Non-Resident Nepalis (NRNs) can establish a private limited company in Nepal under the Companies Act, 2063 (2006). The Office of Company Registrar (OCR) regulates company registration procedures. NRNs enjoy specific privileges under the Non-Resident Nepali Act, 2064 (2008), allowing them to invest and operate businesses in Nepal with certain restrictions in specific sectors.
Legal Framework Governing NRN Business Registration
The legal framework for NRN company registration comprises multiple statutes. The Companies Act, 2063 (2006) provides the primary legal basis for company formation. The Non-Resident Nepali Act, 2064 (2008) defines NRN status and investment rights. The Foreign Investment and Technology Transfer Act, 2075 (2019) regulates foreign investment aspects. The Industrial Enterprises Act, 2076 (2020) governs industrial licensing requirements for certain business activities.
Legal InstrumentYearRelevance to NRN Company RegistrationCompanies Act2063 (2006)Primary law governing company formation and operationNon-Resident Nepali Act2064 (2008)Defines NRN status and investment privilegesForeign Investment and Technology Transfer Act2075 (2019)Regulates foreign investment proceduresIndustrial Enterprises Act2076 (2020)Governs industrial licensing requirements
Eligibility Criteria for NRNs to Register Private Limited Company
NRNs must hold a valid Non-Resident Nepali card issued by the Department of Immigration or Nepali diplomatic missions abroad. According to Section 2 of the Non-Resident Nepali Act, 2064, a person of Nepali origin who has acquired citizenship of a foreign country qualifies as an NRN. NRNs can hold up to 100% equity in most sectors except those restricted under the Foreign Investment and Technology Transfer Act.
Minimum Requirements for Private Limited Company Formation
The Companies Act, 2063 mandates specific minimum requirements for private limited company formation. A minimum of two shareholders and two directors are required. The minimum authorized capital requirement varies by business sector. For general trading and service businesses, no minimum capital is mandated, but sector-specific regulations may apply. The company must have a registered office address in Nepal.
Requirement CategoryMinimum SpecificationNumber of ShareholdersMinimum 2 personsNumber of DirectorsMinimum 2 personsAuthorized CapitalNo general minimum (sector-specific requirements apply)Registered OfficeMust be located within NepalCompany NameMust be unique and approved by OCR
Restricted and Prohibited Sectors for NRN Investment
The Foreign Investment and Technology Transfer Act, 2075 identifies sectors where foreign investment, including NRN investment, faces restrictions. Arms and ammunition manufacturing remains completely prohibited. Retail business with investment below NPR 10 million is restricted. Domestic courier services with investment below NPR 10 million face restrictions. Personal service businesses like barber shops and beauty parlors are restricted for foreign investors.
Documents Required for NRN Company Registration
NRNs must prepare comprehensive documentation for company registration. The following documents are mandatory:
- Valid Non-Resident Nepali Card: The original NRN card issued by the Department of Immigration or Nepali diplomatic missions abroad must be submitted with a certified copy.
- Passport Copy: A notarized copy of the valid passport showing personal details and visa status in the country of residence.
- Citizenship Certificate or Foreign Citizenship Document: For NRNs, a copy of the foreign citizenship certificate or naturalization document with Nepali translation.
- Passport-sized Photographs: Recent passport-sized photographs of all shareholders and directors (typically 4 copies each).
- Company Name Approval Letter: The name reservation approval from the Office of Company Registrar confirming the proposed company name is available.
- Memorandum of Association: The MOA drafted according to Schedule 1 of the Companies Act, 2063, signed by all subscribers.
- Articles of Association: The AOA prepared according to Schedule 2 of the Companies Act, 2063, or customized articles approved by shareholders.
- Registered Office Proof: Rental agreement or ownership documents of the proposed registered office with a no-objection letter from the property owner.
- Tax Clearance Certificate: PAN registration certificate of all shareholders and directors from the Inland Revenue Department.
- Board Resolution: A resolution from the initial board meeting appointing directors and authorizing company registration.
Step-by-Step Company Registration Process for NRNs
Step 1: Obtain Non-Resident Nepali Card
NRNs must first secure their NRN card from the Department of Immigration in Nepal or from Nepali embassies abroad. The application requires proof of Nepali origin and foreign citizenship. Processing typically takes 15-30 working days depending on the issuing authority.
Step 2: Reserve Company Name
Submit a name reservation application to the Office of Company Registrar through the online portal or physical submission. The proposed name must not be identical or similar to existing registered companies. The OCR approves or rejects the name within 1-3 working days. The name reservation remains valid for 35 days.
Step 3: Prepare Incorporation Documents
Draft the Memorandum of Association and Articles of Association according to the Companies Act, 2063. The MOA must specify the company’s objectives, authorized capital, and subscriber details. The AOA outlines internal management rules and procedures. Both documents require signatures from all subscribers with witness attestation.
Step 4: Obtain Tax Registration
Register for Permanent Account Number (PAN) at the Inland Revenue Department. All proposed shareholders and directors must have individual PAN certificates. The company will receive a separate PAN after incorporation. This step can be completed simultaneously with document preparation.
Step 5: Submit Registration Application
File the complete registration application with the Office of Company Registrar. The application includes the approved name reservation, MOA, AOA, and all supporting documents. Pay the prescribed registration fees based on the authorized capital amount. The OCR reviews the application for completeness and legal compliance.
Step 6: Pay Registration Fees
The registration fee structure depends on the authorized capital amount. Companies with authorized capital up to NPR 100,000 pay NPR 1,000. For capital between NPR 100,001 to NPR 500,000, the fee is NPR 2,000. Higher capital amounts attract proportionally higher fees as specified in the Companies Regulation, 2064.
Step 7: Receive Certificate of Incorporation
Upon approval, the Office of Company Registrar issues the Certificate of Incorporation. This certificate confirms the company’s legal existence from the date of incorporation. The company receives a unique company registration number. The certificate must be displayed at the registered office.
Step 8: Post-Incorporation Compliance
Complete mandatory post-incorporation registrations including VAT registration if applicable, social security fund registration for employees, and municipality business license. Open a corporate bank account using the incorporation certificate. Commence business operations only after completing all statutory registrations.
Capital Requirements and Investment Procedures
The Companies Act, 2063 does not mandate a universal minimum capital requirement for private limited companies. However, sector-specific regulations impose minimum capital thresholds. The Foreign Investment and Technology Transfer Act, 2075 requires foreign investors, including NRNs in certain contexts, to invest a minimum amount depending on the business nature.
Business SectorMinimum Capital RequirementGeneral Trading/ServicesNo minimum specifiedManufacturing IndustryVaries by industry typeTourism IndustryNPR 50 million for star hotelsFinancial ServicesAs per Nepal Rastra Bank directivesTechnology-based ServicesNo minimum specified
Shareholding Structure and Equity Distribution
NRNs can hold 100% equity in private limited companies in non-restricted sectors. The shareholding structure must be clearly defined in the Memorandum of Association. Share certificates must be issued to all shareholders within 60 days of incorporation according to Section 44 of the Companies Act, 2063. Shares can be transferred subject to the restrictions mentioned in the Articles of Association.
Director Appointment and Responsibilities
The Companies Act, 2063 requires a minimum of two directors for private limited companies. NRNs can serve as directors without physical presence requirements, but at least one director should be accessible for legal notices. Directors bear fiduciary duties under Section 103 of the Companies Act. They must act in good faith, exercise due diligence, and avoid conflicts of interest.
Registered Office Requirements
Every private limited company must maintain a registered office in Nepal under Section 12 of the Companies Act, 2063. The registered office address must be filed with the Office of Company Registrar. All official communications and legal notices are served at this address. The company must display its name board at the registered office. Any change in registered office requires notification to the OCR within 15 days.
Tax Registration and Compliance Obligations
Companies must register with the Inland Revenue Department for tax purposes immediately after incorporation. The PAN certificate enables the company to conduct financial transactions and fulfill tax obligations. Value Added Tax (VAT) registration is mandatory for businesses with annual turnover exceeding NPR 5 million. Companies must file annual income tax returns and maintain proper accounting records as per the Income Tax Act, 2058.
Annual Compliance Requirements for Private Limited Companies
Private limited companies must fulfill several annual compliance obligations. The Companies Act, 2063 mandates holding an Annual General Meeting within six months of the fiscal year end. Companies must file annual returns with the Office of Company Registrar within one month of the AGM. Financial statements must be audited by a registered auditor and submitted to the OCR.
Compliance RequirementDeadlineLegal ProvisionAnnual General MeetingWithin 6 months of fiscal year endSection 73, Companies ActAnnual Return FilingWithin 1 month of AGMSection 79, Companies ActAudited Financial StatementsWith Annual ReturnSection 109, Companies ActIncome Tax ReturnWithin 3 months of fiscal year endIncome Tax Act, 2058
Banking and Financial Transaction Procedures
NRN-owned companies must open corporate bank accounts with licensed commercial banks in Nepal. The account opening requires the Certificate of Incorporation, company PAN, board resolution, and director identification documents. NRNs can repatriate profits and dividends subject to applicable taxes under the Foreign Exchange Regulation Act, 2019. All foreign currency transactions must comply with Nepal Rastra Bank regulations.
Repatriation of Profits and Dividends
The Foreign Investment and Technology Transfer Act, 2075 guarantees profit repatriation rights to foreign investors including NRNs. Section 9 of the Act permits repatriation of amounts received from sale of shares, profits, and dividends after paying applicable taxes. The company must obtain tax clearance certificates before remitting funds abroad. Nepal Rastra Bank approval may be required for large remittances.
Conversion from Sole Proprietorship to Private Limited Company
NRNs operating as sole proprietors can convert their business into a private limited company. The conversion process involves registering a new private limited company and transferring business assets and liabilities. The sole proprietorship must be closed after asset transfer. This conversion provides limited liability protection and enhanced credibility for business expansion.
Differences Between NRN and Foreign Investment
While NRNs are technically foreign citizens, the Non-Resident Nepali Act, 2064 provides them with privileges similar to Nepali citizens in most sectors. NRNs can invest in sectors restricted to foreign investors. They enjoy simplified approval procedures compared to foreign direct investment. However, in certain strategic sectors, NRNs may face similar restrictions as foreign investors.
AspectNRN InvestmentForeign Direct InvestmentInvestment ApprovalSimplified procedureDepartment of Industry approval requiredRestricted SectorsFewer restrictionsMore sectors restrictedProperty OwnershipCan own property with limitationsCannot own landProfit RepatriationPermitted after tax paymentPermitted after tax payment
Role of Department of Industry
The Department of Industry under the Ministry of Industry, Commerce and Supplies facilitates industrial enterprise registration. Companies engaged in manufacturing or industrial activities must obtain approval from the Department. The Industrial Enterprises Act, 2076 governs the registration process. The Department issues industry registration certificates and monitors compliance with industrial policies.
Intellectual Property Protection
Companies can protect their intellectual property through registration with the Department of Industry. Trademark registration protects brand names and logos under the Patent, Design and Trademark Act, 2022. Patent registration protects inventions and innovations. Copyright protection applies automatically to original creative works. NRN-owned companies enjoy the same intellectual property rights as domestic companies.
Employment and Labor Law Compliance
Companies must comply with the Labor Act, 2074 (2017) regarding employee rights and working conditions. Employment contracts must specify terms of employment, salary, and benefits. Companies must register with the Social Security Fund and contribute to employee social security. Foreign nationals employed by NRN companies require work permits from the Department of Labor.
Dispute Resolution Mechanisms
Commercial disputes can be resolved through negotiation, mediation, or litigation. The Arbitration Act, 2055 (1999) provides for arbitration as an alternative dispute resolution mechanism. The Companies Act, 2063 contains provisions for resolving shareholder disputes. The Company Registrar’s Office has jurisdiction over certain company law matters. Complex commercial disputes are adjudicated by specialized commercial courts.
Closure and Liquidation Procedures
Companies can be voluntarily wound up under Section 122 of the Companies Act, 2063 through a special resolution of shareholders. The liquidation process involves appointing a liquidator, settling debts, and distributing remaining assets to shareholders. The liquidator must file a final account with the Office of Company Registrar. The company is dissolved after the Registrar issues a dissolution certificate.
Recent Amendments and Policy Changes
The Government of Nepal periodically updates investment policies to attract NRN investment. Recent amendments to the Foreign Investment and Technology Transfer Act, 2075 simplified approval procedures. The Industrial Enterprises Act, 2076 introduced online registration facilities. The Department of Industry has established one-stop service centers for business registration and licensing.
Frequently Asked Questions
Can NRNs own 100% equity in a private limited company in Nepal?
Yes, NRNs can own 100% equity in private limited companies in most sectors except those specifically restricted under the Foreign Investment and Technology Transfer Act, 2075. Restricted sectors include retail business below NPR 10 million investment and certain personal service businesses.
What is the minimum capital requirement for NRN company registration?
The Companies Act, 2063 does not specify a universal minimum capital requirement for private limited companies. However, sector-specific regulations may impose minimum capital thresholds. General trading and service businesses typically have no minimum capital requirement, while specialized sectors have specific requirements.
How long does the company registration process take?
The complete company registration process typically takes 15-30 working days from name reservation to receiving the Certificate of Incorporation. The timeline depends on document completeness, OCR workload, and whether all prerequisites are fulfilled. Online submissions may expedite the process.
Do NRN directors need to be physically present in Nepal?
NRN directors are not required to maintain continuous physical presence in Nepal. However, at least one director should be accessible for receiving legal notices and managing company affairs. Directors can authorize representatives through power of attorney for routine matters.
What taxes apply to NRN-owned companies in Nepal?
NRN-owned companies pay corporate income tax at 25% on taxable income under the Income Tax Act, 2058. VAT at 13% applies to taxable supplies. Dividend distribution tax at 5% applies to dividends paid to shareholders. Withholding taxes apply to certain payments as specified in tax laws.
Can NRNs repatriate profits from their Nepali companies?
Yes, NRNs can repatriate profits and dividends after paying applicable taxes. Section 9 of the Foreign Investment and Technology Transfer Act, 2075 guarantees repatriation rights. Companies must obtain tax clearance certificates and comply with Nepal Rastra Bank regulations for foreign currency remittances.
What is the difference between authorized capital and paid-up capital?
Authorized capital is the maximum share capital a company can issue as stated in the Memorandum of Association. Paid-up capital is the actual amount shareholders have paid for shares. Companies can increase authorized capital through amendment procedures, while paid-up capital increases when shareholders pay for additional shares.
Are there any sector restrictions for NRN investment?
Yes, certain sectors restrict NRN investment similar to foreign investment restrictions. Arms and ammunition manufacturing is prohibited. Retail business with investment below NPR 10 million, domestic courier services below NPR 10 million, and personal service businesses face restrictions under the Foreign Investment and Technology Transfer Act.
What happens if the company fails to file annual returns?
Failure to file annual returns within the prescribed deadline attracts penalties under Section 165 of the Companies Act, 2063. The Office of Company Registrar may impose fines and eventually strike off the company from the register for persistent non-compliance. Directors may face personal liability for non-compliance.
Can a single person register a private limited company as an NRN?
No, the Companies Act, 2063 requires a minimum of two shareholders and two directors for private limited company formation. However, NRNs can register a private company (previously called one-person company) under specific provisions, though this structure has limited applicability and different requirements.
