Before commencing any business venture, entrepreneurs must prioritize the registration of their

company. A streamlined and accessible system is essential to facilitate this process for all

aspiring business owners. It is crucial for entrepreneurs to thoroughly understand their specific

requirements and the nature of their business in order to make an informed decision regarding

the type of company they want to register.

In Nepal, there are three commonly chosen business ownership structures:

Sole Proprietorship,
Partnership Business, and
Company (further divided into Public and Private companies);
Business that only do trading : Department of Commerce, Supplies and Customer
Protection ( as Propritor or partnership firm)

Sole Proprietorship/ Private Firm

1. An entrepreneur can initiate a business by registering it as a Sole Proprietorship, which

allows the firm to have a trading name.

2. In a Sole Proprietorship, the business is solely owned and managed by one individual.

3. This structure offers easy establishment, control, and dissolution, enabling quick and

flexible decision-making.

4. However, it’s important to note that a Sole Proprietorship doesn’t have a distinct legal

identity, and the owner has unlimited liability.

5. The registration needs periodic renewal, and the business isrestricted from issuing

corporate guarantees.

6. It works best for small businesses that don’t need large capital.

Registration of a Private Firm :

The registration of a sole proprietorship business institution is required in specific

government departments based on the nature of the business.

Industry	Department
commerce-related firms	Department of Commerce
cottage and rural industry	Department of Cottage and Rural Industry
any other industry	Department of Industry

As per section 4 of the Private Firm Registration Act, 2014: Any person who intends to

Department along with the prescribed fee. Such an application should contain the

following information;

i. The name of the private firm.

ii. The address of the private firm

iii. Objectives, functions and the particulars of goods or commodity to be transacted by the

private firm.

iv. The name and address of the owner, and the name of his/her father, mother and

grandfather, grandmother

v. Other particulars prescribed by the Government of Nepal by publishing a Notification in

the Nepal gazette.

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Registeration Partnership Firm :

Any business registered in a record of the Government of Nepal by the persons who have

agreed to share the profit of the business carried on by them in a single name under an

agreement (Kabuliat) made with each other which entitles all partners to take part in all

business for each partner or entitles any of them for the same on behalf of all others.

Partners are individuals who enter into a partnership agreement, collectively forming a firm,

and the name they use for their business is referred to as the ‘name of firm’.

Features of Partnership firm

Formed by an agreement between two or more individuals (partners).
Each partner contributes capital, skills, or labor to the business.
Shared decision-making and responsibilities among partners.
Unlimited liability for partners, meaning personal assets can be used to settle debts.
Partnerships do not have a separate legal identity from the partners.
The partnership’s name is known as the “name of the firm.”
Flexibility in operations and decision-making due to fewer legal formalities.
Dissolution may occur due to the death, withdrawal, or bankruptcy of a partner.

Registration of a Partnership Firm

The firm must register with the relevant department within six months from the date of the

partnership agreement. If the partnership fails to register within this period, any acts or business

conducted by the partnership, or on its behalf, will not hold legal validity.

In order to register a firm an application in the specified legal format shall be submitted before

the concerned Department, stating the details as follows, along with the fees as and a copy of the

agreement concluded between partners, if any

i. Full Name of the firm

ii. The principal place of business of the firm,

iii. The objectives of the firm including the short description of the

nature of the goods or services, as the case may be, which the firm

intends to run the business,

iv. The full name, surname and permanent address of the partners,

v. The matter of restriction imposed on the power of a partner, if any,

vi. The types of partnership and the capital subscribed by each partner,

vii. The name of a partner or partners, who represent the firm,

viii. The mode to share the profit and loss between /among partners,

ix. The mode to calculate the profit of a firm.

x. Any other matters prescribed by the concerned Department stating which should be set

out in the application.

Name of the Firm:Firms cannot be named similarly to already registered firms or limited

companies under the Company Act.

Issuance of a Certificate after registration of a firm:After meeting the requirements, the

the concerned Department will register the firm under the Act. Once registration is complete, the

Department will issue a certificate (Nissa) in the name of the partners.

No need to register previous firm:Firms previously registered under the Private Firm

Registration Act, 2014, do not need to re-register under this Act. However, if any required

information was not provided during the earlier registration, the concerned Department may

request and the partners must submit the missing particulars.

Approval required to change the particulars

Renewal: An application shall be submitted before the concernedDepartmentfor the renewal of a

firm registered under this Act within a period of Thirty -Five days of the expiry of fiscal year of

the firm.

Reasons for cancellation of a firm’s registration:

1. Failure to renew the firm’s registration within the stipulated time for commercial

businesses.

2. Voluntary application by partners to terminate the firm’s registration with reasonable

reasons provided.

3. Failure to submit sought particulars to the concerned Department within the prescribed

period.

4. Closure of an industry-related firm without providing notice to the concerned

Department.

5. Failure of an industry-related firm to renew within the prescribed time or submit required

progress reports for establishing and operating the industry according to the licence

conditions.

6. Committing acts that contravene this Act or its Rules.

use of partnership property:Partners cannot utilize partnership property for purposes other than

the partnership business.

Liability of partners in a firm:Partners are jointly and personally liable for all firm actions during their partnership.

Dissolution of a partnership firm:

1. Firm can be dissolved with the consent of all partners or according to an agreement among partners.

2. If the firm has no specific term, any partner can dissolve it by providing written notice to

all other partners.

3. The firm is considered dissolved from the date mentioned in the notice or, if not

mentioned, from the date of communication of the notice.

4. A partner can cause dissolution in specific circumstances, such as:

A partner becoming incapable of fulfilling duties.

Another partner not paying dues or transferring interest without consent.

Court attachment of a partner’s interest.

A partner committing fraud or serious recklessness in business.

Imposition of imprisonment on a partner.

After the expiry of the term the firm dissolved itself

Participation through attorney:Every partner shall be entitled to take part in the process of

dissolution of the firm, by himself/herself or through the attorney.

Mode of settlement of accounts between partners after firm dissolution:

1. Convert firm assets into monetary value.

2. Cover losses from profits first, then from capital if insufficient, and finally from

individual partner assets.

3. Distribute firm assets in the following order:

Pay debts to third parties.
Pay each partner proportionately for debts (excluding capital).
Pay each partner proportionately for capital.
Divide the remaining amount among partners based on their entitled profit share.

Company

A company is a legal entity formed by a group of individuals to conduct business activities as a

separate and distinct entity from its owners. Company is registered as per the Company Act,

2063 in Nepal.

Features of a Company:

Separate Legal Entity: A company has its own legal identity, separate from its owners
or shareholders.
Limited Liability: Shareholders are liable only to the extent of their investment in the
company.
Perpetual Existence: Companies continue to exist even if shareholders change or pass
away.
Transferability of Shares: Shares of a company can be easily bought and sold, allowing
for ownership transfer.
Professional Management: Companies often have professional managers to run day-to-
day operations.
Raise Capital: Companies can raise capital by issuing shares or borrowing funds from
the public.
Regulatory Compliance: Companies are subject to various laws and regulations
governing their operations.

Public and Private Company :

A Public Company is a company where the shares are offered to the general public for

subscription and are freely transferable. Likewise, A Private Company is a company where the

transfer of shares is restricted, and the number of shareholders is limited.

Paid up Capital and Registration fee

S.N.	On the basis of	Public Company	Private Company
1.	Paid up Capital andRegistration fee	NPR 1,00,00,000 as aminimum paid up capitalRegistration fee:Rs 16,000	NPR: 1,00,000 as aminimum paid up capitalRegistration Fee: Rs 1,000
2.	Numbers of members	7 to any numbers ofmembers	Minimum of 2 members tomaximum of 101 members
3.	Transferability of shares	Not restricted	Restricted
4.	Minimum numbers ofdirectors	3	2
5.	Public subscription	Can invite the public tosubscribe to its shares ordebentures	Issues of shares ordebentures to the public isprohibited
6.	Issue of prospectus	Can issue a prospectus or itcan also optional for privateplacement	Prohibited from issuing aprospectus
7.	Minimum amount of allotment	Cannot allot shares unlessthe minimum subscriptionstated in the prospectus isobtained	Can allot shares, withoutobtaining minimumsubscription
8.	Appointment of Director	One director can beappointed by a singleresolution	2 or more directors can beappointed by a singleresolution
9.	Place of holding AGM	AGM is held at theregistered office or any otherplace where the registeredoffice is situated	AGM can be heldanywhere
10.	Statutory Meeting	It is compulsory	It is optional

Registration of a Company

For the registration of a company, the person should make an application to the Company

Registrar’s Office in the prescribed legal format, fee which depend on the authorized capital of

the company, along with the following documents:

1. Memorandum of Association

2. Article of Association

3. Copy of Agreement (For Public Company): If any agreement exists between the

promoters before incorporation, a copy of that agreement should be included.

4. Copy of Consensus Agreement (For Private Company): In the case of a private company,

a copy of the consensus agreement should be provided.

5. Approval or Licensefrom a competent authority, if required

6. Citizenship Certificate (For Nepalese Promoter):a certified copy of their citizenship

certificate should be provided.

7. Documents for Corporate Promoters: If the promoter is a body corporate (another

company), the registration certificate of that body, the decision of the Board of Directors,

and major documents related to its incorporation should be included.

8. Company Registration: The Company Registrar’s Office will review the application and

conduct necessary inquiries. If everything is in order, the company will be registered

within 15 days from the date of application, and a company registration certificate will be

granted.

It’s important to note that for a single shareholder company, the Articles of Association are not

required

Registration of an Industry :

1. When establishing an industry, an application must be submitted to the concerned

Department for registration.

2. The application should include details about the nature and classification of the industry.

3. It should also specify the proposed location of the industry and the machinery that will be

used.

4. Information about the raw materials, auxiliary raw materials, chemicals, and packaging

goods to be employed should be provided.

5. The name of the industrialist or the person responsible for the industry should be

mentioned in the application.

6. For Cottage and Small Industries, registration should be done at the Department of

Cottage and Small Industries or any designated district-level office.

7. For Medium and Large Industries, registration should be made at the Department of

Industries or at an office designated by the Department.

Nepal hasrules and regulations for foreign investment under the Foreign Investment and

Technology Transfer Actand the Industrial Enterprises Act, administered by the Department

of Industries (DOI).A foreign investor can own up to 100% equity shares in most industries, but

some industries are restricted and listed as the ‘Negative List.’ They are as follows:

1. Industries not granted permission for foreign investment in Nepal include cottage

industries using electricity more than 5 kW.

2. Personal service businesses like hair cutting, beauty salons, tailoring, and driving training

are not open to foreign investment.

3. Industries related to arms and ammunition, gunpowder, explosives, and radioactive

materials are restricted.

4. Real estate businesses (except construction industries), film industries in national and

recognized languages of Nepal, and security printing of banknotes and coins are not

allowed for foreign investment.

5. Retail businesses (except international chain retail businesses operating in at least two

countries) and more than 90% exportable tobacco are on the Negative List.

6. Foreign investment is restricted in internal courier services, atomic energy, poultry,

fisheries, and beekeeping.

7. Consultancy services have a maximum foreign investment limit of 51%.

8. Processing of food grains on rent, local catering services, and rural tourism are also not

open to foreign investment in Nepal.

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Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The law office shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.

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