Understanding the Company Act of Nepal for New Business Owners

If you are considering company registration in Nepal, understanding the Company Act of Nepal, 2063 (2006) is non-negotiable. This law governs how businesses are formed, operated, regulated, and dissolved in Nepal.

For foreign companies, the Company Act works alongside FDI laws, tax rules, and labor regulations. Together, they determine whether your Nepal entry is smooth or frustrating.

In this guide, I will break down the Company Act in plain English. You will learn what it allows, what it restricts, and how it affects foreign investors planning company registration in Nepal.

What Is the Company Act of Nepal?

The Company Act, 2063 (2006) is the primary legislation that regulates:

• Incorporation of companies

• Corporate governance and management

• Shareholding and capital structure

• Compliance, reporting, and penalties

• Mergers, liquidation, and closure

It applies to both local and foreign-owned companies registered with the Office of the Company Registrar (OCR).

Why the Company Act Matters for Foreign Companies

Foreign investors often assume that FDI approval alone is enough. It is not.

The Company Act directly impacts:

• Ownership structure

• Director responsibilities

• Capital requirements

• Compliance timelines

• Legal exposure of shareholders

Ignoring it can delay or even invalidate company registration in Nepal.

Types of Companies Recognized Under the Company Act

The Company Act allows several business forms. However, only some are practical for foreign companies.

1. Private Limited Company

This is the most common structure for company registration in Nepal by foreign investors.

Key features:

• Minimum 1 shareholder

• Maximum 101 shareholders

• No public share offering

• Limited liability

2. Public Limited Company

Suitable for large-scale ventures.

Key features:

• Minimum 7 shareholders

• Mandatory public disclosure

• Higher compliance burden

3. Branch Office (Foreign Company)

Allowed under specific approvals.

Key features:

• Not a separate legal entity

• Parent company bears liability

• Limited scope of activities

4. Liaison Office

Used only for market research and coordination.

Key features:

• No income-generating activity

• Strict reporting rules

Eligibility Rules Under the Company Act

Under the Company Act, a company can be registered if:

1. The proposed name is unique

2. The objectives are lawful

3. The capital structure is clearly defined

4. Required documents are submitted to OCR

For foreign shareholders, additional FDI approvals are required. However, the company itself is still governed by the Company Act.

Shareholders and Directors: What the Law Requires

Shareholders

The Company Act allows:

• Individual or corporate shareholders

• 100 percent foreign ownership in permitted sectors

• Shares to be held in foreign currency value

Directors

Under the Company Act:

• Minimum 1 director for private companies

• Directors can be foreign nationals

• Directors owe fiduciary duties to the company

Directors are personally liable for serious non-compliance.

Capital Requirements Under the Company Act

The Company Act does not fix a minimum capital for all companies. However:

• OCR reviews whether capital matches business objectives

• FDI regulations may impose sector-specific thresholds

• Capital must be declared in the Memorandum of Association

This is a critical area where company registration in Nepal often gets delayed.

Step-by-Step Process Under the Company Act

Below is a simplified process flow governed by the Company Act.

Company Registration Process

1. Name reservation at OCR

2. Drafting Memorandum and Articles of Association

3. Submission of incorporation application

4. Payment of registration fees

5. Issuance of company registration certificate

FDI approval and tax registration follow this step.

Key Documents Required Under the Company Act

You must prepare the following:

• Memorandum of Association

• Articles of Association

• Shareholder details

• Director consent letters

• Registered office address

Comparison Table: Private vs Public Company Under the Company Act

This comparison helps foreign founders choose the right structure for company registration in Nepal.

Compliance Obligations After Registration

Under the Company Act, every company must:

• Maintain statutory registers

• File annual returns with OCR

• Notify changes in directors or shareholders

• Keep proper accounting records

Failure can result in fines or deregistration.

Penalties and Liabilities Under the Company Act

The Company Act empowers OCR to:

• Impose monetary penalties

• Suspend company operations

• Cancel company registration

• Hold directors personally liable

This makes compliance a serious business issue, not paperwork.

How the Company Act Interacts With Other Laws

Company registration in Nepal is not governed by one law alone.

The Company Act works alongside:

• Foreign Investment and Technology Transfer Act (FITTA)

• Income Tax Act

• Labor Act

• Social Security Act

A compliant structure must align with all of them.

Common Mistakes Foreign Companies Make

Avoid these frequent errors:

• Assuming FDI approval equals registration

• Using generic MOA templates

• Underestimating compliance timelines

• Ignoring director liability

• Choosing the wrong company type

Each mistake can delay company registration in Nepal by months.

Why Professional Guidance Matters

The Company Act is clear, but its application is not always straightforward.

Local interpretation, OCR practice, and sector-specific rules matter. Professional structuring reduces risk and speeds up approval.

Conclusion: Company Registration in Nepal Begins With the Company Act

Successful company registration in Nepal starts with mastering the Company Act. It defines your company’s legal existence, governance, and long-term compliance.

Foreign companies that align their structure with the Company Act from day one save time, money, and legal exposure.

Call to Action

Planning company registration in Nepal?
Speak with our Nepal market-entry specialists for end-to-end support on company incorporation, FDI approval, compliance, and ongoing governance.

FAQs: Company Act and Company Registration in Nepal

Is the Company Act mandatory for foreign companies in Nepal?

Yes. Every company registered in Nepal, including foreign-owned entities, must comply with the Company Act.

Can foreigners be directors under the Company Act?

Yes. The Company Act allows foreign nationals to serve as directors without residency requirements.

Does the Company Act set minimum capital?

No. The Act itself does not, but FDI rules may impose sector-specific minimum capital thresholds.

Which company type is best for foreign investors?

A private limited company is usually best due to flexibility and lower compliance requirements.

What authority enforces the Company Act?

The Office of the Company Registrar enforces the Company Act in Nepal.

References

• Company Act, 2063 (2006), Government of Nepal

• Office of the Company Registrar (OCR), Nepal

• Foreign Investment and Technology Transfer Act (FITTA), 2019