Introduction
A subsidiary entity in Nepal operates as a separate legal entity owned or controlled by a parent company. Establishing a subsidiary allows foreign investors to conduct business operations while maintaining distinct legal liability and operational independence. Nepal’s regulatory framework, governed by the Companies Act, 2063 (2006), establishes the legal requirements and procedures for subsidiary registration. This article outlines the complete process, timeline, and financial requirements for opening a subsidiary entity in Nepal.
Legal Framework for Subsidiary Entities in Nepal
Nepal’s subsidiary registration operates under the Companies Act, 2063, which defines corporate structures and registration procedures. The Act mandates that all subsidiaries register with the Office of the Company Registrar (OCR) before commencing business operations. Foreign subsidiaries must comply with the Foreign Investment and Technology Transfer Act, 2075 (2019), which regulates foreign direct investment and operational guidelines. The Nepal Rastra Bank (NRB) oversees foreign exchange regulations affecting subsidiary operations. Subsidiaries must adhere to tax laws under the Income Tax Act, 2058 (2002), and comply with sector-specific regulations applicable to their business activities.
Types of Subsidiary Entities in Nepal
| Entity Type | Ownership Structure | Liability | Registration Authority |
|---|---|---|---|
| Private Limited Company | Shareholders hold equity stakes | Limited to share capital | Office of Company Registrar |
| Public Limited Company | Shares traded publicly | Limited to share capital | Office of Company Registrar |
| Branch Office | Extension of parent company | Parent company liable | Office of Company Registrar |
| Representative Office | Non-commercial operations | Parent company liable | Office of Company Registrar |
| Joint Venture Company | Multiple parties hold shares | Limited to investment | Office of Company Registrar |
Step-by-Step Process for Opening a Subsidiary
Step 1: Name Approval and Reservation
The first step involves obtaining approval for the subsidiary’s proposed name from the Office of the Company Registrar. The applicant submits a name approval application with three alternative names in English and Nepali. The OCR verifies that the proposed name does not duplicate existing registered entities and complies with naming conventions. Name approval typically takes three to five working days. The approved name remains reserved for 120 days, during which the applicant must proceed with registration.
Step 2: Prepare Incorporation Documents
Applicants must prepare comprehensive incorporation documents including the Memorandum of Association (MOA) and Articles of Association (AOA). The MOA defines the subsidiary’s objectives, powers, and capital structure. The AOA establishes internal governance rules, shareholder rights, and operational procedures. Documents must be prepared in English and translated into Nepali by certified translators. All documents require notarization by a licensed notary public. Foreign parent company documents require authentication through the respective embassy or consulate in Nepal.
Step 3: Obtain Director and Shareholder Identification
The subsidiary requires at least one director and one shareholder, both of whom must be identified and verified. Directors must provide citizenship certificates, passport copies, and residential addresses. Shareholders submit similar documentation along with proof of financial capacity. At least one director must be a resident of Nepal or hold a valid work permit. Foreign directors require visa documentation and embassy verification. All individuals undergo background verification by the OCR.
Step 4: Submit Registration Application
The applicant submits the complete registration application package to the Office of the Company Registrar. The application includes the approved name certificate, MOA, AOA, director and shareholder identification documents, and the registration fee payment receipt. Applications are submitted in person or through authorized representatives. The OCR conducts preliminary document verification and may request clarifications or additional information. This stage typically requires five to seven working days for processing.
Step 5: Obtain Certificate of Incorporation
Upon approval, the OCR issues the Certificate of Incorporation, which legally establishes the subsidiary as a separate entity. The certificate contains the company registration number, date of incorporation, and authorized capital details. The applicant receives the original certificate and certified copies. The subsidiary can commence business operations only after obtaining this certificate. The certificate serves as proof of legal existence for all subsequent registrations and transactions.
Step 6: Register for Tax Identification Number (TIN)
The newly incorporated subsidiary must register with the Inland Revenue Department (IRD) to obtain a Tax Identification Number (TIN). The application includes the Certificate of Incorporation, MOA, AOA, and director identification documents. The IRD processes TIN applications within three to five working days. The TIN is mandatory for filing tax returns, conducting financial transactions, and maintaining business compliance. The subsidiary receives the TIN certificate and registration documentation from the IRD.
Step 7: Open Bank Account
The subsidiary opens a corporate bank account with a licensed commercial bank in Nepal. The bank requires the Certificate of Incorporation, TIN certificate, MOA, AOA, director identification documents, and board resolution authorizing account opening. The bank conducts Know Your Customer (KYC) verification and Anti-Money Laundering (AML) compliance checks. Account opening typically takes five to ten working days. The subsidiary receives account details, checkbooks, and debit cards upon account activation.
Step 8: Register with Social Security and Labor Authorities
If the subsidiary employs staff, registration with the Social Security Fund (SSF) and the Department of Labor and Employment is mandatory. The application includes the Certificate of Incorporation, TIN certificate, and employee details. The SSF processes registration within five working days. The subsidiary receives the SSF registration number and contribution guidelines. Compliance with labor laws under the Labor Act, 2074 (2017), is mandatory for all employers.
Timeline for Subsidiary Registration
| Process Stage | Duration | Remarks |
|---|---|---|
| Name Approval | 3–5 working days | Reservation valid for 120 days |
| Document Preparation | 5–10 working days | Includes notarization and translation |
| OCR Registration | 5–7 working days | Subject to document completeness |
| TIN Registration | 3–5 working days | Processed by Inland Revenue Department |
| Bank Account Opening | 5–10 working days | Includes KYC and AML verification |
| SSF Registration | 3–5 working days | Required only if employing staff |
| Total Timeline | 24–42 working days | Approximately 5–8 weeks |
Cost Structure for Subsidiary Registration
Government Fees and Charges
| Fee Category | Amount (NPR) | Remarks |
|---|---|---|
| Name Approval | 500–1,000 | Non-refundable |
| Registration Fee (up to 1 million capital) | 5,000–10,000 | Based on authorized capital |
| Registration Fee (1–10 million capital) | 10,000–25,000 | Scaled according to capital |
| Registration Fee (above 10 million capital) | 25,000–50,000 | Maximum fee applies |
| Certificate of Incorporation (copies) | 100 per copy | Certified copies charged separately |
| TIN Registration | 500–1,000 | Processed by IRD |
Professional and Administrative Costs
| Service | Estimated Cost (NPR) | Remarks |
|---|---|---|
| Legal Consultation | 15,000–50,000 | Varies by complexity |
| Document Translation | 5,000–15,000 | Per document or per page |
| Notarization | 2,000–5,000 | Per document |
| Company Registration Agent | 10,000–30,000 | Optional service |
| Bank Account Opening | 500–2,000 | One-time charge |
| Total Estimated Cost | 38,500–168,000 | Excludes capital deposit |
Foreign Investment Regulations
Foreign subsidiaries must comply with the Foreign Investment and Technology Transfer Act, 2075 (2019). The Act requires foreign investors to register with the Department of Industry and register their investment with the Foreign Investment Promotion Board (FIPB). Foreign investors must maintain minimum capital requirements specified by sector regulations. The Nepal Rastra Bank regulates foreign exchange transactions and repatriation of profits. Certain sectors, including defense, media, and telecommunications, have restricted foreign ownership limits. Foreign subsidiaries must file annual reports with the OCR and maintain compliance with all applicable regulations.
Sector-Specific Considerations
Different business sectors in Nepal have distinct regulatory requirements for subsidiary operations. Manufacturing subsidiaries must obtain industrial licenses from the Department of Industry. Financial services subsidiaries require licensing from the Nepal Rastra Bank. Telecommunications subsidiaries need approval from the Nepal Telecommunications Authority (NTA). Tourism and hospitality subsidiaries must register with the Ministry of Culture, Tourism, and Civil Aviation. Real estate subsidiaries comply with regulations under the Land Act, 2021. Applicants must identify sector-specific requirements before commencing the registration process.
Compliance Obligations for Operating Subsidiaries
Subsidiaries must maintain statutory compliance throughout their operational period. Annual financial statements require preparation and audit by licensed chartered accountants. The subsidiary files audited financial statements with the OCR within six months of the fiscal year end. Annual general meetings must be conducted with proper notice and documentation. Board meetings require minutes and resolutions for all significant decisions. The subsidiary maintains a statutory register of members, directors, and shares. Tax returns must be filed with the IRD by the prescribed deadline. Non-compliance results in penalties, suspension of operations, or cancellation of registration.
Frequently Asked Questions
What is the minimum capital requirement for a subsidiary in Nepal?
Nepal does not prescribe a fixed minimum capital requirement for private limited companies. However, the authorized capital must be specified in the MOA, and at least 20 percent of authorized capital must be paid up at incorporation. Foreign subsidiaries may face sector-specific capital requirements.
Can a foreign individual establish a subsidiary in Nepal?
Yes, foreign individuals can establish subsidiaries in Nepal. However, at least one director must be a resident of Nepal or hold a valid work permit. The foreign individual must comply with visa regulations and provide embassy-authenticated documents.
How long does the entire subsidiary registration process take?
The complete registration process typically takes 24 to 42 working days, approximately 5 to 8 weeks, depending on document completeness and processing efficiency.
What are the annual compliance requirements for subsidiaries?
Subsidiaries must file audited financial statements, conduct annual general meetings, maintain statutory registers, file tax returns, and comply with sector-specific regulations annually.
Can a subsidiary be converted to a branch office later?
No, a subsidiary cannot be converted to a branch office. These are distinct legal entities with different structures. Conversion would require dissolution of the subsidiary and establishment of a new branch office.
What is the process for foreign exchange repatriation from a subsidiary?
Foreign subsidiaries can repatriate profits through licensed banks following Nepal Rastra Bank regulations. The subsidiary must maintain proper documentation of profit calculations and obtain bank approval before repatriation.
Read More:
- https://lawaxion.com/restaurant-registration-in-nepal-a-legal-guide/
- https://lawaxion.com/how-to-register-at-commerce-in-nepal-trade-license/
- https://lawaxion.com/how-to-register-agricultural-business-in-nepal/
- https://lawaxion.com/where-to-submit-a-company-registration-application-in-nepal/
- https://lawaxion.com/how-to-open-a-business-in-kathmandu/
Conclusion
Opening a subsidiary entity in Nepal involves systematic compliance with the Companies Act, 2063, and sector-specific regulations. The process requires approximately 5 to 8 weeks and costs between NPR 38,500 and NPR 168,000 in government and professional fees. Foreign investors must additionally comply with the Foreign Investment and Technology Transfer Act, 2075. Subsidiaries must maintain continuous statutory compliance, including annual financial reporting and regulatory filings. Engaging qualified legal professionals ensures adherence to all requirements and facilitates smooth registration and operational compliance.
