Trademark Law in Nepal: Protecting Your Intellectual Property

If you are evaluating a private vs public company in Nepal, trademark protection must be part of your entry strategy. Your legal structure determines how you own, license, and enforce intellectual property. For foreign companies, this decision affects liability, compliance, taxation, and brand control.

Nepal offers strong statutory protection under the Patent, Design and Trade Mark Act. But ownership flows differently between private and public companies. Choosing the wrong structure can expose your IP to governance risk or compliance delays.

This guide explains both company structures. It also shows how Nepal’s trademark law works in practice. If you are entering Nepal through FDI or local incorporation, this article gives you clarity.

Understanding the Legal Framework in Nepal

Nepal’s corporate regime is governed by the Companies Act. Foreign investment is regulated under the Foreign Investment and Technology Transfer Act (FITTA).

Trademark protection is administered by the Department of Industries (DOI).

Together, these frameworks determine:

• How a company is formed
• Who owns shares
• How trademarks are registered
• How foreign shareholders repatriate profits

Understanding this regulatory ecosystem builds confidence and reduces entry risk.

What Is a Private Company in Nepal?

A private company is the most common vehicle for foreign investors.

Under the Companies Act 2006:

• Minimum 1 director
• Minimum 1 shareholder
• Maximum 101 shareholders
• Shares cannot be publicly traded
• Transfer of shares is restricted

Why Foreign Companies Prefer Private Companies

1. Faster incorporation
2. Lower compliance burden
3. Confidential shareholding
4. Flexible governance
5. Easier IP control

Private companies are ideal for wholly owned subsidiaries, joint ventures, and branch-style structures.

What Is a Public Company in Nepal?

A public company is structured for capital raising.

Under the Companies Act 2006:

• Minimum 3 directors
• Minimum 7 shareholders
• Can invite public subscription
• Must comply with securities regulations

Public companies are regulated by the Securities Board of Nepal (SEBON).

They are appropriate for large-scale infrastructure, banking, insurance, and IPO-driven ventures.

Private vs Public Company in Nepal – A Detailed Comparison

When evaluating a private vs public company in Nepal, foreign investors should assess ownership control, compliance intensity, and trademark strategy.

Comparison Table: Private vs Public Company

Original Insight:
For trademark protection, private companies offer faster licensing decisions and cleaner IP ownership structures. Public companies require board-level approvals and greater disclosure.

How Trademark Law Works in Nepal

The Patent, Design and Trade Mark Act 1965 governs trademarks.

Nepal follows a first-to-file principle. This means registration priority goes to whoever files first, not who used the mark first.

Key Trademark Features

• Valid for 7 years
• Renewable indefinitely
• Protection across goods and services classes
• Civil and criminal remedies available

Trademark registration is handled by the Department of Industries.

Trademark Registration Process in Nepal

Here is a simplified process foreign companies follow:

1. Conduct trademark search
2. File application with DOI
3. Examination by registrar
4. Publication for opposition
5. Registration certificate issuance

The process typically takes 8–18 months depending on objections.

Why Company Structure Matters for Trademark Protection

Your corporate structure affects:

• Who legally owns the trademark
• Licensing arrangements
• Tax treatment of royalties
• Repatriation of IP income
• Liability in infringement disputes

Example Scenario

A foreign parent sets up a private company in Nepal.

• The trademark can be owned by the parent.
• The Nepal subsidiary licenses the brand.
• Royalty payments follow FITTA and NRB rules.

In a public company, royalty arrangements face greater scrutiny.

Risk Factors Foreign Companies Must Evaluate

When choosing between a private vs public company in Nepal, assess:

• Governance complexity
• Minority shareholder exposure
• Disclosure obligations
• Capital raising strategy
• Long-term expansion plan

A private company reduces exposure for early-stage market entry.

Compliance Overview

Private Company Compliance

• Annual return filing
• Tax return under the Income Tax Act
• Audit requirement
• Board meetings

Public Company Additional Compliance

• Prospectus approval
• SEBON reporting
• Quarterly disclosures
• Public shareholder meetings

Public companies face significantly higher compliance costs.

Foreign Investment Considerations

Under FITTA 2019:

• Minimum FDI threshold applies
• Profit repatriation permitted
• Technology transfer allowed
• Dividend repatriation subject to tax clearance

Foreign investors usually begin with a private company model.

Strategic Use Cases

Choose a Private Company If:

• You want 100% foreign ownership
• You are testing the market
• You need tight IP control
• You want fast incorporation

Choose a Public Company If:

• You plan an IPO
• You need local capital
• You operate in regulated sectors
• You require large infrastructure financing

Intellectual Property Risk Mitigation Strategies

Foreign companies should:

• File trademarks before market entry
• Register both English and Nepali versions
• Protect logos separately
• Monitor marketplace infringements
• Structure licensing clearly

Strong documentation strengthens enforceability.

Tax Implications for Trademark Licensing

Royalty payments are subject to withholding tax under the Income Tax Act 2002.

Foreign licensors must comply with:

• Tax clearance procedures
• NRB approval for remittance
• Double taxation treaties where applicable

Proper structuring prevents delays.

Enforcement of Trademark Rights in Nepal

Enforcement mechanisms include:

• Civil injunction
• Damages claim
• Customs seizure
• Criminal prosecution

The legal system supports registered rights more strongly than unregistered use.

Why Most Foreign Companies Start with Private Companies

Over 80% of foreign-incorporated subsidiaries in Nepal adopt private company status. This is based on DOI registration trends.

Private companies provide:

• Speed
• Confidentiality
• Cost efficiency
• Governance simplicity

They align well with controlled IP management.

Frequently Asked Questions (FAQ)

1. Is a private company better for foreign investors in Nepal?

Yes. Most foreign investors choose private companies for flexibility and lower compliance.

2. Can a public company own trademarks in Nepal?

Yes. Both private and public companies can own trademarks legally.

3. How long does trademark registration take in Nepal?

Typically 8 to 18 months, depending on objections or opposition.

4. Is Nepal a first-to-file trademark jurisdiction?

Yes. Registration priority is based on filing date.

5. Can foreign companies fully own a private company in Nepal?

Yes, subject to FITTA approval and sector eligibility.

Conclusion: Choosing the Right Structure for IP Protection

When deciding on a private vs public company in Nepal, consider your capital needs, governance tolerance, and trademark strategy.

For most foreign investors, a private company offers cleaner IP ownership and lower compliance risk. Public companies serve capital-intensive ventures.

Trademark law in Nepal provides solid statutory protection. But structure determines control.

If you are planning entry into Nepal, consult professionals who understand company law, FDI compliance, and intellectual property strategy.