What You Need to Know About Company Formation in Nepal

Choosing between a private vs public company in Nepal is one of the first strategic decisions foreign businesses face. The structure you select affects ownership, capital raising, compliance, control, and long-term growth. Nepal welcomes foreign investment, but the rules differ significantly by company type. This guide delivers a clear, authoritative comparison—so you can incorporate with confidence and avoid costly missteps.

Your company type determines how easily you can raise capital, repatriate profits, and scale operations. It also dictates reporting obligations, audit intensity, and governance. For most foreign entrants, the decision comes down to control vs access to capital.

In brief:

• Private companies favour control and speed.

• Public companies favour capital access and visibility.

Legal framework governing company formation in Nepal

Company incorporation and governance are primarily regulated by:

• Companies Act, 2006 (as amended)

• Foreign investment approvals under sectoral rules

• Oversight by the Office of the Company Registrar

• Industrial licensing via the Department of Industry

These authorities define ownership limits, disclosure standards, and ongoing compliance.

Private vs Public Company in Nepal — Core Definitions

What is a private company in Nepal?

A private company is closely held. Shares are not offered to the public, and transferability is restricted by the Articles of Association.

Typical features

• 1–50 shareholders

• Minimum paid-up capital set by sector

• Directors can be as few as one

• Faster incorporation and fewer disclosures

What is a public company in Nepal?

A public company can offer shares to the public and may list on the Nepal Stock Exchange (NEPSE), subject to eligibility.

Typical features

• Minimum 7 shareholders

• Higher paid-up capital thresholds

• Mandatory board committees

• Extensive disclosures and audits

Key differences at a glance

Ownership and control implications

Foreign parents typically prefer private companies to retain decision-making control. Public companies dilute control in exchange for capital and market credibility.

Choose private if you value:

• Tight governance

• Confidential financials

• Rapid pivots

Choose public if you need:

• Large capital pools

• Market visibility

• Broad ownership

Capital requirements and fundraising options

Capital rules vary by sector. Public companies face higher minimum capital and stricter capital maintenance rules.

Fundraising pathways

1. Private company

   • Parent funding

   • Strategic investors

   • Intercompany loans

2. Public company

   • IPO

   • Rights issues

   • Secondary offerings

Compliance, audits, and reporting

Public companies must publish audited financials, hold AGMs, and comply with securities regulations. Private companies enjoy lighter reporting.

Compliance checklist (illustrative):

• Annual returns

• Statutory audit

• Tax filings

• Beneficial ownership disclosures

Taxation overview for foreign companies

Corporate income tax applies equally by structure, but public companies may face additional disclosure and withholding layers.

Common considerations

• Corporate income tax

• Withholding tax on dividends

• Transfer pricing for intercompany transactions

• Profit repatriation approvals

Governance and management structure

Public companies require independent directors and board committees. Private companies can operate with lean governance.

Governance contrast

• Private: Founder-led, agile boards

• Public: Independent oversight, formal committees

Market perception and credibility

Public companies enjoy stronger brand recognition and lender confidence. Private companies rely more on parent guarantees and track record.

Which structure fits your entry strategy?

Best use cases for private companies

• Market entry subsidiaries

• IT and services

• Professional firms

• Regional hubs

Best use cases for public companies

• Infrastructure

• Hydropower

• Large manufacturing

• Capital-intensive projects

Numbered checklist: how to decide

1. Define your capital needs.

2. Assess control requirements.

3. Map compliance capacity.

4. Review sectoral caps.

5. Plan your exit strategy.

Bulleted pros and cons

Private company

• Pros: Control, speed, confidentiality

• Cons: Limited capital access

Public company

• Pros: Capital, visibility, scale

• Cons: Costly compliance, diluted control

Common mistakes foreign investors make

• Over-structuring too early

• Underestimating compliance costs

• Ignoring sector-specific approvals

Avoid these by aligning structure to growth stage.

FAQs — People Also Ask

1) Can a foreigner own 100% of a private company in Nepal?
Yes, subject to sectoral approval and licensing.

2) Is a public company mandatory for foreign investors?
No. Most foreign entrants choose private companies.

3) How long does incorporation take?
Private companies incorporate faster than public ones.

4) Can a private company convert to public later?
Yes, conversion is permitted with approvals.

5) Which structure is cheaper to maintain?
Private companies have lower ongoing costs.

Conclusion

When weighing private vs public company in Nepal, foreign businesses should prioritize strategy oversize. Private companies dominate early entry due to control and efficiency. Public companies suit large, capital-heavy ventures. The right structure reduces risk and accelerates growth.