Types of Companies in Nepal: Private vs Public Explained

Choosing the right company structure is the first strategic decision foreign investors make in Nepal.
The debate around private vs public company Nepal is not just legal.
It affects ownership, capital raising, compliance burden, and exit options.

Many foreign companies default to a private company.
Some later realise a public company would have aligned better with growth plans.
This guide gives you a clear, practical, and legally grounded comparison.

By the end, you will know exactly which structure fits your market entry, risk appetite, and long-term strategy.

Types of Companies Recognised in Nepal

Nepal’s corporate framework is governed primarily by the Companies Act, 2006.
Under this law, companies are broadly classified as:

1. Private Limited Company

2. Public Limited Company

Other forms exist.
Examples include branches, liaison offices, partnerships, and non-profits.
However, for foreign direct investment, the real comparison is private vs public company Nepal.

What Is a Private Company in Nepal?

A private company in Nepal is designed for closely held ownership.
It is the most common structure used by foreign investors entering Nepal.

Key Legal Characteristics of a Private Company

Under the Companies Act, a private company:

• Restricts the right to transfer shares

• Limits the number of shareholders

• Prohibits public subscription of shares

Who Typically Chooses a Private Company?

Private companies are preferred by:

• Foreign subsidiaries

• Joint ventures with Nepali partners

• Professional services firms

• IT, outsourcing, and shared service centers

What Is a Public Company in Nepal?

A public company is structured for wider ownership and capital mobilisation.

It allows shares to be offered to the public.
It can list on the Nepal Stock Exchange (NEPSE), subject to regulatory approvals.

Key Legal Characteristics of a Public Company

A public company in Nepal:

• Has no restriction on share transfer

• Can invite public subscription

• Is subject to enhanced disclosure and governance rules

Who Typically Chooses a Public Company?

Public companies are usually:

• Banks and financial institutions

• Insurance companies

• Hydropower and infrastructure projects

• Large manufacturing and trading entities

Private vs Public Company Nepal: Core Legal Differences

Minimum Capital and Shareholders

Original insight:
For foreign investors, capital flexibility makes private companies significantly faster to launch.

Ownership and Control: Private vs Public Company Nepal

Private Company Ownership

• Control remains with founders or parent company

• Share transfers require shareholder approval

• Ideal for IP protection and operational control

Public Company Ownership

• Ownership can be diluted through public shareholding

• Board composition is more regulated

• Minority shareholder protection rules apply

For foreign parents, private companies offer tighter governance.

Compliance and Governance Burden Compared

One of the biggest differences in private vs public company Nepal is compliance intensity.

Private Company Compliance

• Annual filings with the Office of Company Registrar

• Financial statements and tax returns

• Fewer disclosure requirements

Public Company Compliance

• Mandatory audits with stricter standards

• Public disclosures and reporting

• Securities regulations and regulator oversight

Public companies face significantly higher recurring costs.

Capital Raising Options Explained

Capital in a Private Company

Private companies raise capital through:

• Parent company equity

• Shareholder loans

• Foreign direct investment inflows

They cannot raise funds from the general public.

Capital in a Public Company

Public companies can raise capital through:

• Initial Public Offering (IPO)

• Rights issues

• Debentures and public instruments

This flexibility comes with regulatory scrutiny.

Taxation Perspective: Private vs Public Company Nepal

From a tax rate perspective, Nepal does not differentiate heavily.

However, compliance exposure differs.

Key Tax Considerations

• Corporate income tax applies equally

• Dividend distribution is regulated

• Transfer pricing scrutiny applies to foreign entities

Private companies usually manage tax risk more efficiently due to simpler structures.

Foreign Direct Investment Angle

For FDI, both private and public companies are permitted.
However, regulatory experience differs.

Why Foreign Investors Prefer Private Companies

• Faster incorporation

• Easier capital injection

• Lower compliance friction

• Clear parent-subsidiary control

Public companies are generally chosen only when public capital is essential.

Private vs Public Company Nepal: Operational Flexibility

Operational agility is critical for foreign companies.

Private companies allow:

• Faster board decisions

• Easier restructuring

• Simpler exit or share transfer

Public companies require:

• Regulatory approvals

• Shareholder disclosures

• Compliance alignment with securities laws

When Does a Public Company Make Sense?

Despite complexity, a public company is justified when:

1. Large-scale capital is required

2. The project is infrastructure-heavy

3. Public participation is mandated by law

4. Long-term listing is a strategic objective

For most foreign entrants, this is not the starting point.

Quick Decision Framework for Foreign Companies

Choose a Private Company if you:

• Want speed and control

• Are entering Nepal for operations or services

• Plan to fund via parent company

Choose a Public Company if you:

• Need public capital

• Operate in regulated sectors

• Plan for IPO or large-scale expansion

Common Misconceptions About Private vs Public Company Nepal

• Public companies are not “more legitimate”

• Private companies can scale significantly

• Conversion from private to public is possible later

Structure choice should follow strategy, not perception.

Frequently Asked Questions (People Also Ask)

Is a private company better than a public company in Nepal?

For most foreign companies, yes.
Private companies offer flexibility, speed, and control with lower compliance costs.

Can a foreigner own 100% of a private company in Nepal?

Yes.
100% foreign ownership is permitted in many sectors, subject to FDI approval.

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

Generally NPR 10 million, though sector-specific rules may apply.

Can a private company convert into a public company later?

Yes.
Conversion is legally permitted with regulatory approvals and compliance upgrades.

Which company type is best for FDI in Nepal?

A private company is usually the most practical entry vehicle for FDI.

Conclusion: Choosing the Right Structure in Private vs Public Company Nepal

The decision between private vs public company Nepal should align with your investment horizon.
Private companies dominate foreign investment for good reason.
They are faster, leaner, and easier to manage.

Public companies serve specific capital-intensive use cases.
They are not default entry vehicles.

A well-chosen structure reduces risk, cost, and regulatory friction.

Call to Action

Planning to register a company in Nepal?
Need clarity on private vs public structures for foreign investment?

Book a consultation with our Nepal incorporation specialists.
Get a structure aligned with law, tax, and long-term growth.