If you are evaluating private vs public company in Nepal, you are already thinking strategically. The structure you choose will determine control, capital flexibility, compliance burden, and long-term scalability. For foreign companies entering Nepal, this decision is not administrative. It is foundational.

Nepal’s regulatory framework is governed primarily by the Companies Act 2063 (2006) and the Foreign Investment and Technology Transfer Act 2019 (FITTA). The wrong structure can slow approvals, complicate capital inflow through Nepal Rastra Bank, and limit exit options.

This guide breaks down everything foreign investors need to know. Clear. Practical. Actionable.

Why Nepal Is on the Radar of Global Investors

Nepal is no longer a frontier market. It is a reforming economy with improving infrastructure and policy clarity.

Key drivers:

• Strategic location between India and China
• Young, cost-efficient workforce
• Expanding digital and service economy
• Liberalized FDI framework under FITTA 2019
• Growing hydropower and manufacturing sectors

The Government of Nepal reports increasing FDI commitments annually, particularly in energy, IT services, tourism, and manufacturing. Regulatory reforms continue under the supervision of:

• Office of the Company Registrar (OCR)
• Department of Industry (DOI)
• Nepal Rastra Bank (NRB)
• Inland Revenue Department (IRD)

Before investing, you must choose the right corporate vehicle.

Private vs Public Company in Nepal: Core Legal Differences

Understanding private vs public company in Nepal requires clarity on legal definitions under the Companies Act 2063.

What Is a Private Company in Nepal?

A private company:

• Restricts share transfer
• Limits number of shareholders
• Cannot invite the public to subscribe for shares
• Must include “Private Limited” in its name

Minimum requirements:

• At least 1 shareholder
• At least 1 director
• No minimum paid-up capital mandated under general law (FDI minimums apply separately)

Private companies are the most common structure for foreign investors.

What Is a Public Company in Nepal?

A public company:

• Can invite public subscription
• Can list shares on the Nepal Stock Exchange (NEPSE)
• Has no restriction on share transfer
• Requires higher governance standards

Minimum requirements:

• At least 7 shareholders
• At least 3 directors
• Higher regulatory disclosure obligations

Public companies are typically used for large infrastructure, banking, hydropower, and large-scale manufacturing projects.

Comparison Table: Private vs Public Company in Nepal

Strategic Insight:
For 90% of foreign market entries, a private company provides flexibility, control, and faster execution.

Foreign Investment Rules Under FITTA 2019

Foreign investors must obtain approval under the Foreign Investment and Technology Transfer Act 2019 (FITTA).

Key compliance steps:

1. FDI approval from Department of Industry (DOI)
2. Company incorporation at OCR
3. Capital injection approval from NRB
4. Tax registration with Inland Revenue Department
5. Sector-specific licenses if applicable

Minimum FDI threshold currently stands at NPR 20 million in many sectors, though this can change via government notification.

Both private and public companies can receive FDI. However, the private structure is typically more efficient for approval.

Capital Structure and Funding Flexibility

When analyzing private vs public company in Nepal, capital strategy matters.

Private Company Funding Options

• Foreign equity injection
• Shareholder loans
• Joint venture structure
• Internal accrual reinvestment

Public Company Funding Options

• IPO
• Follow-on public offering
• Debentures
• Institutional investors

Public companies provide broader fundraising access. But they come with heavier reporting obligations and regulatory oversight.

Governance and Compliance Requirements

Compliance determines cost and risk exposure.

Private Company Governance

• Annual general meeting
• Annual return filing
• Tax filings
• Audit (if threshold met)
• Director resolutions

Public Company Governance

• Mandatory independent directors
• Securities Board compliance
• Prospectus disclosure
• Quarterly financial reporting
• Stronger audit requirements

Public governance is more transparent but significantly more complex.

Taxation: Corporate Income and Withholding

Corporate taxation is governed by the Income Tax Act 2002.

General Corporate Income Tax (CIT):

• 25% standard rate for most companies
• Concession rates for specific industries such as hydropower

Dividend distribution tax applies upon repatriation.

There is no difference in basic CIT rate between private and public companies. However, public companies often face additional compliance audits and regulatory costs.

Sector-Specific Considerations

Certain industries influence structure choice.

Banking and Financial Institutions

Must be public companies due to regulatory requirements under Nepal Rastra Bank.

Hydropower

Often structured as public companies to facilitate IPO and infrastructure financing.

IT and Service Companies

Typically structured as private companies for flexibility and foreign ownership clarity.

Strategic Decision Framework for Foreign Companies

When choosing between private vs public company in Nepal, ask:

1. Do you need public capital access?
2. Is IPO part of your exit strategy?
3. What is your projected scale in five years?
4. How much regulatory oversight can you manage?
5. Are you entering as a subsidiary or standalone venture?

If control and operational speed matter, choose private.

If capital expansion and public participation are critical, consider public.

Compliance Cost Comparison

Below is an estimated compliance intensity matrix:

Public companies require deeper legal infrastructure.

Repatriation of Profits

Under FITTA and NRB regulations:

• Dividends can be repatriated
• Capital gains can be repatriated
• Loan repayments permitted

Approval from Nepal Rastra Bank is required.

Structure does not materially change repatriation rights. But documentation standards are stricter for public companies.

Share Transfer and Exit Strategy

Private companies:

• Share transfer subject to shareholder agreement
• Useful for joint ventures
• Easier to negotiate strategic exit

Public companies:

• Shares traded openly
• Liquidity through market
• Greater transparency

For foreign strategic investors, private share sale agreements provide stronger control.

Common Mistakes Foreign Investors Make

• Choosing public structure without capital plan
• Ignoring sectoral restrictions
• Underestimating compliance cost
• Not aligning exit strategy with structure
• Failing to structure shareholder agreements properly

Structure drives everything.

When Should You Choose a Private Company?

Choose a private company if:

• You are entering Nepal as a subsidiary
• You require operational flexibility
• You want limited public disclosure
• You plan strategic partnerships
• You aim for controlled growth

When Should You Choose a Public Company?

Choose a public company if:

• You require large-scale public funding
• IPO is part of roadmap
• You operate in infrastructure
• You need market liquidity
• Regulatory transparency strengthens credibility

Long-Term Investment Climate Outlook (2026)

Nepal’s reform trajectory shows:

• Continued FDI liberalization
• Digitization of OCR processes
• Stronger tax enforcement
• Infrastructure expansion
• Regional trade integration

Private companies will remain the preferred entry model for foreign investors. Public companies will dominate large capital projects.

The decision is strategic, not procedural.

Frequently Asked Questions (People Also Ask)

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

Yes. FITTA 2019 allows full foreign ownership in many sectors, subject to approval and minimum investment thresholds.

2. Is a public company mandatory for FDI?

No. Foreign investors commonly use private companies. Public status is required only in specific regulated industries.

3. What is the minimum capital for a private company in Nepal?

General law does not impose a fixed minimum. However, FDI currently requires minimum NPR 20 million in many sectors.

4. Can a private company convert into a public company?

Yes. Conversion is permitted under Companies Act 2063, subject to compliance and shareholder approval.

5. Which structure is easier for profit repatriation?

Both structures allow repatriation under NRB guidelines. Private companies generally involve simpler documentation.

Final Thoughts: Making the Right Structural Choice

Choosing between private vs public company in Nepal shapes your control, capital strategy, compliance exposure, and exit options.

For most foreign companies, the private limited model delivers speed, control, and flexibility. Public companies suit capital-intensive sectors and IPO ambitions.

The right structure aligns with your five-year strategy. Not just your incorporation plan.

If you are evaluating entry into Nepal, conduct a structured feasibility assessment before incorporation. Align legal structure with capital roadmap, governance capacity, and sector compliance.