Types of Companies in Nepal 2026: Companies Act 2063 Guide

The first decision every founder in Nepal makes is also the most consequential: which company structure to incorporate. The Companies Act 2063 (2006) recognises seven distinct types — private limited, public limited, one-person company, profit-not-distributing (non-profit) company, foreign company, and the holding–subsidiary structure — each with different shareholder caps, capital floors, governance load, listing eligibility and tax treatment. Choose the wrong structure at incorporation and the cost is conversion later (a private-to-public conversion before NEPSE listing, a sole-proprietorship-to-private-limited conversion when the business outgrows its original shell), with two sets of OCR fees and double the audit work.

This guide is the comparison framework. It walks through each company type under the Companies Act 2063, sets out the shareholder cap, the minimum capital, the governance requirements, the audit and disclosure load, and the realistic use case. It is the right starting point for a founder, an NRN investor, or corporate counsel choosing between structures. The operational registration steps for each are covered in the dedicated guides — see our company registration in Nepal guide for the full OCR process, the small business registration guide for the sole-proprietorship route, and the IPO in Nepal guide for the public-listing path.

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Our corporate law team handles incorporation, conversion, foreign-company registration and pre-IPO restructuring across the Companies Act 2063 framework. The pattern in conversion work is consistent — most clients incorporate as private limited because that is the default route, then face an NPR 10 million paid-up capital top-up and shareholder restructure when they decide to list. The cleaner path is to choose the right structure at the start. The comparison below covers the question every founder asks at incorporation: which type fits my business model, capital plan and exit strategy.

Why does the choice of company type matter?

Five operational consequences flow directly from the structure you pick on the OCR application:

1. Shareholder cap and ownership flexibility — private companies are limited to 101 shareholders with restricted transfer; public companies have no cap and free transfer
2. Minimum capital — public limited requires NPR 10 million paid-up; private limited has no statutory minimum at the Act level but practical minimums apply by sector
3. Governance load — public companies require a minimum of three directors and a board structure compliant with the Securities Act 2063 if listed; private companies require one or more directors with lighter board obligations
4. Audit and disclosure — public companies file audited accounts on a stricter schedule and must publish certain disclosures; private companies have lighter filing
5. Exit and listing — only a public company can list on NEPSE through a SEBON-approved IPO; a private company that wants to go public must first convert to public limited

Tax treatment is largely uniform under the Income Tax Act 2058 (the standard corporate tax rate applies regardless of structure), but specific reliefs and incentives — for foreign investment, for profit-not-distributing companies, for industries operating in special economic zones — depend on the registration category and the underlying activity.

Private limited company — the default founder structure

The private limited company is the default vehicle for almost every Nepali startup, family business, professional firm and SME. The Act caps the shareholders at one hundred and one, prohibits open invitations to subscribe for shares, and restricts share transfer in the Articles of Association. There is no statutory minimum paid-up capital at the Act level, although sector-specific minimums apply (banks, insurance companies, hydropower projects, education and health institutions all have their own capital floors under sector legislation).

Governance is light by Companies Act standards: at least one director, an annual general meeting, an audited financial statement filed annually with the OCR. The structure offers full limited liability for shareholders, separates ownership from operations, and gives the entity a perpetual existence independent of its members. The full operational registration steps are detailed in our company registration in Nepal guide.

Public limited company — capital-raise and listing structure

The public limited company is the structure for a business that wants to raise capital from outside the founder circle, list on NEPSE, or take on the disclosure load of a regulated public entity. The Act requires a minimum of seven shareholders with no upper cap, free transferability of shares, and a minimum paid-up capital of NPR 10 million at incorporation. The board must have at least three directors and the governance regime aligns with the Securities Act 2063 once the company is listed or invites public subscription.

Conversion from private to public is the standard route for startups that grow into IPO candidates. The conversion involves passing a special resolution, filing the conversion application at the OCR, topping up paid-up capital to the NPR 10 million floor, restructuring the board to meet the three-director minimum, and re-issuing the corporate documentation in the public-company format. For the SEBON / NEPSE pre-listing process see our dedicated IPO in Nepal guide.

One-person company — single-shareholder limited liability shell

The one-person company is the structure for a solo professional or sole founder who wants the limited-liability protection of a corporate entity without bringing in a co-shareholder for legal-form reasons. It is also the standard structure for a wholly-owned subsidiary where the holding company is the single shareholder. Compliance is lighter than a multi-shareholder private company — the AGM and share-transfer rules adapt to the single-owner reality — but full Companies Act 2063 obligations on annual return, audit and OCR filing apply.

Profit-not-distributing company — the Section 166 non-profit

Section 166 of the Companies Act 2063 creates a distinct category for entities that pursue social, educational, religious, scientific or charitable objectives and undertake not to distribute profits to their members. The structure differs from an NGO or association under the Associations Registration Act 2034 — a Section 166 company has the full corporate form (limited liability, perpetual succession, board governance) but is contractually committed to retain all surplus inside the entity for its stated objects.

The Section 166 form is the right vehicle for foundations, research bodies, private schools and hospitals operating on a not-for-profit basis, and for social enterprises where the founder explicitly wants to ring-fence surplus from distribution. It is registered at the OCR like any other company; tax treatment under the Income Tax Act 2058 depends on whether the entity qualifies as a tax-exempt institution under the relevant section.

Foreign company — branch and liaison office

A foreign company under the Companies Act 2063 means a company incorporated outside Nepal that operates in Nepal through a branch office or a liaison office. Section 154 onwards govern registration with the OCR. Branch offices conduct revenue-generating business and pay corporate tax in Nepal; liaison offices are limited to communication, market research and similar non-revenue activities and do not file an income tax return on Nepal-source income beyond the prescribed.

For foreign direct investment in a Nepal-incorporated entity (private limited or public limited owned wholly or partly by a non-resident), the regime is the Foreign Investment and Technology Transfer Act 2075 and the Department of Industry / Investment Board approval process, not the Section 154 foreign-company branch route. The two are distinct and the choice depends on whether the entry is via a Nepal-incorporated subsidiary or a direct branch.

Holding and subsidiary companies

The Act recognises the holding–subsidiary relationship — a holding company is one that controls a subsidiary, and a subsidiary is one controlled by a holding company. Control is typically defined as ownership of more than 50 percent of voting shares or board control. Each entity is registered separately at the OCR and files its own returns; the consolidated accounting and inter-company governance rules of the Companies Act and the relevant accounting standards apply at the group level.

The structure is used by corporate groups and conglomerates, by international parents establishing a Nepal subsidiary, and by Nepali businesses spinning out a separate entity for a specific business line. Tax treatment of inter-company transactions is governed by the Income Tax Act 2058 transfer-pricing and related-party rules.

Government companies and statutory corporations

Government companies are companies in which the Government of Nepal or a State-owned entity holds a majority of shares. They are registered at the OCR under the Companies Act 2063 framework but are also subject to sector-specific statutes and the public-procurement and audit regimes that apply to State entities. Examples include Nepal Telecom (where the Government holds the majority stake), Nepal Oil Corporation, and various subsidiaries of Nepal Electricity Authority.

How to choose between the types — practical matrix

Conversion between types — when and how

Conversion is permitted under the Companies Act 2063 between most types subject to fulfilling the new structure's requirements. The most common conversions in our practice:

• Private to public — most common, driven by a planned IPO or an outside capital raise. Requires special resolution, OCR application, capital top-up to NPR 10 million paid-up, board restructuring to three directors, and refresh of corporate documentation.
• One-person to private — when a solo founder takes on co-shareholders. Requires special resolution, transfer of shares to the new co-shareholders, AGM and director restructuring as the shareholder base grows.
• Sole proprietorship to private limited — strictly speaking not a "conversion" because a sole prop has no separate legal personality, but practically a registration of the new private limited company and asset transfer from the proprietor to the company.
• Branch to subsidiary — for foreign companies that move from a market-presence model to a long-term operating model. Requires fresh incorporation under Companies Act 2063 + FITTA approval if FDI.

Each conversion has its own OCR fee, documentation set and timeline. Plan the right structure at incorporation if at all possible — the cost saving over the company's lifetime is meaningful.