Company Registration by Foreign Investors in Nepal

Foreign investors can register a company in Nepal by following a 9-step process governed by the Foreign Investment and Technology Transfer Act (FITTA), 2019 and the Industrial Enterprises Act, 2020. 

The process begins with obtaining Foreign Investment Approval from the Department of Industry (DOI) or Investment Board Nepal (IBN), followed by company registration at the Office of the Company Registrar (OCR), tax registration at the Inland Revenue Department, local ward office registration, industry registration, and finally recording the investment with Nepal Rastra Bank (NRB). 

A minimum capital of NPR 20,000,000 (approx. USD 145,000) is required, except for IT sector companies, which are fully exempt. Foreign investors may establish a Private Limited Company, Public Limited Company, Branch Office, or Joint Venture, with 100% foreign ownership permitted in most sectors. 

Navigating this process requires a clear understanding of Nepal’s FDI regulations, sector restrictions, ownership caps, and post-registration compliance obligations. Working with an experienced law firm in Nepal such as Bhandari Law and Partners ensures that foreign investors meet every regulatory requirement accurately and on time from initial eligibility checks to share registry filing and industry commencement notifications. . 

Is Your Business Eligible for Foreign Investment?

Before committing a single dollar or rupee, foreign investors must confirm that their proposed business activity is legally permitted under Nepal’s FDI framework. Two conditions must simultaneously be satisfied.

Condition 1: Not on the Negative (Restricted) List

Under FITTA 2019, the following sectors are closed to foreign investment entirely:

Restricted / Negative-List Sectors

• Primary Agro-Production such as poultry, fisheries, bee-keeping, fruits, vegetables, oil seeds, pulses, dairy
• Cottage and small industries
• Personal service businesses (haircuts, tailoring, driving, etc.)
• Arms, ammunition, explosives, nuclear, biological & chemical (NBC) weapons; atomic energy and radioactive materials
• Real estate (excluding construction), retail trade, internal courier, local catering, money-changing and remittance services
• Travel agencies, trekking/mountaineering guides, homestays, and rural tourism
• Mass communication media such as newspapers, radio, TV, online news and national-language motion pictures
• Management, accounting, engineering, legal consultancy, and language, music, and computer training
• Consultancy services where foreign equity exceeds 51%
• Ride-sharing platforms where foreign equity exceeds 70%

Condition 2: Qualifies as an “Industry”

The activity must additionally qualify as an “industry” under the Industrial Enterprises Act, 2020. This positive-list requirement ensures that FDI flows into productive, value-adding sectors of the Nepalese economy.

Pro Tip for Investors: When in doubt about whether your proposed activity qualifies, request a formal sector determination from the Department of Industry (DOI) before proceeding. This avoids costly administrative delays later.

Minimum Capital Requirement

Nepal mandates a minimum foreign investment threshold to ensure genuine capital inflow. The baseline figure is NPR 20,000,000 (approximately USD 145,000).

Pursuant to a Nepal Gazette notification dated October 2, 2023, the minimum investment requirement has been completely waived for companies operating in the Information Technology (IT) sector. This makes Nepal an attractive destination for tech startups and digital ventures.

Sector-Specific Ownership Caps

While Nepal allows 100% foreign ownership in most permitted sectors, certain strategic industries carry equity ceilings that are non-negotiable:

Pre-Registration Essentials

Three foundational decisions must be locked in before any application is filed:

1. Company Name Reservation

The proposed company name must consist of two or more words and must be distinct from all existing registered entities. Before finalizing, investors should also conduct a trademark search with the DOI and verify domain name availability to protect brand identity and avoid future legal disputes.

2. Registered Office Address

A confirmed physical address in Nepal is required before registration, as this address is incorporated into the Memorandum of Association (MOA) and Articles of Association (AOA). The company must subsequently register with the corresponding ward office and obtain a tax certificate from the Inland Revenue Department (IRD) for that jurisdiction. Any future change of address necessitates a formal amendment process.

3. Single Business Objective

Unlike domestic companies, FDI companies are permitted only a single, clearly defined business objective. The DOI does not allow multiple objectives. The stated objective must align precisely with the sector for which FDI approval is granted.

Types of Business Entities Available to Foreign Investors

Foreign investors in Nepal can choose from several legal structures. A qualified law firm in Nepal can advise on which entity best suits your business model, tax situation, and long-term goals.

1. Private Limited Company (Pvt. Ltd.)

The most popular choice for foreign investors. It requires a minimum of one director and one shareholder, with no upper cap on share capital. Shareholders’ liability is limited to their investment, making it ideal for small-to-medium enterprises (SMEs) and startups entering Nepal.

2. Public Limited Company

Suited for larger ventures, this structure requires a minimum of seven shareholders. It allows public offering of shares and is typically used for large-scale infrastructure or manufacturing projects requiring significant capital.

3. Branch Office / Liaison Office

Foreign companies can establish a branch or liaison office in Nepal. A branch office can engage in commercial activities, while a liaison office is restricted to non-commercial coordination activities. Both require prior approval from the Department of Industries (DOI) and the Office of the Company Registrar (OCR).

4. Joint Venture (JV) Company

A joint venture with a Nepali partner is often the fastest route into sectors with restrictions. It combines local expertise and networks with foreign capital, and is particularly advantageous in sectors like construction, health, and education.

How to Register a Company in Nepal as a Foreign Investor?

Starting a company in Nepal as a foreign investor involves navigating a structured legal and regulatory process designed to facilitate foreign direct investment while ensuring compliance with national laws.

Here’s a process to register a company in Nepal as a foreign investor: 

• Step 1 – Obtaining the Foreign Investment Approval from DOI or IBN: The investor must first apply for foreign investment approval from the Department of Industry (DOI) or the Investment Board Nepal (IBN), depending on the size and nature of the project. This approval confirms that the proposed foreign investment is legally permitted under Nepalese law.

• Step 2- Registration of Company at Office of the Company Registrar: After receiving foreign investment approval, the company must be registered at the Office of the Company Registrar. This step establishes the company as a legal entity and provides it with an official certificate of incorporation.

• Step 3 – Tax Registration at Inland Revenue Office: The company must then register with the Inland Revenue Department to obtain a Permanent Account Number (PAN) and, if applicable, VAT registration. This is necessary for tax compliance and for conducting financial transactions legally.

• Step 4 – Business Registration at Local Ward Office: The business must be registered at the relevant local ward office where the company’s physical office is located. This confirms the company’s operational presence within the local government jurisdiction.

• Step 5 – Obtaining the Recommendation Letter from the Local Ward Office for Industry Registration: The local ward office issues a recommendation letter after verifying the company’s office location and business activities. This recommendation is required as supporting documentation for industry registration with the Department of Industry.

• Step 6 – Registration of Industry before the Department of Industry: The company must register its industry with the Department of Industry based on the nature of its operations. This registration grants formal industrial recognition and allows the company to legally operate its business activities.

• Step 7 – Obtaining the “Non-Black Certificate” from the Credit Information Bureau: The foreign investor must obtain a non-blacklisting certificate from the Credit Information Bureau Nepal to confirm they are not listed as a defaulter. This certificate is important for banking procedures and regulatory compliance.

• Step 8 – Opening the Local Bank Account of the Company: The company must open a corporate bank account in Nepal under its registered name through a licensed commercial bank. This account will be used for receiving foreign investment funds and managing local business transactions.

• Step 9 – Recording the Investment Amount before NRB: Finally, the foreign investment amount must be recorded with Nepal Rastra Bank (NRB) after the funds are remitted into Nepal. This recording ensures legal recognition of the investment and is necessary for future profit repatriation and capital withdrawal.

Sector-Specific Licenses & Approvals

• Banking & Finance: Nepal Rastra Bank (NRB)
• Insurance: Insurance Board of Nepal
• Tourism & Trekking: Department of Tourism (DOT) 
• Hydropower: Dept. of Electricity Development (DoED)
• Pharmaceuticals: Dept. of Drug Administration (DDA)
• Seeds & Fertilizers: Ministry of Agriculture & Livestock
• Data Centers & Cloud: Dept. of Information Technology (DoIT)
• Telecommunications: Nepal Telecom Authority

Documents Required for Foreign Investor Company Registration

• Passport copies of all foreign directors and shareholders (notarized)
• Company incorporation certificate from the investor’s home country (apostilled)
• Board resolution authorizing the investment in Nepal
• Detailed project/business plan with financial projections
• Memorandum and Articles of Association (draft)
• Proof of source of funds (bank statements, audited financials)
• Power of Attorney for local representative (if applicable)
• DOI/IBN approval letter (issued after FDI approval stage)

Post-Registration Compliance Obligations

Registering the company is only the beginning. Nepal’s corporate law imposes ongoing compliance obligations that FDI companies must strictly observe:

1. Initial OCR Filing (Within 3 Months)

Within the first three months of incorporation, the company must furnish the OCR with details of its registered address, appointed auditor, and constituted Board of Directors, per Sections 92 and 184 of the Companies Act 2006.

2. Inflow Certificate from the Bank

After the statutory NRB notification and receipt of investment funds, the company’s bank processes documentation and issues an Inflow Certificate confirming the receipt of foreign capital.

3. Share Distribution & OCR Share Registry

Once the Inflow Certificate is issued, shares are distributed to shareholders and the share distribution is filed with the OCR. The OCR issues a certified Share Registry, the official record of ownership.

4. NRB Recording of Foreign Investment

Foreign investments must be formally recorded with the NRB by submitting the Inflow Certificate, Share Registry, and company documentation. This is mandated by FITTA to maintain transparency and ensure regulatory accountability of all foreign capital in Nepal’s financial system.

5. Annual General Meeting (AGM) & Reporting

The first AGM must be held within one year of incorporation, with audited financial statements submitted to the OCR. From year two onward, annual reports must be submitted within six months of fiscal year-end (typically by December/January for Nepal’s July–June fiscal year).

6. Labour Law Compliance

Companies must prepare a company handbook, execute employment agreements with all staff, and enroll in Nepal’s Social Security Fund (SSF),m a contribution-based statutory social security scheme.

7. Industry Operation Commencement

FDI companies must commence operations within one year of industry registration. Prior to commencing, at least 70% of authorized capital must be injected. Operations formally begin with the issuance of the first invoice, which must be notified to the DOI within 30 days. Failure to comply results in financial penalties.

Conclusion

Company registration by foreign investors in Nepal provides a legal framework for establishing and operating businesses in the country. It ensures compliance with government regulations, protects investor rights, and creates opportunities for long-term business growth and sustainable investment.