issuing you an FIRC). Without an FIRC, banks will not accept the funds. In one case, a client wired capital prematurely and had to return it because NRB approval wasn’t secured first.

To avoid pitfalls:

• Set aside enough initial capital to cover at least 6–12 months of expenses. This prevents scrambling for funds after setup.

• Work with a bank experienced in FDI. Provide them with the OCR certificate, MoA, directors’ IDs, and capital details so they can apply for your FIRC in parallel.

• Plan for currency restrictions: capital must enter officially in convertible currency. Keep good documentation of the fund source to satisfy regulators.

• Equity vs loan: If part of the funding is structured as a loan from abroad (not equity), register that loan with NRB, too. Loans have different repatriation rules, so clarify each component early.

• Authorized vs paid-up: You can declare a high authorized capital, but only the paid-up portion is recognized initially. Banks and regulators focus on actual paid-in funds, so plan to deposit at least what you declare.

• Capital deposit timeline: Nepali law requires the paid-up capital to be deposited into the company’s account within one year of registration. Failing to deposit the declared capital can lead to penalties or cancellation.

Failing to handle this right can stall operations immediately. We’ve seen companies ready to launch, only to sit idle for weeks while waiting on NRB clearance. DCV can coordinate the banking and NRB steps for you, ensuring your funding is smooth.

Note: You can raise your authorized capital later, but each increase requires another OCR filing and fee. It’s often cheaper to plan sufficiently high capital at the start and avoid extra filings.

Mistake 6: Neglecting Tax and Labor Compliance

Incorporating your company is just the start. Nepal’s tax and labor rules take effect right away. Many foreign founders focus on registration and postpone these ongoing duties, which leads to penalties later. Key areas to address immediately:

• Tax registration: Once you have your incorporation certificate, apply for a Permanent Account Number (PAN) with the Inland Revenue Department (IRD). If your expected turnover exceeds the VAT threshold (NPR 5 million/year), register for VAT immediately. The standard VAT rate is 13%. Late VAT registration means you cannot reclaim input taxes on your purchases.

• Withholding taxes: Nepal mandates withholding on various payments – salaries (TDS), rent, contractor fees, etc. Set up your accounts to deduct and remit these as required. For payroll, ensure you deduct income tax from employee wages according to the income tax slab.

• Corporate tax: Remember that your first corporate tax filing (and any advance tax) will be due after the fiscal year-end. Start your accounting early to avoid a year-end scramble.

• Employee compliance: If you hire Nepali staff, you must register them in the Social Security Fund (SSF) and follow the Labor Act. Provide written employment contracts in Nepali that meet legal standards (leave, notice periods). Labor inspections can happen, so keep records of payroll, provident fund contributions, etc.

• Statutory records: Even small companies must keep formal records (board minutes, share register, etc.). Maintain these diligently at your registered office.

• Fiscal year: Nepal’s fiscal year runs from mid-July to mid-July (Bikram Sambat calendar). Align your accounting accordingly.

Treaty benefits: Nepal has tax treaties (e.g., with India, China, Mauritius) which can reduce withholding taxes on dividends, interest, and royalties. DCV can advise on structuring your investment to take advantage of these benefits if applicable.

Embedding compliance early makes future steps easier. DCV can create a compliance calendar for you – PAN/VAT timelines, payroll setup, annual return dates – so you won’t miss a deadline.

Mistake 7: Overlooking Local Office, Permits, and HR Details

The final mistakes are operational but critical. Your company must have a proper local presence:

• Physical office: OCR requires a valid Kathmandu (or other city) address at incorporation. After registration, sign a legitimate lease and register it at the local ward office. That registration must be renewed every year. Using a P.O. box or an outdated address invites penalties.

• Permits and licenses: Many businesses require additional licenses. For example, tourism businesses need approval from the Nepal Tourism Board; restaurants need health licenses; and factories require environmental clearance. Review your industry’s requirements: neglecting a necessary permit can halt operations even if you have a company certificate.

• Hiring and immigration: Any Nepali employee triggers the labor law. Draft Nepali-language employment contracts and withhold the correct taxes. If you or other foreigners will work in Nepal, arrange the necessary work permits and visas – these require sponsorship by your company and proof of compliance.

• Local representative: You don’t need a Nepali director, but appointing a legal representative (for correspondence) is wise. Ensure their role is documented in a board resolution or consent.

• Address accuracy: Ensure your registered address is correct and up-to-date. A wrong or outdated address can lead to missed legal notices.

Note: Make sure your office space is zoned for commercial use. Some areas are residential-only, and using them for business can cause local authority issues.

Many investors underestimate these steps. One retailer left its new shop unregistered locally and was fined by the municipality. Another tech startup halted hiring when it realized its managers needed valid work visas. Plan these logistics in parallel with incorporation.

Below is a quick checklist of the key tasks to complete before you file your incorporation:

1. Regulatory due diligence: Identify required approvals (OCR, DoI/IBN for FDI, NRB for funds, IRD for tax, and any sector-specific regulators). 

2. Documentation readiness: Prepare signed MoA/AoA in Nepali and gather certified IDs (passport/citizenship, PAN) and board consents.

3. Name reservation: Choose a clear, unique company name (with several backups) and ensure your stated objectives match the planned business.

4. Capital and banking: Declare a realistic authorized capital and open a capital-in bank account. Confirm Nepal Rastra Bank procedures for registering foreign investment.

5. Post-filing prep: Plan for immediate PAN/VAT registration, SSF registration for employees, and maintenance of statutory registers from day one.

FAQ

Q: Can foreigners fully own a private limited company in Nepal?
Yes – Nepal allows foreign nationals to own 100% of a private limited company. Foreigners can serve as directors, and there is no legal requirement to have a Nepali shareholder. You will need to complete any required FITTA/NRB approvals for the investment, but ownership itself is not restricted.

Q: What is the minimum capital required for a new private company in Nepal?
Nepal’s law sets no fixed minimum capital for a private company. Instead, fees are tiered by declared capital (the smallest OCR fee band begins at NPR 100,000). In practice, many startups use around NPR 100,000 in paid-up capital to minimize fees, unless a sector-specific rule demands more.

Q: Do I need special approval from the Nepal Rastra Bank (NRB)?
Yes. Any foreign equity or loan must be registered and approved by NRB. Before incorporating, obtain a Foreign Investment Registration Certificate (FIRC) for your capital inflow. Without NRB clearance, you cannot legally bring in foreign funds. The FIRC is also needed to repatriate profits later (FITTA guarantees profit repatriation after tax).

Q: How long does the company registration process in Nepal take?
In a straightforward case, OCR may issue the registration certificate in a few working days. In practice, allow about 4–6 weeks total. This covers preparing documents, getting approvals (e.g. FDI/NRB), and any follow-ups. Complex filings (special permits, visas) can extend the timeline, so plan accordingly.

Q: Is a Nepalese company required to have a local director?
No. Nepal’s Companies Act permits foreign nationals to be sole directors and shareholders. You do not need to appoint a Nepali citizen. Many foreign firms designate a local manager for convenience (banking, taxes), but it’s optional. (DCV can advise on any local representation needed.)

By avoiding these seven pitfalls, you can secure a faster and smoother company registration in Nepal. Many foreign entrepreneurs underestimate the importance of thorough preparation, even minor oversights in names, documents, or compliance can cause costly delays. 

Don’t risk a costly hiccup after you’ve invested time and money. Get expert support: contact DCV for a free consultation on your private limited company registration in Nepal. We will review your situation, spot any red flags, and guide you through the entire process step-by-step. With DCV handling the heavy lifting, you can focus on growing your business. Reach out today to expand confidently into Nepal.