Start a Company in Nepal by Nepalese Investor

Introduction

Nepalese investors seeking to establish a business entity in Nepal must comply with the Companies Act, 2063 (2006) and related regulations. The legal framework provides multiple company structures including private limited companies, public limited companies, and partnerships. The Department of Industry and Department of Company Registrar serve as primary regulatory authorities overseeing company registration and compliance. Nepalese citizens enjoy full ownership rights without foreign investment restrictions, making the incorporation process relatively straightforward for domestic entrepreneurs.

Legal Framework for Company Registration in Nepal

The Companies Act, 2063 (2006) governs all company formations in Nepal. This legislation establishes requirements for incorporation, management, and dissolution of business entities. The Company Registrar’s Office operates under the Ministry of Industry, Commerce and Supplies, maintaining records of all registered companies. The Industrial Enterprises Act, 2076 (2020) regulates industrial enterprises and provides additional guidelines for manufacturing businesses. Nepalese investors must also comply with the Income Tax Act, 2058 (2002) and Labor Act, 2074 (2017) for operational compliance.

Types of Companies Available for Nepalese Investors

Nepalese law recognizes several company structures suitable for domestic investors. Private limited companies remain the most popular choice due to limited liability protection and operational flexibility. Public limited companies suit larger ventures planning to raise capital through public offerings. Partnership firms operate under the Partnership Act, 2020 (1964), requiring two or more partners. Sole proprietorships offer simplicity but expose owners to unlimited liability. Each structure carries distinct legal obligations, taxation requirements, and compliance responsibilities.

Company Type	Minimum Shareholders	Minimum Capital	Liability
Private Limited	1	NPR 100,000	Limited
Public Limited	7	NPR 1,000,000	Limited
Partnership	2	No minimum	Unlimited
Sole Proprietorship	1	No minimum	Unlimited

Eligibility Requirements for Nepalese Investors

Nepalese citizens aged 18 years or above possess full legal capacity to establish companies. The Companies Act, 2063 does not impose restrictions on Nepalese nationals regarding ownership percentages or business sectors. Investors must hold valid citizenship certificates and maintain permanent addresses within Nepal. Individuals declared bankrupt or convicted of financial crimes face temporary disqualification from directorship positions. Professional qualifications may be required for specific regulated industries such as banking, insurance, and healthcare services.

Documents Required for Company Registration

Valid citizenship certificate of all shareholders and directors with certified copies.
Recent passport-size photographs of all shareholders and directors.
Memorandum of Association clearly stating company objectives and authorized capital.
Articles of Association defining internal management rules and procedures.
Consent letters from all directors accepting their appointment positions.
Office lease agreement or ownership documents proving registered office address.
PAN (Permanent Account Number) registration certificate from Inland Revenue Department.
Company name reservation approval from Company Registrar’s Office.
Board resolution authorizing company registration and appointing authorized signatories.
Bank statement showing deposit of minimum required capital amount.

Step-by-Step Company Registration Process

The registration process begins with name reservation at the Company Registrar’s Office. Applicants submit three proposed names following prescribed naming conventions. Upon approval, founders prepare incorporation documents including Memorandum and Articles of Association. These documents require notarization before submission. The application package goes to the Company Registrar with prescribed fees. The Registrar examines documents for legal compliance and completeness. After satisfactory review, the Registrar issues a Certificate of Incorporation. The company then obtains PAN registration and opens a bank account for capital deposit.

Name Reservation Process

Submit name reservation application with three alternative names to Company Registrar.
Pay name reservation fee of NPR 100 at designated bank.
Wait for approval which typically takes one to three working days.
Receive name reservation certificate valid for 35 days from approval date.
Proceed with document preparation using approved company name only.

Document Submission and Verification

Prepare Memorandum of Association stating company objectives and capital structure.
Draft Articles of Association defining internal governance and operational procedures.
Obtain notarization of all incorporation documents from authorized notary public.
Submit complete application package with required documents to Company Registrar.
Pay registration fees based on authorized capital amount as per fee schedule.

Certificate Issuance

Company Registrar reviews submitted documents for legal compliance and accuracy.
Registrar may request clarifications or additional documents if necessary.
Upon satisfaction, Registrar issues Certificate of Incorporation with unique company number.
Company becomes legal entity from date mentioned on incorporation certificate.
Collect original certificate and certified copies for regulatory submissions.

Capital Requirements and Payment Procedures

Private limited companies require minimum authorized capital of NPR 100,000 under the Companies Act, 2063. Public limited companies must maintain minimum authorized capital of NPR 1,000,000. At least 25% of authorized capital must be paid up at incorporation. Shareholders deposit capital in a designated bank account opened in the company’s name. The bank issues a certificate confirming capital deposit, which accompanies the registration application. Additional capital can be raised later through rights issues or private placements following prescribed procedures.

Registration Fees and Government Charges

Authorized Capital Range	Registration Fee (NPR)
Up to NPR 100,000	2,000
NPR 100,001 to 500,000	5,000
NPR 500,001 to 1,000,000	10,000
NPR 1,000,001 to 10,000,000	15,000
Above NPR 10,000,000	20,000

Additional charges include name reservation fee of NPR 100, document certification fees, and notarization charges. Companies must also pay annual renewal fees to maintain active status with the Company Registrar.

Post-Registration Compliance Requirements

Newly incorporated companies must obtain PAN registration from the Inland Revenue Department within 30 days. VAT registration becomes mandatory when annual turnover exceeds NPR 5,000,000. Companies must register with the Social Security Fund for employee benefits. Municipal business licenses are required from local authorities where the company operates. Annual returns must be filed with the Company Registrar within six months of fiscal year end. Companies maintain statutory registers including member register, director register, and meeting minutes.

Tax Registration and Obligations

The Income Tax Act, 2058 (2002) requires all companies to register for PAN immediately after incorporation. Corporate income tax rate stands at 25% for most businesses, with reduced rates for specific sectors. Companies file annual tax returns by mid-December following the fiscal year ending mid-July. Advance tax payments occur quarterly based on estimated annual income. VAT-registered companies charge 13% on taxable supplies and file monthly returns. Employers deduct tax at source from employee salaries and remit to tax authorities monthly.

Labor and Employment Compliance

The Labor Act, 2074 (2017) governs employment relationships in Nepal. Companies must prepare written employment contracts specifying terms and conditions. Minimum wage rates vary by industry and skill level as determined by government. Employees receive statutory benefits including provident fund, gratuity, and leave entitlements. Companies with 10 or more employees must frame service regulations approved by labor authorities. Social Security Fund registration covers health insurance, accident insurance, and dependent family benefits. Workplace safety standards require compliance with occupational health regulations.

Annual Compliance and Reporting

Companies must conduct annual general meetings within six months of fiscal year end. Financial statements require preparation following Nepal Financial Reporting Standards. Audited accounts must be filed with the Company Registrar along with annual returns. The annual return includes details of shareholders, directors, capital structure, and registered office. Late filing attracts penalties ranging from NPR 1,000 to NPR 10,000 depending on delay duration. Companies update any changes in directors, shareholders, or registered office within 35 days of occurrence.

Role of Axion Partners in Company Formation

Axion Partners stands as the No.1 service provider for company registration services in Nepal. The firm provides comprehensive support throughout the incorporation process, from name reservation to post-registration compliance. Their legal experts prepare all required documents ensuring accuracy and regulatory compliance. Axion Partners coordinates with government departments, minimizing processing time and administrative burden. The firm offers ongoing compliance services including tax registration, annual filings, and corporate governance advisory. Their experience with Nepalese corporate law ensures smooth company establishment for domestic investors.

Common Challenges and Solutions

Name approval delays occur when proposed names conflict with existing registrations or violate naming guidelines. Applicants should research existing company names and prepare multiple alternatives. Document deficiencies cause registration delays, requiring careful preparation and legal review before submission. Capital deposit requirements may challenge startups, but phased payment provisions allow gradual capital infusion. Understanding sector-specific regulations prevents compliance issues in regulated industries. Professional legal assistance from firms like Axion Partners helps navigate complex requirements efficiently.

Sector-Specific Regulations

Certain industries require additional licenses and approvals beyond basic company registration. Financial institutions need Nepal Rastra Bank approval under the Bank and Financial Institution Act, 2073 (2017). Educational institutions obtain approval from the Ministry of Education, Science and Technology. Healthcare facilities require registration with Nepal Medical Council and Department of Health Services. Manufacturing industries may need environmental clearance from the Ministry of Forest and Environment. Tourism businesses obtain licenses from the Department of Tourism under the Tourism Act, 2035 (1978).

Advantages of Incorporating in Nepal

Limited liability protection shields personal assets of shareholders from business debts. Corporate structure enhances credibility with customers, suppliers, and financial institutions. Companies access formal banking channels for loans and credit facilities more easily. Tax benefits include deductions for business expenses and depreciation allowances. Perpetual succession ensures business continuity regardless of changes in ownership. Companies can raise capital through equity issuance and attract professional management. The formal structure facilitates business expansion and partnership opportunities.

Frequently Asked Questions

What is the minimum capital required to start a private company in Nepal?

The Companies Act, 2063 mandates minimum authorized capital of NPR 100,000 for private limited companies. At least 25% must be paid up at incorporation, meaning NPR 25,000 minimum initial payment. Public limited companies require NPR 1,000,000 minimum authorized capital.

How long does company registration take in Nepal?

Company registration typically takes 7 to 15 working days from complete document submission. Name reservation requires 1 to 3 days. Document preparation and notarization take additional time. Professional service providers like Axion Partners can expedite the process through efficient coordination.

Can a single person start a company in Nepal?

Yes, Nepalese law permits single-person private limited companies. The Companies Act, 2063 allows one shareholder to incorporate a private company. However, at least one director is mandatory, who can be the same person as the sole shareholder.

What are the annual compliance requirements for companies?

Companies must file annual returns with the Company Registrar within six months of fiscal year end. Audited financial statements require submission along with annual returns. Tax returns must be filed by mid-December. Annual general meetings must occur within six months of year end.

Do I need a physical office to register a company?

Yes, companies must provide proof of registered office address during incorporation. This can be owned premises or leased space. A valid lease agreement or ownership document must accompany the registration application. Virtual offices are not acceptable under current regulations.

What taxes do companies pay in Nepal?

Companies pay corporate income tax at 25% on taxable profits. VAT at 13% applies when annual turnover exceeds NPR 5,000,000. Employers deduct income tax from employee salaries. Dividend distribution tax applies at 5%. Local taxes include municipal business licenses and property taxes.

Can foreign nationals be directors in Nepalese companies?

Yes, foreign nationals can serve as directors in companies registered by Nepalese investors. However, at least one director must be a Nepalese citizen. Foreign directors need valid work permits if residing in Nepal. The Companies Act does not restrict foreign directorship in domestically-owned companies.

What happens if annual returns are not filed on time?

Late filing of annual returns attracts penalties from NPR 1,000 to NPR 10,000 depending on delay duration. Continued non-compliance may result in company name removal from the register. The Company Registrar can initiate legal proceedings against defaulting companies and their directors.

How can I change company directors after registration?

Companies file Form 7 with the Company Registrar to change directors. The application must include board resolution approving the change and consent letter from new directors. Filing must occur within 35 days of the change. The Registrar updates records upon satisfactory document verification.

What is the role of Memorandum and Articles of Association?

The Memorandum of Association defines company objectives, authorized capital, and liability structure. Articles of Association establish internal management rules, director powers, and shareholder rights. Both documents form the constitutional framework governing company operations and must comply with the Companies Act, 2063.

Conclusion

Starting a company in Nepal as a Nepalese investor involves systematic compliance with the Companies Act, 2063 and related regulations. The process requires careful document preparation, capital arrangement, and regulatory submissions. Nepalese citizens enjoy unrestricted ownership rights across most business sectors. Professional assistance from experienced service providers like Axion Partners ensures efficient registration and ongoing compliance. Understanding legal requirements, maintaining proper documentation, and adhering to annual obligations are essential for successful business operations. The corporate structure offers significant advantages including limited liability, enhanced credibility, and growth opportunities for domestic entrepreneurs.