Public, Private and Non-Profit Companies in Nepal

Companies in Nepal play a vital role in driving economic growth, generating employment, and promoting industrial development. Governed by the Companies Act, 2063 (2006), businesses in Nepal can be registered in various forms, such as private limited companies, public limited companies, non-profit organizations, and foreign companies. The Office of the Company Registrar (OCR) oversees the registration, regulation, and monitoring of companies across the country.

Private limited companies are the most common, especially among small and medium enterprises, due to simpler legal requirements and limited liability protection. Public limited companies, on the other hand, can raise capital by issuing shares to the public and are typically used for larger-scale operations. Non-profit companies operate for social, educational, or charitable purposes without distributing profits to members.

Nepal has witnessed a steady rise in company registrations over the years, reflecting increasing entrepreneurial activity and investor confidence. With the government promoting digital registration and foreign investment, the corporate sector is becoming more structured and efficient. Sectors like hydropower, tourism, manufacturing, and IT are seeing significant growth through formal companies. Overall, the company structure in Nepal provides a legal and organized framework for businesses to operate, innovate, and contribute to the nation's economic development.

There are different types of Companies. Major types are explained below:-

1. Private Companies

A private company is a type of business entity owned by a small group of individuals, typically friends, family members, or private investors. It is registered under the Company Act and operates with limited liability, meaning the personal assets of shareholders are protected from company debts. Unlike public companies, private companies do not offer their shares to the general public on the stock exchange, and ownership is usually restricted to a fixed number of shareholders, often not exceeding 50. Private companies are popular among startups and small to medium-sized enterprises due to simpler regulatory requirements and more operational flexibility. They are governed by a Board of Directors and must comply with legal formalities such as registration, annual general meetings, and financial disclosures.

In Nepal, private companies play a significant role in economic development by creating jobs, fostering innovation, and contributing to GDP growth. They are often preferred for family-owned businesses due to the ease of management and control. Overall, a private company provides a secure and structured way to do business while maintaining confidentiality and limited liability.

A private company is a business entity with several key characteristics that distinguish it from other types of companies. Here are the main characteristics:

1. Limited Liability

Shareholder’s liability is limited to the amount unpaid on their shares, protecting personal assets from business debts and obligations.

2. Shareholding Restrictions

Ownership is restricted to a limited number of shareholders, usually up to 50, who are often friends, family members, or private investors. Shares are not available for public trading.

3. No Public Share Offering

Private companies cannot offer their shares to the public on stock exchanges, unlike public companies. This ensures that ownership remains concentrated within a small group.

4. Private Management and Control

A private company is typically controlled by its shareholders or directors, offering more flexibility in decision-making without the need to answer to public shareholders.

5. Less Regulatory Requirements

Private companies are not required to disclose as much information publicly, which allows for greater privacy. However, they must still comply with basic legal requirements, such as filing annual financial statements.

6. Ownership Transfer Restrictions

The transfer of shares is often subject to approval from other shareholders or the company’s articles of association.

7. Flexibility in Operations

Private companies have more freedom in management and operational decisions since they do not have to meet the complex regulatory standards of public companies.

2. Public company

A public company is a type of business organization that offers its shares to the general public and is typically listed on a stock exchange. In Nepal, public companies are governed by the Companies Act, 2063 (2006), and are required to follow strict regulatory and disclosure standards. They must have a minimum of seven shareholders and three directors, and there is no upper limit on the number of shareholders. Public companies raise capital by issuing shares, debentures, or bonds to the public, making them ideal for large-scale businesses and infrastructure projects. Examples include banks, insurance companies, hydropower companies, and manufacturing industries. To protect investors, public companies must regularly publish financial reports, conduct annual general meetings, and comply with regulations set by the Securities Board of Nepal (SEBON).

The key advantages of public companies are access to large-scale funding, enhanced credibility, and increased public visibility. However, they also face more legal obligations and scrutiny. In Nepal, public companies contribute significantly to the national economy by generating employment, attracting investment, and promoting transparency in the business environment. Despite challenges, they play a crucial role in driving industrial development and financial market growth.

Characteristics of a Public Company

1. Public Shareholding

A public company can offer its shares to the general public through the stock exchange or public offerings. Anyone can buy its shares.

2. Minimum Number of Members

It must have at least seven shareholders to be established. There is no maximum limit on the number of shareholders.

3. Limited Liability

Shareholders' liability is limited to the amount paid on their shares. Their personal assets are protected from company debts.

4. Perpetual Succession

The company continues to exist regardless of changes in ownership or the death/exit of shareholders or directors.

5. Board of Directors

A public company must have a minimum of three directors to manage its operations, and directors are appointed by shareholders.

6. Regulatory Compliance

It must comply with detailed legal and financial regulations, including registration with the Company Registrar and oversight by SEBON (Securities Board of Nepal).

7. Transparency and Disclosure

Public companies are required to publish annual reports, financial statements, and hold annual general meetings (AGMs) to inform shareholders.

8. Access to Capital

They can raise large amounts of capital by issuing shares, bonds, or debentures to the public.

3. Company Not Distributing Profits

A company not distributing profit is typically referred to as a not-for-profit company or non-profit organization. In Nepal, such companies are registered under the Companies Act, 2063 (2006) for the promotion of social welfare, education, culture, charity, or other public interest activities. These companies do not distribute their profits or income to members, shareholders, or directors. Instead, all earnings are reinvested to achieve the organization’s objectives.

Non-profit companies operate without the motive of personal financial gain. They may generate income through donations, grants, service fees, or fundraising events, but this income is used solely to fund programs, cover operational costs, and support their mission. Examples include educational institutions, health organizations, research foundations, and community development groups. Such companies must submit financial reports to the Office of the Company Registrar and are accountable for the use of funds. Although they enjoy certain legal benefits, including tax exemptions in some cases, they are still required to maintain transparency and compliance with the law.

In Nepal, non-profit companies play a vital role in supporting underprivileged communities and addressing social challenges. They help bridge gaps left by the government and for-profit sectors, contributing significantly to national development and social inclusion.

Characteristics of a Company Not Distributing Profits

1. No Profit Distribution

Profits or income earned cannot be distributed to members, shareholders, or directors. All earnings must be reinvested to fulfill the company’s objectives.

2. Social or Charitable Purpose

These companies are established to promote education, health, culture, religion, environment, social welfare, or other non-commercial goals.

3. No Share Capital

Non-profit companies do not issue shares and do not have shareholders. Instead, they are managed by members or a board of directors.

4. Voluntary Participation

Often run by volunteers or socially committed individuals, with decisions made in the public interest.

5. Tax and Legal Benefits

In some cases, these companies may receive tax exemptions or government support for their charitable work.

6. Accountability and Transparency

They must maintain proper financial records, submit annual reports, and are subject to government monitoring to ensure proper use of funds.

7. Sustainability through Donations and Grants

These companies often rely on donations, grants, or service fees to sustain their operations.

In conclusion, companies in Nepal serve as essential drivers of economic development, employment, and innovation. Governed by the Companies Act, 2063, they exist in various forms, private, public, and non-profit, each with distinct characteristics and roles. Private companies are preferred for small to medium enterprises due to limited liability and flexibility, while public companies fuel large-scale growth through capital markets. Non-profit companies work for public welfare without profit distribution. Together, these company types form a balanced corporate framework, encouraging entrepreneurship, transparency, and social responsibility. With ongoing reforms and digitization, Nepal’s corporate sector continues to evolve and strengthen its economic foundation.