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
register a private firm may submit an application in the format as prescribed to the concerned
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.

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
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 license
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 and Registration fee	NPR 1,00,00,000 as a minimum paid up capital Registration fee:Rs 16,000	NPR: 1,00,000 as a minimum paid up capital Registration Fee: Rs 1,000
2.	Numbers of members	7 to any numbers of members	Minimum of 2 members to maximum of 101 members
3.	Transferability of shares	Not restricted	Restricted
4.	Minimum numbers of directors	3	2
5.	Public subscription	Can invite the public to subscribe to its shares or debentures	Issues of shares or debentures to the public is prohibited
6.	Issue of prospectus	Can issue a prospectus or it can also optional for private placement	Prohibited from issuing a prospectus
7.	Minimum amount of allotment	Cannot allot shares unless the minimum subscription stated in the prospectus is obtained	Can allot shares, without obtaining minimum subscription
8.	Appointment of Director	One director can be appointed by a single resloution	2 or more directors can be appointed by a single resolution
9.	Place of holding AGM	AGM is held at the registerd office or any other place where the registered office is situated	AGM can be held anywhere
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.

To consult or get legal advice from our Expert for Legal Services for Startup Business in
Nepal/Startup Lawyer in Nepal/Startup Law in Nepal/Business Registeration in Nepal;
contact us at: 977-01-4102849/977-9851059026, Prime Law Associates, Anamnagar,
Kathamndu, info@primelawnepal.com , www. primelawnepal.com

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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