Types of Companies in Nepal under Company Act, 2063

A company is an artificial person created, operated, and ended by law. A company is a form of business organization, in which a committee of representatives manages the funds of many investors. Company Act, 2063 sec 2(a) defines the term company as a company incorporated by this act. A company is a legal person or legal entity separate from and capable of rights and duties of its own and endowed with the potential of perpetual succession.

Types of Company

1. Private Company

A private limited company can be formed with one member but the maximum number of shareholders cannot exceed fifty and restricts the transfer of shares from one shareholder to another. It is not necessary to issue a prospectus to collect share capital. It is not necessary to hold a statutory meeting for a private company. The private company must use the words “Pvt.ltd” at the end of its name.

Characteristics of a private company are as follows: -

1. A single person can establish a private company.
2. It does not need to publish a prospectus at the time of the issue of its share.
3. The certificate of the business must be obtained before the commencement of the business.
4. It restricts the transfer of shares from one person to another.
5. It is not required to hold statutory meetings.

2. Public Company

A public company is a company whose membership is open to the general public under the provision of articles. The minimum number required for the formation is seven, but there is no upper limit. The paid-up capital of a public company shall be a minimum of 10 million rupees. It offers its share to the public through a prospectus and any person can apply for its share. A public limited company has to obtain the certificate of commencement before its business along with the time of issuing shares incorporation.

Characteristics of a public company are as follows: -

1. Its shares are transferable.
2. Liabilities of shareholders are limited.
3. Free to invite people to subscribe to its share and debenture.
4. Not allowed to collect capital more than registered capital.
5. Need to receive a certificate to run a business.

3. Company not distributing profit

A 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 and shareholders. These companies may qualify for tax exemptions under Nepali law. There shall not be required share capital to incorporate a company not distributing profits. Provided, however, that the company may receive any donation, or gift under law for the accomplishments of the objectives. No member of the company shall be liable for the debts and liabilities of the company except in the case where any member accepts such liability in writing, with the specification of the limit of such liability. The company shall not distribute dividends, bonuses, or any other amount, from the profits earned by it, to its members or employees; and the profits earned by the company shall be used to increase the capital of the company or for the attainment of its objectives. Any company not distributing profits shall not be merged with any company distributing profits.

4. Foreign Company

Any company or body corporate incorporated outside Nepal which has a place of business in Nepal whether by itself or through an agent, physically or through electronic mode, and conducts any business activity in Nepal in any other manner. A foreign company desiring to have its branch office registered in Nepal shall apply to the OCR, accompanied by the foreign direct investment permission obtained from the concerned body under the prevailing laws.

5. Government Company

Government company is not clearly described in the Company Act of Nepal, but the Indian Companies Act describes it as any company in which not less than fifty-one percent of the paid-up capital is held by the central government or state government.

Holding company and subsidiary company

According to the company act, 2063 it defines a holding company as a company having control over a subsidiary company and it also defines the subsidiary company as a company controlled by a holding company. Company Act states that a holding company may control its subsidiary company as follows: -

1. By holding direct or indirect control over the formation of the Board of Directors.
2. By holding majority shares of the company.

Such a wide categorization of companies in Nepal within the Company Act, 2063 gives in-depth detail toward the varied faces of business entities present in the nation. In fact, under the above classification, a company may be a private company, public company, nonprofit distributing company, foreign company, government company, or holding/subsidiary company. It serves a range of purposes starting from profit earning up to social motives and bears diverse natures with specific lawful requirements accordingly.

Private companies serve small groups of people with limited share transfers, whereas public companies involve the general public to raise capital. Non-profit distributing companies have social and educational objectives without the distribution of profits. Foreign companies extend international business to Nepal, and government companies are mainly established to serve public interests. Holding and subsidiary companies reveal corporate entities with control over one another.

This categorization will not only facilitate regulatory oversight but also provide businesses and investors with options fitted to their needs, thereby fostering economic growth and social welfare in Nepal.

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.