November 28, 2024
FOREIGN INVESTMENT IN NEPAL
INTRODUCTION
Nepal, a beautiful country in Asia, is nestled between two of the world’s largest nations, India, and China. Renowned for its stunning landscapes and rich cultural heritage, Nepal’s economy thrives on key sectors such as tourism, agriculture, and the production of carpets, textiles, and tea. Due to its geographical proximity and deep historical ties, Nepal conducts most of its trade with India. However, China and the United States also play significant roles as vital trade partners, contributing to the nation’s economic diversity.
FOREIGN INVESTMENT (“FI”)
Nepal has been pursuing a liberal foreign investment policy and has been striving to create an investment.
A foreign investor includes any foreign individual, firm, company, non-resident Nepali, foreign government, international agency, and foreign institutional investor.
Generally, 100% FI is allowed. However, there is a certain list of activities where FI is not allowed, generally referred to as the negative list.
Foreign investors are allowed to invest only in public limited companies and in private limited companies registered with the Office of Company Registrar.
Currently, each foreign investor is required to invest a minimum of NPR 50 million (USD 0.5 million) in Nepal.
ENTRY OPTIONS IN NEPAL
An entity is required to be set up by a foreign company if it carries on business/transaction in Nepal for a period of one month or more in a financial year.
There are three types of business entities, as follows:
- Liaison Office: They are permitted to be the point of contact offices in Nepal; very limited promotional activities can be carried out. They are not permitted to engage in any earning activity in Nepal.
- Branch Office: It is permitted to carry out activities for which it is formed, subject to requisite approvals. As a matter of practice, the approval for setting up a branch office in Nepal is granted only when there is a contract with the Nepali government agency.
- Company: A foreign investor is permitted to set up a company with a single business objective. A foreign investor can set up a company in Nepal relating to any of the sectors.
MAJOR FORMS OF BUSINESS VEHICLES IN NEPAL
There are different forms of business vehicles through which businesses can be established in Nepal. The major forms of business vehicles are as mentioned.
- Sole Proprietorship:
The sole proprietorship firm does not have separate legal personality, and the liability of the individual is unlimited. It is mostly used by individuals undertaking trading activities, operating small retailer shops, restaurants, etc., and professional service providers.
- Partnership Firms—In private firms, a partnership firm does not have a separate corporate personality, and the liability of partners is unlimited. Partnership firms are mostly used for trading activities and professional services. Nepalese law has not made any restriction on the maximum number of partners in this type of business vehicle.
- Limited Liability Companies
Limited liability companies are the most common form of business vehicle that investors incorporate in Nepal. The same is applicable for the foreign investor who wants to register the business in Nepal.
- Private Limited Companies
The minimum number of shareholders required in a private company is one and may not exceed one hundred one. For the registration of a private limited company, required documents need to be submitted at the office of the company registrar.
HOW WE CAN HELP?
- Our experts can help set clear objectives, outline actionable steps, and identify opportunities for growth and expansion.
- Our team can conduct risk assessments to identify potential threats and vulnerabilities within a business. They can then recommend risk mitigation strategies to safeguard against adverse events.
For more information or queries, please email us at
[email protected]
Key Contact
Surendra Singh Chandrawat
Managing Partner
