Types of companies in Nepal

Company as a legal person in Nepal

A company is an artificial person created, operated, and ended by law. It is a form of business organization where a group of individuals collectively manages the funds of multiple investors. Section 2(a) of the Company Act, 2063 defines a company as one incorporated under this Act. Legally, a company is recognized as a separate entity, capable of enjoying rights and fulfilling duties, and endowed with the potential of perpetual succession. This legal identity is central to its operation, enabling it to exist beyond the involvement of its founders.

Types of companies under Company Act 2063

The Company Act, 2063 of Nepal classifies companies into several types, each serving a distinct purpose and regulated accordingly. These categories help ensure proper governance, legal compliance, and flexibility in business operations.

Private Company

A private limited company is a popular structure in Nepal. It can be formed by even a single individual, and the number of shareholders must not exceed fifty. It also restricts the transfer of shares between shareholders. Private companies are not required to issue a prospectus or hold statutory meetings, which makes the registration and compliance process easier. The name of such a company must end with “Pvt. Ltd.”

Key characteristics of private companies:

• A single person can form and operate a private company.

• There is no requirement to issue a prospectus to collect capital.

• A business commencement certificate is required before starting operations.

• Share transfers are restricted.

• Statutory meetings are not mandatory.

Public Company

Public companies are open to the general public under the provisions of their Articles of Association. At least seven members are required to form a public company, and there is no upper limit. The minimum paid-up capital must be at least 10 million rupees. These companies can offer their shares to the public via a prospectus and must obtain a certificate of commencement before operating.

Key characteristics of public companies:

• Shares are freely transferable.

• Shareholders have limited liability.

• Public companies can raise capital from the public.

• Capital collection is restricted to the registered capital.

• Must obtain a certificate of commencement before starting business activities.

Company not distributing profit (non-profit company)

These companies operate for social, educational, charitable, or other non-profit objectives. They do not distribute profits as dividends or bonuses. Instead, any earnings are reinvested to meet the company’s objectives. Such companies may receive donations and grants and are often eligible for tax exemptions.

Important aspects of non-profit companies:

Foreign company in Nepal

A foreign company refers to an entity incorporated outside Nepal but conducting business within Nepal. This may be done physically, through agents, or via electronic platforms. To register, such companies must obtain foreign direct investment (FDI) approval and then apply at the Office of the Company Registrar (OCR).

Important points on foreign companies:

• Must register their branch office with OCR.

• Required to submit FDI approval documents.

• Operates under local business and tax laws while maintaining international operations.

• Must submit regular compliance documents just like domestic companies.

Government Company

While not specifically defined under Nepal’s Company Act, the concept aligns with the definition from Indian law, which considers a company a government company if at least 51% of its paid-up capital is held by the government. These companies generally serve national interests and are involved in essential services or infrastructure development.

Government company overview:

• Majority-owned by the government.

• Operate in public interest sectors like energy, transport, and telecom.

• Subject to public sector auditing and transparency standards.

• Hybrid model combining public ownership with corporate governance.

Holding Company and Subsidiary Company

Under Section 4 of the Company Act, 2063, a holding company is defined as one that controls a subsidiary company. Control may be exerted by owning a majority of the shares or influencing the board of directors.

A holding company controls a subsidiary by:

• Direct or indirect control over the formation of the Board of Directors.

• Holding a majority shareholding in the subsidiary.

• Setting strategic directions and policies for the subsidiary.

Categorization and Its Impact on Nepali Businesses

This classification helps businesses and regulators clearly define a company's nature, responsibilities, and regulatory framework. Private companies are best suited for small and medium businesses, while public companies offer scalability. Non-profit companies support social goals, foreign companies enable international collaboration, and government companies focus on public welfare.

Steps to Register Private, Public, or Foreign Companies in Nepal

Registering a company in Nepal is a legal process governed by the Company Act, 2063, and handled by the Office of the Company Registrar (OCR). Whether you're planning to start a private company, a public company, a non-profit distributing company, or even a branch of a foreign company, the registration steps follow a structured path. To begin, the applicant must choose a unique name and get it approved by OCR. Once approved, the promoters prepare essential documents like the Memorandum of Association (MoA), Articles of Association (AoA), and application forms, along with the citizenship documents of shareholders or directors. All paperwork must align with the type of company being registered.

After submitting the documents to OCR, the office reviews and verifies all details. Once the application is approved and registration fees are paid, OCR issues a company registration certificate. For public companies and foreign companies, additional documents such as capital commitments, tax clearances, or foreign investment approval may be required. After obtaining the registration certificate, businesses may proceed to PAN/VAT registration, open a company bank account, and complete other formalities like social security registration. The registration process has been streamlined through the OCR's online portal, making it more accessible for entrepreneurs across Nepal.

The diverse company types outlined in the Company Act, 2063, serve varying commercial and social objectives. From the profit-driven private and public companies to social enterprises and international branches, the legal framework offers flexibility for every business idea. With growing reforms such as support for women entrepreneurs and simplified digital procedures, Nepal is steadily creating a more inclusive and investment-friendly business environment.