Overview of Company Registration for Foreigners in Nepal
Foreign nationals and entities can establish companies in Nepal under the Foreign Investment and Technology Transfer Act, 2019 (FITTA). The Office of Company Registrar (OCR) under the Department of Industry manages company registration processes. While Nepal has introduced digital initiatives, the current system requires physical presence and manual submission of documents for foreign investors. The online portal primarily serves as an information gateway rather than a complete registration platform for foreign-owned entities.
Legal Framework Governing Foreign Company Registration
The Companies Act, 2063 (2006) provides the primary legal framework for company registration in Nepal. Foreign investment is specifically regulated under the Foreign Investment and Technology Transfer Act, 2019, which replaced the earlier 1992 Act. Section 3 of FITTA permits foreign investors to invest in all sectors except those listed in the negative list. The Industrial Enterprises Act, 2020 also governs certain aspects of foreign business operations. These laws collectively establish the requirements, procedures, and restrictions applicable to foreign company registration.
| Legal Instrument | Year | Primary Purpose |
|---|---|---|
| Companies Act | 2063 (2006) | General company registration and governance |
| Foreign Investment and Technology Transfer Act | 2019 | Foreign investment regulation and approval |
| Industrial Enterprises Act | 2020 | Industrial enterprise registration and operation |
| Foreign Exchange Regulation Act | 1962 | Foreign currency transactions and repatriation |
Current Status of Online Company Registration Services
The Office of Company Registrar launched an online portal (www.ocr.gov.np) to facilitate certain aspects of company registration. The system allows users to check name availability, download forms, and access information about registration procedures. However, the portal does not provide end-to-end online registration services for foreign investors. Physical submission of documents remains mandatory at the Department of Industry or One Stop Service Center. The system lacks integration with foreign identity verification mechanisms and payment gateways for international transactions.
Limitations of Online Services for Foreign Investors
Document Authentication Requirements
Foreign investors must submit authenticated documents that cannot be processed entirely online. The Department of Industry requires original or notarized copies of passports, investment approval letters, and company formation documents from the home country. These documents must be authenticated by the Nepali Embassy or Consulate in the investor’s country. Section 7 of FITTA mandates prior approval from the Department of Industry for foreign investment, which involves physical document verification.
Physical Presence Requirements
The current regulatory framework necessitates physical presence at multiple stages of the registration process. Foreign investors or their authorized representatives must appear before the Company Registrar for document submission and verification. The Companies Act, 2063 requires at least one director to be a resident of Nepal, which creates additional compliance requirements. Bank account opening for the company also requires physical presence at Nepali financial institutions.
Payment Processing Constraints
The online portal does not support international payment methods for registration fees. Foreign investors must make payments through Nepali banks or authorized financial institutions. The Foreign Exchange Regulation Act, 1962 governs foreign currency transactions, requiring proper documentation and approval for fund transfers. Registration fees must be paid in Nepali Rupees through designated banking channels.
Step-by-Step Company Registration Process for Foreigners
Step 1: Obtain Investment Approval
Foreign investors must first obtain approval from the Department of Industry under Section 7 of FITTA. The application must include details of proposed investment, business plan, and source of funds. The Department reviews applications within 7 working days for automatic approval sectors and 30 days for other sectors. Approval is granted through an investment approval letter that specifies the terms and conditions of investment.
Step 2: Reserve Company Name
The proposed company name must be reserved through the Office of Company Registrar. Applicants can check name availability online through the OCR portal. However, formal name reservation requires submission of Form 1 along with prescribed fees. The name must comply with Section 8 of the Companies Act, 2063, which prohibits names that are identical or similar to existing companies.
Step 3: Prepare Required Documents
Foreign investors must compile and authenticate all required documents. The list includes authenticated passport copies, investment approval letter, memorandum and articles of association, and proof of registered office address. Documents in foreign languages must be translated into Nepali or English by certified translators. All foreign documents require authentication from the Nepali Embassy or Consulate.
Step 4: Submit Registration Application
The complete application package must be submitted physically to the Office of Company Registrar or One Stop Service Center. Form 2 serves as the main registration application under the Companies Act, 2063. The application must be accompanied by all supporting documents and payment receipts. The Registrar examines the application for completeness and legal compliance.
Step 5: Pay Registration Fees
Registration fees vary based on the authorized capital of the company. The fee structure is prescribed under the Companies Regulation, 2064 (2007). Payment must be made through designated banks in Nepali Rupees. Foreign investors must convert foreign currency through authorized banking channels in compliance with foreign exchange regulations.
Step 6: Obtain Certificate of Incorporation
Upon approval, the Office of Company Registrar issues a Certificate of Incorporation under Section 11 of the Companies Act, 2063. The certificate confirms the legal existence of the company from the date of incorporation. The company receives a unique registration number and PAN (Permanent Account Number) for tax purposes. The entire registration process typically takes 7 to 15 working days after submission of complete documents.
Required Documents for Foreign Company Registration
Documents from Foreign Investors
- Authenticated passport copies of all foreign shareholders and directors must be submitted with clear photographs and signature pages.
- Investment approval letter issued by the Department of Industry under FITTA must be included in the application package.
- Board resolution or authorization letter from the parent company (if applicable) must authorize the establishment of the Nepali subsidiary.
- Bank statement or financial documents proving the source of investment funds must demonstrate financial capability.
- Police clearance certificate from the home country may be required for certain business sectors.
- Curriculum vitae of foreign directors and key management personnel must detail their professional qualifications and experience.
Company Formation Documents
- Memorandum of Association must be drafted in accordance with Schedule 1 of the Companies Act, 2063.
- Articles of Association must comply with Schedule 2 of the Companies Act, 2063 or adopt model articles.
- Consent letters from all directors must be submitted in the prescribed format accepting their appointment.
- Registered office address proof must include a rental agreement or ownership document for the company premises.
- Citizenship certificate or passport copy of the resident director must be provided as per legal requirements.
Types of Companies Foreigners Can Register
Private Limited Company
Private Limited Companies represent the most common structure for foreign investment in Nepal. Section 2(h) of the Companies Act, 2063 defines private companies as those restricting share transfer rights and limiting shareholders to 101. Foreign investors can hold up to 100% equity in private companies in most sectors. The minimum authorized capital requirement varies by sector, with no general minimum for private companies. Private companies must have at least two shareholders and two directors.
Public Limited Company
Public Limited Companies can offer shares to the general public and list on the Nepal Stock Exchange. Section 2(i) of the Companies Act, 2063 defines public companies as those not classified as private companies. Foreign equity participation in public companies is subject to sector-specific restrictions. The Securities Act, 2007 governs public offerings and stock exchange listings. Public companies must have at least seven shareholders and three directors.
Branch Office
Foreign companies can establish branch offices in Nepal under Section 60 of the Companies Act, 2063. Branch offices cannot engage in manufacturing activities but can provide services and conduct liaison work. The parent company must be in operation for at least three years before establishing a branch in Nepal. Branch offices require separate registration with the Office of Company Registrar and approval from the Department of Industry.
Liaison Office
Liaison offices serve as representative offices for foreign companies without engaging in commercial activities. These offices can conduct market research, facilitate business contacts, and promote the parent company’s interests. Liaison offices cannot generate revenue or enter into commercial contracts in Nepal. Registration requires approval from the Department of Industry and the Nepal Rastra Bank.
Sector-Specific Restrictions for Foreign Investment
The Foreign Investment and Technology Transfer Act, 2019 maintains a negative list of sectors where foreign investment is prohibited or restricted. Schedule 1 of FITTA lists sectors closed to foreign investment, including cottage industries, personal services, and arms manufacturing. Certain sectors require maintaining minimum Nepali equity participation. The Department of Industry publishes updated guidelines on sector-specific investment policies.
| Sector Category | Foreign Investment Limit | Additional Requirements |
|---|---|---|
| Manufacturing (General) | Up to 100% | Industrial Enterprise License required |
| Service Industries | Up to 100% | Sector-specific approvals may apply |
| Tourism | Up to 100% | Tourism Industry License required |
| Financial Services | Up to 51% | Nepal Rastra Bank approval mandatory |
| Consulting Services | Up to 51% | Professional registration required |
| Retail Trading | Up to 50% | Minimum investment threshold applies |
Role of One Stop Service Center
The One Stop Service Center (OSSC) operates under the Department of Industry to facilitate foreign investment. The center provides integrated services for investment approval, company registration, and license issuance. Foreign investors can submit applications and obtain multiple approvals through a single window. However, the OSSC operates through physical offices in Kathmandu and does not offer complete online services. The center coordinates with various government agencies to expedite the approval process.
Alternative Options for Remote Company Registration
Engaging Local Legal Representatives
Foreign investors can appoint local law firms or company secretaries to handle registration procedures on their behalf. A power of attorney authenticated by the Nepali Embassy authorizes representatives to act on behalf of foreign investors. Legal representatives can submit documents, make payments, and complete registration formalities without the investor’s physical presence. This approach remains the most practical solution for foreigners unable to travel to Nepal.
Using Professional Company Formation Services
Several professional service providers in Nepal specialize in company formation for foreign investors. These firms offer comprehensive services including document preparation, government liaison, and compliance management. Service providers charge fees ranging from NPR 50,000 to NPR 200,000 depending on company type and complexity. Engaging professional services significantly reduces the time and effort required for company registration.
Tax Registration and Compliance Requirements
Permanent Account Number (PAN) Registration
All companies must obtain a Permanent Account Number from the Inland Revenue Department under the Income Tax Act, 2058 (2002). PAN registration is mandatory for tax compliance and business transactions. The Office of Company Registrar facilitates PAN issuance during the company registration process. Foreign investors must provide tax identification numbers from their home countries.
Value Added Tax (VAT) Registration
Companies with annual turnover exceeding NPR 5 million must register for VAT under the Value Added Tax Act, 2052 (1996). VAT registration requires submission of company registration certificate, PAN certificate, and business premises documents. The Inland Revenue Office issues a VAT registration certificate within 7 working days. Foreign investors must appoint a tax representative if they do not have permanent residence in Nepal.
Post-Registration Compliance Obligations
Annual Return Filing
Section 110 of the Companies Act, 2063 requires all companies to file annual returns with the Office of Company Registrar. The annual return must include financial statements, list of shareholders, and details of directors. Companies must file returns within six months of the financial year end. Failure to file annual returns results in penalties and potential company deregistration.
Foreign Investment Reporting
Foreign-invested companies must submit annual reports to the Department of Industry under FITTA regulations. The report must detail investment utilization, business operations, and employment generation. Companies must also report any changes in shareholding, directors, or business activities. The Department monitors compliance with investment approval conditions through these reports.
Technology Transfer and Intellectual Property
The Foreign Investment and Technology Transfer Act, 2019 governs technology transfer agreements between foreign and Nepali entities. Section 15 of FITTA requires registration of technology transfer agreements with the Department of Industry. Foreign investors can protect intellectual property rights through registration with the Department of Industry. The Patent, Design and Trademark Act, 1965 provides legal protection for intellectual property in Nepal.
Repatriation of Profits and Capital
Section 11 of FITTA guarantees foreign investors the right to repatriate profits, dividends, and invested capital. Repatriation requires approval from Nepal Rastra Bank and compliance with the Foreign Exchange Regulation Act, 1962. Foreign investors must pay applicable taxes before repatriating funds. The Nepal Rastra Bank issues repatriation permits after verifying tax clearance certificates and audited financial statements.
Challenges in Digital Company Registration
Infrastructure Limitations
Nepal’s digital infrastructure remains underdeveloped for comprehensive online company registration services. Internet connectivity issues and power supply interruptions affect system reliability. The government’s digital signature framework is not fully integrated with company registration systems. International payment gateway integration faces regulatory and technical challenges.
Regulatory Framework Gaps
The Companies Act, 2063 and related regulations were drafted before widespread digital service adoption. Current laws do not adequately address electronic document submission, digital signatures, and online verification processes. The Legal Framework for Electronic Transactions Act, 2063 (2008) provides some basis for digital transactions but requires further implementation. Regulatory amendments are necessary to enable full online registration for foreign investors.
Future Developments in Online Registration
The Government of Nepal has announced plans to digitize company registration services under the Digital Nepal Framework. The Office of Company Registrar is developing an integrated online platform with international payment support. The Department of Industry is working on electronic approval systems for foreign investment applications. However, implementation timelines remain uncertain, and physical processes continue to dominate.
Comparison with Regional Practices
| Country | Online Registration for Foreigners | Processing Time | Physical Presence Required |
|---|---|---|---|
| Nepal | Limited (Information only) | 7–15 days | Yes |
| India | Partial (Some services online) | 10–15 days | For certain steps |
| Bangladesh | Partial (Application online) | 15–20 days | Yes |
| Sri Lanka | Yes (Full online available) | 3–5 days | No |
| Singapore | Yes (Full online available) | 1–2 days | No |
Practical Recommendations for Foreign Investors
Foreign investors should engage qualified legal representatives in Nepal before initiating company registration. Preparation of authenticated documents should begin well in advance of the planned registration date. Investors must budget adequate time for the approval and registration process, typically 30 to 45 days. Maintaining regular communication with the Department of Industry and Office of Company Registrar helps expedite processing. Understanding sector-specific requirements and restrictions prevents application rejections and delays.
Cost Structure for Company Registration
Government Fees
Registration fees for private limited companies start at NPR 1,000 for authorized capital up to NPR 100,000. The fee increases progressively based on authorized capital, reaching NPR 100,000 for capital exceeding NPR 100 million. Name reservation costs NPR 100, while certificate copies cost NPR 500 each. Additional fees apply for expedited processing and document authentication.
Professional Service Charges
Legal firms charge between NPR 50,000 to NPR 150,000 for complete company registration services. Accounting firms providing tax registration and compliance services charge NPR 25,000 to NPR 75,000. Document translation and authentication services cost approximately NPR 10,000 to NPR 30,000. Total professional fees typically range from NPR 100,000 to NPR 300,000 depending on company complexity.
Read More:
- https://lawaxion.com/establishment-of-business-in-nepal-by-foreign-investors/
- https://lawaxion.com/branch-office-registration-process-in-nepal/
- https://lawaxion.com/liaison-office-registration-process-in-nepal/
- https://lawaxion.com/hiring-and-terminating-employees-in-nepal/
- https://lawaxion.com/registration-of-non-profit-institution-in-nepal/
Frequently Asked Questions
Can foreigners register a company in Nepal entirely online?
No, foreigners cannot complete company registration entirely online in Nepal. The current system requires physical submission of authenticated documents to the Department of Industry and Office of Company Registrar. Foreign investors must engage local representatives or travel to Nepal for registration.
What is the minimum investment required for foreign company registration?
The Foreign Investment and Technology Transfer Act, 2019 does not specify a universal minimum investment amount. However, sector-specific minimums apply, with manufacturing requiring substantial capital investment. The Department of Industry evaluates investment adequacy based on the proposed business scale and sector.
How long does company registration take for foreign investors?
Company registration for foreign investors typically takes 30 to 45 days from initial application to certificate issuance. This includes 7 to 30 days for investment approval and 7 to 15 days for company registration. Processing time varies based on application completeness and sector complexity.
Do foreign investors need a local partner in Nepal?
Foreign investors do not necessarily need a local partner for most business sectors in Nepal. FITTA permits 100% foreign ownership in many industries. However, certain sectors require minimum Nepali equity participation, and all companies must have at least one resident director.
What documents require authentication from the Nepali Embassy?
All foreign documents including passport copies, company formation documents, and authorization letters require authentication from the Nepali Embassy or Consulate. Bank statements, police clearance certificates, and educational certificates also need embassy authentication. Documents in foreign languages must be translated and authenticated.
Can a foreign company open a bank account before registration?
No, foreign companies cannot open bank accounts in Nepal before obtaining a Certificate of Incorporation. Banks require the company registration certificate, PAN certificate, and board resolution for account opening. At least one director must visit the bank physically for account activation.
What are the annual compliance costs for foreign-owned companies?
Annual compliance costs include company renewal fees of approximately NPR 5,000 to NPR 50,000 based on capital. Tax compliance and audit fees range from NPR 50,000 to NPR 200,000 annually. Additional costs include annual return filing, tax return preparation, and regulatory reporting expenses.
Is it possible to convert a branch office to a subsidiary company?
Yes, foreign companies can convert branch offices to subsidiary companies in Nepal. The process requires closing the branch office registration and establishing a new company through standard registration procedures. All assets and liabilities must be properly transferred according to the Companies Act, 2063.
What happens if investment approval conditions are not met?
Failure to meet investment approval conditions can result in approval cancellation by the Department of Industry. Section 9 of FITTA empowers the Department to revoke approval for non-compliance. Companies must request approval modifications if they cannot meet original conditions due to genuine reasons.
Can foreign investors use digital signatures for company registration?
Currently, foreign investors cannot use digital signatures for company registration in Nepal. The system requires physical signatures on original documents submitted to the Office of Company Registrar. The Electronic Transactions Act, 2063 recognizes digital signatures, but implementation in company registration remains pending.
