Table of Contents
What are the Types of Companies in Nepal?
The Company Act of 2006 delineates the various classifications of companies that are permitted in Nepal:
- Private Company
- Public Company
- Holding Company
- Subsidiary Company
- Foreign Company
- Listed Company
- Company Not Distributing Profits
Company Registration in Nepal
What are the Laws governing Companies in Nepal?
Companies are primarily governed by the Companies Act, 2063 (2006) that has addressed the procedure for the incorporation of a company which requires a memorandum of association. Further, the Act has laid down the differences between private and public company, formation of company, creation of public company and the method of dissolving a company. Insolvency Act, 2063 (2006) has established the procedure for breaking down a company in Nepal.
Private Company
As per the Companies Act 2063, private companies are defined as entities that are under the ownership of private individuals. These companies are not permitted to offer their shares for ownership to the general public or to register on a stock exchange. Whether held singly or jointly, these corporations may be established with the intention of achieving particular goals specified in their respective documents.
Defining Components of a Private Company
Limited Liability
The Individuals with Ownership of a Private Company aren’t liable for the corporate transactions of the Company as the company is considered, by virtue of the Civil Code, as a Legal Person with an independent identity.
Restricted Shareholders
The Shareholders of a Private Company cannot exceed 101. Moreover, the Directors of a Private Company should also be limited from 3 to 11 in accordance with the Companies Act.
No Public Trading
It is imperative that a Private Company cannot be publicly traded in a Stock Exchange.
Convertible to Public Company
If the Private Company through General Meeting adopts a special resolution, then, it can be converted into a Public Company although it must fulfill the requirements laid down by Nepalese Law. Moreover, if more than 25% shares of a company are owned by Public Companies, they shall also be considered Public Companies.
Registration of Private Company
Step 1: Registration of OCR Portal
Step 2: Submission of Application
Step 3: Upload Required Documents to OCR
Step 4: Payment of Fees
Step 5: Official Review and Authentication
Public Company
Public Companies are defined by the Companies Act 2063 as entities raising fund from the General Public through bonds, shares, debentures. These Companies are publicly traded at the Stock Exchange although the minimum capital requirement for such companies is at least NPR 1 Crore.
Defining Components of Public Company
Freely Transferable Shares
The Shares of a Public Company can be freely transferred once handed to the Public through Stock Exchanges. The Company can offer additional shares to the Public or gain capital through bonds, debentures etc.
Listed in Stock Exchange
For the shares of a Public Company to be freely traded, they are required to be listed in National Stock Exchange by the authorization of National Securities Board of the respective country (SEBON).
Convertible to Private Company
A Public Company can be re-converted into a Private Company in the following circumstances:
- If the Number of Shareholders of the Company becomes less than 7
- If the Public Company fails to maintain its Paid-Up Capital of NPR 1 Crore.
The Company will be required to conduct such re-conversion within six months of such event along with necessary changes and amendments into their respective documents.
Uncapped Amount of Shareholders
The Number of Shareholders cannot be limited or capped in any form.
Registration of Public Company
Generally, a public company isn’t directed registered but converted from a Private Company to Private Company. The Procedure of Registration of a Public Company are:
Step 1: Submit an Application to OCR
The Relevant Private Company should make an application to the office within 30 days of the date of resolution of the General Meeting which consented to the conversion.
Step 2: Review of Fulfillment of Criteria
The Private Company after submitting an application to OCR sets out all the details with the fees into a Public Company within seven days.
Step 3: Issuance of Certificate of Company Conversion
If the Company is discovered to have fulfilled the criteria for the conversion of a company, they are allocated a certificate of Company Conversion by the Office of Company Registrar.
Company Not-Distributing Profits
A Not-For-Profit Company or Company Not-Distributing Profits are company entities that operate for Social, Educational or other purposes without the objective of attaining personal gain or profits for its owners or shareholders. The Objectives of these companies are:
- Development and promotion of any profession;
- Protection of collective rights and interests of the persons engaged in a specific profession or occupation; and
- For the attainment of any scientific, academic, social, benevolent or public utility or welfare objective on the condition of not distributing dividends.
Registration of Company Not-Distributing Profits
Step 1: Reservation of Company Name
Step 2: Submission of Relevant Documents for the Filing of Company
Step 3: Issuance of Company Registration Certificate
Step 4: Registration of PAN Number at IRO
Step 5: Registration at Ward Office
Step 6: Registration at Social Welfare Council for Foreign Grants
What are the Additional Companies Mentioned in Companies Act 2006?
Government Company
Government Companies are usually publicly traded companies without Majority of Government Ownership in Nepal. These are Semi-Governmental Entities that operate as a Corporate Entity.
Foreign Company
Foreign Companies refer to those companies that have been incorporated outside Nepal.
Holding Company
Holding Companies are referred to those companies that have direct ownership or control through a Board of Directors over another company, named as Subsidiary Company.
Subsidiary Company
Subsidiary Companies are those companies that are directly controlled by a Holding Company referred above.
Conclusion
Companies are are governed primarily by the Companies Act, 2063 (2006) and the Insolvency Act, 2063 (2006). Private companies have limited liability, restricted shareholders, and cannot be publicly traded without special resolution. Public companies have freely transferable shares, must have a minimum capital, and can convert to private companies under certain conditions. Companies not distributing profits operate for specific non-profit purposes.
Frequently Asked Questions
1) What is a private company in Nepal?
A Private Limited Company (Pvt. Ltd.) is a company run for profit, restricted to:
Max 101 shareholders
Cannot publicly issue shares
Easier compliance, documentation & operation
OK for small/medium businesses
Examples: IT companies, trading companies, consultancies.
2) What is a public company in Nepal?
A Public Limited Company (Ltd.):
Can issue shares to the public
Minimum paid-up capital often required (sector-based)
At least 7 shareholders
Suitable for large businesses, banks, hydropower, insurance, manufacturing
Public companies are regulated more strictly by SEBON and related laws.
3) What is a non-profit company in Nepal?
A Non-Profit Company (Section 166 of Company Act) is:
Formed not for profit distribution
Income cannot be given to members
Must use funds for social, educational, charitable, religious, or community purposes
Requires no minimum capital
Common for NGOs that want corporate structure instead of traditional NGO registration.
4) What is the legal basis for company types in Nepal?
All company types are regulated by the:
Non-profit companies are governed by Section 166.
5) Can a private company become a public company?
Yes, a private company can convert into a public company if:
It meets share capital requirements
Removes share transfer restrictions
Increases number of shareholders
Updates MOA & AOA
Fulfills SEBON and CRO requirements
Common during mergers, expansions, or pre-IPO preparation
6) Can a foreigner form a company in Nepal?
Yes, through:
FDI (Foreign Direct Investment) route
Minimum NPR 20 million investment for FDI
Approval from DoI, NRB, and respective authorities
Foreigners cannot register a normal small private company without FDI.
7) Which is better: NGO, Non-Profit Company, or Public Company for social projects?
Depends on objective:
NGO: donor-funded social service
Non-Profit Company: transparent, corporate-style social work
Public Company: only if you plan profit + public investment (not for charity)
Non-profit companies are more credible for international partnerships.
8) Is minimum capital required for all company types?
Private Company: No minimum capital (except sector rules)
Public Company: Sector-based minimum (banks, hydropower, insurance, etc.)
Non-Profit Company: No capital requirement
9) Can a non-profit company distribute profit?
No, All income must be used for:
Objectives in MOA
Social, educational, or charitable activities
Members cannot take salary beyond approved roles.
10) Are private companies allowed to raise investment?
Yes, but through private placement only, not public offering.
11) Are public companies required to publish financial reports?
Yes, they must publish:
Annual reports
Audited financial statements
Notices for shareholders
Public disclosures (if listed)
Private companies don’t need to publish publicly.
Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The firm shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.