The Foreign Investment and Technology Transfer Act 2075 (2019 AD)
Foreign Investment 

Foreign Investment includes the investments by a foreign investor in Nepal,

  • through shares in foreign currency,
  • reinvestment of earnings,
  • lease financing of specified equipment like airlines, ships, machineries and equipment (up to prescribed threshold),
  • investment in venture capital funds (VCFs) by institutional foreign investors,
  • investment in listed securities through secondary market by VCFs,
  • acquisition of shares/assets of existing companies,
  • issuance of securities in foreign capital market,
  • investment made through technology & know-how transfer agreement
  • Investment maintained by establishing and expanding an industry in Nepal


Technology Transfer 

“Technology Transfer” means any transfer of technology to be made under an agreement between an industry and a foreign investor on the following matters:

  • Patent, design, trademark, goodwill, technological specificity, formula, process,
  • User’s license, technological know-how sharing or use of technological knowledge (franchise),
  • Provision of foreign technical adviser, management and marketing service or other technological skill or knowledge.


Foreign Investor 

“Foreign Investor” means any foreign individual, firm, company or corporate body, Non-resident Nepali, Foreign Government, International Agency and Final-Interest Holder or ultimate beneficiaries involved in foreign investment.


Permission to be obtained 

For investment in an Industry with investment up to NPR 6 Billion, permission of foreign investment or technology transfer to be taken from Department of Industry (DOI), and from the Investment Board of Nepal (IBN) if it is in excess of NPR 6 Billion. Moreover, in some sectors i.e. Banking and Insurance, approval from other agencies like Nepal Rastra Bank, Insurance Board is also required.


Minimum Threshold of Foreign Investment

The minimum threshold for the foreign investment is NPR 50 Million. A foreign investor is required to invest such amount as a minimum as per the “Foreign Investor” which can be invested in tranches within prescribed time frame.


Investment through a Venture Capital Fund

A foreign investor can establish a venture capital Fund with the approval of Securities Board of Nepal (SEBON) for investment in the equity shares of a company in Nepal.


Dealing in Securities Transactions

Entities establishing a venture capital fund may transact in securities through the stock exchange’s secondary market after registering with the SEBON. However information such as the minimum securities to be purchased, the ceiling of investment , minimum securities holding period, and foreign currency reserve fund to be maintained by the foreign investor etc. are yet to be prescribed.(This provision will be applicable after the Nepal Government publishes a  notice in Nepal Gazzette)


Issue of Bonds, Debentures or Securities

Any public company established in Nepal or a corporate body that has obtained approval for issuing debentures in accordance with the prevailing law, can, with the approval of Nepal Rastra Bank and the Securities Board, issue bonds, debentures, or securities in foreign security market to raise foreign loan or foreign currency.

Any company established in Nepal with foreign investment can raise loan from local market by issuing securities after obtaining required approvals in accordance with the prevailing law.

Such loan amounts, or foreign currency, must be invested in Nepal.

(This provision will be applicable after the Nepal Government publishes a notice in Nepal Gazzettte)


Raising Foreign Currency Loans

Any Industry with foreign investment can raise loans from foreign BFIs in the form of project loan or project financing agreement (in accordance with the prevailing law, on recommendation of the Ministry and with the approval of NRB).


Escrow Agreement

A foreign investor for the purpose of their foreign investment can enter into a tripartite escrow agreement between their partner investor or another foreign investor and any commercial bank certified by NRB or Infrastructure Development Bank. As per the separate circular issued by NRB, the bank as a party to the escrow agreement acts as an agent for the parties and will also have right of enforcement.



Foreign investor is entitled to repatriate the following amount outside Nepal in the currency as set out in the agreement

  • The amount received by the sale of the share of foreign investment as a whole or any part thereof.
  • The amount earned from profit or dividend.
  • The amount received from the outstanding amount after liquidation of a Company or an Industry and after the payment of liabilities.
  • The amount received as a Royalty under the Technology Transfer Agreement.
  • The amount received from the Lease Rent.
  • Compensation granted by tribunal after end of litigation, arbitration or other legal procedure.
  • Other amount that can be repatriated under prevailing law.


Provisions Related to Visa 
  • The non-tourist visa not exceeding six months shall be granted to a foreign citizen who visits Nepal to make a study, research or survey for foreign investment
  • The business visa shall be granted to a foreign investor or one authorized representative of him or her and the family members of such an investor or representative to stay in Nepal until the foreign investment equal to such minimum amount as prescribed is maintained.
  • Non- tourist visa, is only granted upon obtaining work permit, for high-skilled and technical workers after demonstrating that equivalent workers are not available in Nepal after undergoing a vacancy procedure as prescribed under labor law.


Settlement of Disputes 
  • The dispute may be resolved from the mutual consultation, and if required, the Department of Industry may facilitate to resolve the dispute.
  • If the dispute cannot be resolved with the mutual consultation, than the dispute shall be resolved as per the parties’ written agreement
  • If the parties’ agreement is silent regarding the dispute settlement, then dispute shall be resolved by arbitration. Unless otherwise agreed to by the parties, the arbitration proceedings shall be in accordance with UNCITRAL Rules, the arbitration will be governed by substantive laws of Nepal and venue will be in Nepal.
  • The new FITTA provides the freedom to parties to enter into an agreement for settlement of dispute. This means that investment agreement can be governed by foreign law and any dispute under such agreement can be submitted to the foreign courts or arbitration with some limitation for enforcement of arbitral award.
  • Even though the new FITTA provides freedom to parties to enter into an agreement for dispute settlement, there two important concerns:
  1. According the Arbitration Act, 1998 of Nepal a foreign arbitral award can enforced in Nepal only if (A) Nepal is party to a treaty related to enforcement of foreign arbitral award, and (B) the award is rendered in the territory of the party to that treaty subject to the conditions set out at the time of being party to that treaty itself. Also, it is also essential that the dispute between the parties amount to commercial dispute under laws of Nepal as well as there needs to be reciprocity between Nepal and the foreign country for enforcement of foreign arbitral award.
  2. Beside that the Mutual Legal Assistance Act, 2014 is also vital and should consider a principle legislation governing enforcement of Foreign Judgment in Nepal. As per the provisions of this act it is mandatory to have bilateral treaty as a condition for enforcement of foreign judgment in Nepal and till now Nepal has not signed any such treaty with any foreign country.


Single Point Service Centre

The FITTA 2019 has introduced One-Stop Service Mechanism, which is to be established as per the prevailing law. Government of Nepal can provide exemptions, facilities, concession or services to foreign investors through One-Stop Service Mechanism. Such services are registration of Industries, various approvals, labor permit, visa service, quality check and control of products produced by industries and others.


Hiring Expatriates

Hiring of expatriates as management experts, technical experts, managerial, and technical staff can be undertaken by entities only when qualified Nepali nationals are not available for such positions. The entities must provide the training and development to Nepali staff to eventually replace such expatriates. Furthermore, the labour law has restricted the number of expatriates that can be hired by an entity to a maximum of 5% of the total workforce.


Industries or Businesses Restricted for Foreign Investment
  1. Sectors of primary agricultural production as well as poultry farming, fisheries and bee-keeping, fruits, vegetable, oil seeds, pulse seeds, milk (Dairy) industry and priority production in agricultural sector
  2. Cottage and small industries
  3. Personal service business (hair cutting, Beauty Parlor, Tailoring, Driving etc.),
  4. Industries manufacturing arms, ammunition, bullets and shell, gunpowder or explosives, and nuclear, biological and chemical (N.B.C.) weapons; industries producing atomic energy and radio-active materials
  5. Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service
  6. Travel agency, guide involved in tourism, trekking and mountaineering guide, rural tourism including home-stay
  7. Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language
  8. Management, account, engineering, legal consultancy service and language training, music training, computer training, and
  9. Other consultancy services having foreign investment of more than fifty-one percent.


Note: the government has recently decided to allow foreign investment in poultry farming, fisheries, bee-keeping, fruits, vegetable, oil seeds, pulse seeds, milk (Dairy) industry and primary productions in agricultural sector provided that the industry is a large industry (requiring minimum investment of NPR 500 million in fixed assets) and it exports minimum 75% of its own total production. However, the Supreme Court has ordered the Nepal government to hold its decision of opening foreign investment in the agriculture sector for the time being.

The Foreign Investment and Technology Transfer Rules 2077 (2021 AD)
100% ownership allowed

Foreign investment can be made by purchasing upto 100 % of shares or property of an industry other than those listed in the negative list of FITTA 2075.


Limit of royalty repatriation
  1. Annual Royalty against all types of technology transfer can be repatriated subject to following limits.
Royalty base On local sales On export sales
Fixed  amount or as a % of gross sales Upto 5% of gross sales (net of taxes) Upto 10% of gross sales(net of taxes)
As a % of net profit Upto 15 % of net profit Upto 20% of net profit


  1. Annual Royalty or any fee against use of trademarks only can be repatriated subject to following limits.
Royalty base On local sales On export sales
Tobacco or Alcohol related industry Upto 2% of gross sales (net of taxes) Upto 5% of gross sales(net of taxes)
Other industry Upto 3% of gross sales (net of taxes) Upto 6% of gross sales (net of taxes)


However, royalty or any fee against technology transfer agreement relating to starting the operation of an industry shall be as per the agreement between two parties.


Time limit for bringing FDI into Nepal
FDI approval amount Minimum amount to be brought within 1 year of approval
Up to minimum threshold (i.e. NPR 50 million)

25% of approved amount


More than the threshold limit up to NPR 250 million

15% of approved amount


More than NPR 250 million up to 1000 million

10% of approved amount


More than NPR 1000 Million

5% of approved amount



However in any case, at least 70 percent of the approved amount must be brought prior to the commercial production or transaction and balance amount to be brought within two years from the date of the commencement of commercial production or transaction from such industry or business.

In case any foreign investor has taken approval for foreign investment by purchasing shares of an existing operating industry, then the investor has to make the investment within 1 year of such approval.

In case any industry with FDI has not brought foreign investment at the start of this FITTA RULES 2077, then such industry has to submit and get approved its foreign investment plan and bring the foreign investment according to that approved plan.


Reinvestment of Earnings from foreign investment

Foreign investor can invest, out of its earnings, in same industry or other industry where foreign investment is allowed. For such re-investment, the minimum threshold shall be adjusted as below:


Minimum amount to be invested will be:


Re-investment made in same industry

10% of existing threshold


Re-investment made in other industry

Equal to the existing threshold



VISA provisions

There are two categories of visas for foreign investors, namely business visa and residential visa.


Business VISA

Foreign Investor or his authorized representative and the family members of the foreign investor or his authorized representative shall be granted business visa if the investment has been maintained at the minimum threshold (i.e. NPR 50 Million). For those investors whose FDI was approved before the enactment of FITTA 2075, the minimum threshold shall be as per the Act prevailing at the time of FDI approval.

In case the approved FDI amount is NPR 10 Crore or more and at least 25% of the same has already been brought, then business visa is provided to foreign investor or two authorized representatives and their family members.


Residential VISA

A Residential visa is provided to foreign investor or their authorized representative and their family members where the invested amount exceeds 10 lakh USD (or equivalent foreign currency) and at-least 50% of that amount remains in Nepal.

Industrial Enterprises Act 2076 (2020 AD)
Registration of an Industry

Industrial Enterprises Act (IEA) 2076 (2020 AD) which has replaced the earlier Industrial Enterprises Act 2073 (2016 AD) is now the preeminent legislation guiding the registration, establishment, operation and regulation of industries in Nepal. The Act explicitly restricts to establish or operate industry without registering an industry undergoing through the procedure as provided in the Act.

The IEA 2020 has decentralized the registration process by granting authority to provincial levels for registration, renewal and regulation of industries, however following industries are still to be regulated by the federal authority.

  • Industries listed in schedule–1of the IEA 2020
  • Industries established with Foreign Investment
  • Industries based on subject matter stated in schedule -5 of the constitution of Nepal
  • Industries having its working area in two or more provinces
  • Industry providing educational consultancy services in relation to diplomatic affairs

However the DOI, federal authority shall continue to be responsible for registration, renewal and regulation until the provincial governments make necessary arrangement in the provincial laws.

Every industry has to apply for registration before establishment or operation. The registration document has to be issued by the authority within 5 days if all documents are submitted along with application. Investor, if required, needs to conduct Environmental Impact Assessment (EIA) or Initial Environmental Examination (IEE), in some instance may require to give Brief Environmental Report without going to IEE or EIA process.

IEA 2020 has introduced a new concept of unit industry, eliminating the concept branch industry. Any industry desirous of operating an industry at a different location from that of main industry shall do so by registering a unit of the industry. IEA 2020 requires all existing branch industries to either register itself as a separate industry within a year from the date of enactment of this act or establish it as a unit of the main industry.


Types of Industry Criteria

i)  Fixed assets(capital) worth not more than NPR 20 lakh (except for land & building),

ii) Owner is involved in operation and management of industry,

iii) Workforce of up to 9 people including the owner,

iv) Annual turnover less than NPR 1 crore; and

v) If such industry has used engines, equipment’s or machines then energy consumed by such devices in the form of electricity or diesel or petrol or other crude oils is upto 20 Kilo watt.



Industries specified in schedule-I (Industries Requiring Permission) of Industrial Enterprises Act shall not be micro industries.



i)  Based on traditional skills and technology

ii)  Labor intensive & specific skill or based on local raw materials & local technology, art & culture

iii) If engines, equipment’s or machines are used, then power usage is upto 10 Kilo watt.

iv)As stated in Schedule-2 of Industrial Enterprises Act.


Small Scale


Except those industry classified as Micro and Cottage industries and having Fixed assets(capital) Up to NPR 150,000,000 (One Hundred and Fifty Million)
Medium scale Industry with fixed assets(capital) ranging from NPR 150,000,000 (One Hundred and Fifty Million) to NPR 500,000,000 (Five Hundred Million)
Large scale

Industry with fixed assets(capital) more than NPR 500,000,000 (Five Hundred



Classification based on Nature of Service or Output

a)     Energy-based industries (including generation and distribution of power)

b)     Manufacturing industries

c)     Agro-forestry industries

d)     Mining industries

e)     Construction industries

f)      Tourism industries

g)     Telecommunication and Broadcasting industries

h)     Service industries

Energy based Industries
  • Industry generating energy from water resources, wind, solar, coal, natural oil and fuel or gas, biomass and similar types of energy producing industry; energy transmission; energy distribution etc. as referred in Schedule 3.
Manufacturing Industries
  • Industries which produce goods by utilizing raw materials, semi-processed raw materials or un-used products.
Agro-forestry Industries
  • The businesses of production or processing from raw materials based on agriculture and forests product as referred in Schedule 4.
Mining Industries
  • The industry extracting and processing the metallic and non-metallic material.
Infrastructure Industries
  • The enterprise that constructs and operated physical infrastructure as mentioned in Schedule 5 as Road, bridge, tunnel; ropeway, railway, tram, trolley-bus, cable car, monorail and sliding-car; airway and airport; conference center; waste management; water supply and distribution; irrigation; sport complex and stadium; parking place and parking house; export processing zone; cargo complex; sewage treatment plant; special economic zone; telephone tower, optical fiber network, satellite and satellite transmission center; house and housing complex; film city, film studio; business complex etc.
Tourism Industries
  • The industries related to Tourism industries as mentioned in Schedule 6 as Tourist house, motel, hotel, resort and restaurant; travel agency, tour operator, healing center, casino, massage and spa; adventure tourism; golf course, polo, pony trekking, hiking; village tourism, homestay and ecological tourism; cultural, religious, conference and sports tourism; entertainment part; conservation; mountain flight etc.
Information technology, Communication technology and information dissemination-based Industry
  • Industrial enterprise relating to information, knowledge and communication having used technology for information collection, processing and transmission as referred to in Schedule 7 as Information technology based industry like technology park, IT park, biotech park, software development, computer and related services, data processing, cyber café, digital mapping, BPO, data mining, cloud computing. Communication based industry like internet, telecommunication, teleport services, satellite establishment and operation, satellite transmission center, VSAT, broad band, optical network, satellite network Transmission based industry like FM radio, digital radio service, digital television, satellite television, cable television, IPTV and online services, Digital cable TV, network, Direct-to-home satellite services, MMDS Network, recording studio, printing media, entertainment services, etc
Service Industries
  • Industrial enterprises as mentioned in Schedule 8 as Workshop, printing press, professional research and development, management, engineering and design, legal, accounting, auditing teaching/training, educational and technical consultancy services, ginning and bailing business, cinematography, construction business, public transportation business, photography, hospital, nursing home, educational and training institution, library and museum services, laboratory, air services, sports services, non-agro cold storage, house wiring and electrical fitting and maintenance, waste management services, cargo and courier services, advertising services, packaging and refilling services, foreign employment services, Wholesale and retail trading, operating Cinema hall and multiplex, e-commerce, Leasing, Repackaging, Service apartment, Food court, Catering,  etc.

Compliance Requirement

Industries are required to submit/notify certain details/information to the authorities upon bringing industry into operation and within 6 months from the date of expiry of the fiscal year. A notification is also required to be given to the authorities when the industries stop their operation.


Approval Requirement

Approval of DOI is required for certain changes in the industry. For instance, approval required for-(a) extension of the time period for bringing the industry into operation, (b) transfer of location of the industry, (c) liquidation of industry.

Further, approval from the Industry and Investment Promotion Board is also required for the registration of industry which are listed in schedule -1 of the IEA, 2020



Fixed Capital of Industry

Fixed capital of an industry shall consist of the following assets:

  • Construction or physical renovations made on land and underground, space, water or below water,
  • Surface physical infrastructure (such as sewerage, internal road, drinking water, water supply system),
  • Office of industry, factory building or warehouses,
  • Residential building and equipment or system related to it,
  • Machines, instruments and tools,
  • Transport Vehicles,
  • Office tools and equipment of capital nature,
  • Furniture, Fixture and Furnishing,
  • Communication provisions and equipment,

Note: The following expenses incurred before the establishment of industries or at various stages of construction phases shall be included in the valuation of fixed capital of industry:

  • Technical or supervision expenses to be capitalized,
  • Pre-investment and pre-incorporation expenses,
  • Interest expenses to be capitalized,
  • Environment impact assessment and research cost to be included in the operation of the industry.


Exemption or Concession on Taxation to Industry

Certain exemption or relaxation is granted on Income Tax, Value Added Tax and Custom Duty to industries registered under Industrial Enterprises Act.

Please refer the ‘Taxation’ part of “Doing Business in Nepal 2021” for details.

In addition to relaxation mentioned in ‘Taxation’ part above, following additional benefits and exemptions are provided to following industries.

  • No fees or royalty pursuant to the existing laws shall be applicable in electricity produced by industry for its own consumption.
  • Such industry willing to sell surplus electricity to any other industry, may sell so pursuant to existing laws in the rate agreed upon by both parties.
  • Government of Nepal may provide additional exemptions and facilities to export based industries and prescribed industries established inside Special Economic Zone or inside Government or Private Industrial Estate by publishing notice in Nepal Gazette.
  • Government of Nepal may provide additional exemptions and facilities by publishing a notice in Nepal Gazette to National Priority Industries or industry making optimum use of domestic raw materials, labor or skill or industries established by inventing new technology or goods inside Nepal upon recommendation of Industries and Investment Promotion Board.
  • Industries operating under Foreign Investment may be given approval to import goods produced by the Parent Company located in foreign country for production, market development and promotion of new goods for a prescribed period under prescribed terms and conditions.


Other Highlights
  • Industry may be granted permission to acquire land more than the limit prescribed in the existing laws related to land, if required.
  • No industry shall be nationalized.
  • Government shall provide, if necessary, industrial security to the industry.
  • Industry can hire a foreign national for a maximum period of five years(may be extended for further two years) , in a high level managerial position, where no Nepalese national can be hired because of the lack of skill and expertise, and recommended by the Department of Industry with the permission from the Department of Labor.
  • A foreign national, working in any industry with prior approval of the Department of Labor, may repatriate his/her salaries, allowances, emoluments, etc in convertible foreign currency in an amount not exceeding 70% percent of such salaries, allowances and emoluments.
  • Applicant obtaining permission from the Industry and Investment Promotion Board for registration of the industry as mentioned under schedule 1, cannot sale or change ownership or otherwise transfer the title before operation of industry, commercial production or starting business. However, if the applicant dies before operation of industry, commercial production or starting business, then legal heir of the applicant will carry remaining work.


No Illegal Strikes Allowed

The Act restricts employees to carry out any strike which may affect the operation of an industry and its production. However, this provision does not restrict the employees to put their legitimate demands to the management peacefully and resolve them in a mutual consensus way based on the prevailing Labor laws.


Single Point Service Centre

The Ministry of Industry, Commerce & Supplies (Ministry) has established a Single Point Service Center (Centre). All services required by an industry including concessions, facilities and incentives shall be provided through this Centre in an easy and spontaneous manner. In addition, other administrative services such as approval, registration, expansion and approvals for industries will be provided from the Centre on a timely manner.


Corporate Social Responsibility (CSR)

Medium or large scale industry or cottage/small scale industry with annual turnover of more than NPR 150 million has to allocate at least 1% of its annual profit for CSR activities every year. The amount spent under CSR requirement can be deducted for the purpose of income tax. The plans and programs related to CSR shall be submitted within the end of 6 months of every financial year to the DOI. The plans formulated plans and programs for CSR shall be implemented in co-ordination with local authorities.

For non-compliance of the CSR provisions, fine shall be imposed equivalent to 1.5% of Net Profit every year. (Additional fine equivalent to 0.5% of Net Profit for entities failing to comply for more than 1 year).

Public Private Partnership and Investment Act 2075 (2019 AD)
Infrastructures Covered Under the Act

Infrastructures covered include : roads, tunnels, bridges, canals, dams, sewerage, cable cars, railways, tramways, metro rail, mono rail, sky rail, trolley bus, rapid bus transit, dry port, dock, airports, hospitals, cold stores, stadiums, entertainment parks, waste treatment plants, telecommunication, agriculture, education, etc. and other infrastructures of similar nature.


Investment Approval

Investment above NPR 6 billion shall be approved by Investment Board of Nepal, whereas investments up to NPR 6 billion are approved by the DOI. For the purpose of implementing a project, the authorities responsible are:

  1. Concerned Local Level Government: For projects within the jurisdiction of local level government.
  2. Concerned Province Government: For projects within the jurisdiction of province government.
  3. Concerned Ministry of GON: For projects except hydroelectric project with cost upto NPR 6 billion and for hydroelectric project which has capacity up to 200 MW.
  4. Investment Board: For project except hydroelectric project above NPR 6 billion and for hydroelectric project which has capacity beyond 200 MW.


Forms of Public Private Investment

The public private investments can take any of the following forms:

Build and Transfer (BT); Build, Operate and Transfer (BOT); Build, Own, Operation and Transfer (BOOT); Build, Transfer and Operation (BTO); Lease, Operation and Transfer (LOT); Lease, Build, Operation and Transfer (LBOT); Development, Operation and Transfer (DOT); Management, Operation and Transfer (MOT); Rehabilitation, Operation and Transfer (ROT).


Process of granting License

The process for undertaking an infrastructure project under this law is as follows:

  1. The appropriate authority (Investment Board, Nepal Government, State Government or Local Government) will short list the projects in which a PPP is sought.
  2. The list of projects will be published inviting an EOI for the research and study of the project.
  3. Alternatively, any entity desirous of implementing a project which it has identified, may submit their EOI directly to the appropriate authority without any public notice. In such case the appropriate authority may either directly award the license to carry out detailed study to the applicant or call for competitive bidding if the bidding option seems more rational.
  4. EOI should be furnished with all the required details within the stipulated time stated in the Notice.
  5. The appropriate authority will short list the potential candidates, and will invite proposals from them.
  6. The appropriate authority, after evaluating the technical proposal, the proposed royalty, and the financial proposal (including details of tariffs to customers), will select the best candidate.
  7. The appropriate authority will grant a license to carry out the detailed study of the project and will obtain a performance bond from the selected entity.
  8. The entity enters into a PPP agreement with the respective authority. Such an agreement includes the details of project, the commencement and completion date, the facilities and the exemptions, the license period, milestones, a timetable, technical standards and quality, the conditions to transfer the project to the appropriate authority, royalties, etc.


Project Implementation through direct negotiation

Where a suitable proponent could not be selected ever after notice for at least two times then the concerned authority may cause the project implemented through direct negotiation. Further, any project which deemed appropriate to be implemented through direct negotiations for any of the following reasons, may also be implemented through direct negotiation.

  • no possibility of competition owing to nature or cost of the project,
  • having new concept or technology involved,
  • to be implemented on national priority basis
  • it is not appropriate for the project to adopt the complete process
Companies Act 2063 (2007 AD)
Service restriction

To carryout following business a company must be registered as public company. Public company shall mean a company having paid up capital of not less than NPR 10 million and at least seven promoters.

  • Banking
  • Insurance
  • Financial services
  • Business relating to securities (stock) market
  • Retirement Fund
  • Mutual Fund
  • Telecommunication service (if paid up capital exceeds NPR 50 million)


Issue of share in premium            

Private company can issue shares at a premium if decided by its General meeting provided the company has positive net-worth.

Share premium shall be used for only following purpose:

  • Issue of bonus shares
  • Payment of Premium on redemption of redeemable preference shares
  • Writing off the preliminary expenses
  • Reimbursement of the commission paid or discount allowed on issue of shares.


Issue of different class of shares

Registered companies can issue different classes of shares with different rights by making suitable provision in Articles and memorandum including Preference and Ordinary shares as general practiced.


Restriction on transfer of shares

If a private company is enjoying Loan facility from any company, then its promoters cannot sale/transfer/mortgage their shares unless all their shares have been fully paid and first annual general meeting of the company has been held.


Buyback of shares                         

A company shall not buy back its own shares or lend money against security of its own shares.


Company can buy back its own shares out of its free reserves available for distribution as dividend by giving information to the OCR, if following conditions are satisfied

  • Shares issued are fully paid up.
  • Buy-back is authorized by the articles of association.
  • Special resolution has been adopted at the general meeting authorizing the buyback.
  • After buyback, Debt (both secured and unsecured) of the company will not be more than double of its capital and general reserves.
  • Value of shares to be bought back is not more than 20% of its paid up capital and general reserves.
  • Buyback is not in contravention of any directives issued by OCR.


After adoption of special resolution to buy back of shares, company can buy back its shares in any of the following manner within 12 months.

  • Purchase shares from stock exchange
  • Purchase from employees who are allotted shares
  • From existing shareholders on proportionate basis


Details of bought back shares shall be submitted to OCR within 30 days. A sum equal to the marked price of bought back shares shall be transferred to Capital Redemption reserve fund and the amount of such fund shall be maintained as paid up Capital. The Company shall cancel the shares bought back within 120 days from the date of such buy-back.

Once a company buys back any class of shares, it shall not reissue the shares of that class, except for the issue of bonus shares or payment of its liability prior to the expiration of two years after such buyback.


Prohibition on certain acts 

The BOD of a company enjoying loan facilities from banking and financial institutions shall not do following acts unless authorized by special resolution in general meeting.

  • Sale/donate/gift/lease/or otherwise dispose of more than 70% of one or more undertakings being operated by it,
  • Take loan (except credit facilities for a term not exceeding 6 months) where the loan amount exceeds the company’s paid up capital and free reserves.
  • Make a contribution, donation or a gift (except for employees’ welfare or business promotion) of a sum exceeding NPR 100,000 in one financial year or 1% of the average net profits of the company during the last three financial years whichever is lesser.


Special provision for single shareholder company                                       

Unless otherwise provided in the articles, all acts and decisions required to be done/made by the BOD or general meeting shall be as decided in writing by the single shareholder and no meeting of BOD or general meeting shall be required to be called. In practice, the single man company are operating based on the shareholder’s decision without BOD and AGMs.


Provisions Relating to Foreign Companies                                

A foreign company shall not carry any business transaction in Nepal without registering a branch office in OCR.

A foreign company shall not establish a liaison office in Nepal without registering such office in OCR. A foreign company registered as liaison office cannot do any income earning activities in Nepal.

If a foreign company has made investment in shares of a Nepalese company or provided loan to a Nepalese company or participated in the operation and management of a Nepalese company, then it shall not be treated as carrying business transaction in Nepal for above mentioned purpose.

A foreign company registered as branch office in Nepal can carry only the same type of business or transaction as is being carried on by it in the country where its registered office is situated or where it has been incorporated.

Foreign company shall keep books of accounts and prepare financial statements as prescribed.


Restriction on certain transactions between companies

No company shall

  • Lend money to another company or
  • Give guarantee for loan taken by another company or
  • Make investment in the securities of another company in excess of an amount that is 60% of paid up capital and free reserves or100% of free reserves whichever is higher

However, this restriction does not apply to

  • Bank and FIs
  • Insurance
  • Company with main objective to buy and sale securities or only make investment
  • Private company with no loan from Bank and FIs
  • Company providing Infrastructure facility
  • Holding company making investment in its wholly owned subsidiary
  • Loan /Guarantee given by Holding company to its wholly owned subsidiary
  • Investment made in right shares.


Company Secretary   

A company with paid up capital NPR 10 million or more shall appoint a company secretary.

Member of board of directors of a company could not be appointed as Company secretary of same company.

No person shall be appointed as Company secretary in more than one company, However Company secretary of a holding company can be appointed in subsidiary company also.


Requirement of Accounting, Book keeping and Reporting

Nepalese Companies Act requires every company to maintain books of accounts according to the double entry system of accounting in consonance with the prevailing accounting/reporting standards. Companies are required to prepare financial statements and get it audited within six months of the end of financial year. Nepalese financial year starts on Shrawan 1st (Mid July) and ends in Ashadh end (Mid July) of next year.

Nepalese companies are required to prepare their financial statements as per Nepalese Financial Reporting Standard (NFRS) which is very close to IFRS.

Minutes of AGM along with audited financial statements and a number of other periodic reports are required to be submitted to the Company Registrar’s office, non-compliance of which will attract penal charges.

Labor Act 2074 (2017 AD)

This Act applies to a company, private firm, partnership firm, cooperatives, association or other organization (“entity”) operating, established, incorporated, registered, or formed under the prevailing laws to undertake industry, or business, or provide a service (or services) with or without a profit motive. It also applies to entities registered in foreign countries and engaged in the promotion of trade, the sale of products, or the promotion of other works in Nepal.

The Act is not applicable to: Civil service; Nepal army; Nepal police; Armed police force; Entities incorporated under other prevailing laws or situated in Special Economic Zones (SEZ) to the extent separate provisions are provided, Working journalists, unless specially provided in the Contract.



Employer can appoint worker/employee for a regular/work based/time bound/Casual/Part-time employment by entering into a contract. Also, employer can hire interns accepting agreement with Educational institution and Trainees as required.

  • Regular Persons hired for work or services other than work based, time bound, casual, or piece rate employment.
  • Work Based Persons hired for rendering a specific service.
  • Time Bound Persons hired for rendering services for a definite time period.
  • Casual Persons hired for seven days or less in a month.
  • Part-time Persons hired for 35 hours or less in a week.

Labor Act also provides provisions for Outsourcing of certain manual works such as security personnel, drivers, cleaning staffs, messengers etc.

A maximum of 6 months’ probation period is allowed.


Foreign employee

Foreign National cannot be appointed as an employee without getting permission from the Labor Department. Prior to engaging a foreign national in work, the entity must publish an advertisement in national level Daily Newspaper to ?ll the vacant posts by Nepali citizens. If no application is submitted or if no local skilled person is available for any work after the vacancy publication foreign national can be hired for the work with the approval of Labor Department.

However, in following cases, labor department can give permission to foreign nationals by keeping a record:

  • Where the entity is formed /operated under a foreign investment or foreign aid, then CEO of such entity and employees in specified numbers as prescribed
  • Any technical person coming to Nepal for Machinery repair/installation or similar casual work may be provided work permit simply by recording in the Labor Department for a period not exceeding 3 months.


Working Hours for employee/workers

The working hours for any employee/worker shall not exceed 8 hours per day and 48 hours per week. However, overtime is allowed not exceeding 4 hours per day and 24 hours per week. For the overtime, employee shall be paid at the rate of 1.5 times the normal basic remuneration. Employer shall arrange the transportation facility if employee is required to come or leave office before sunrise or after sunset.

A 30 minutes’ break is provided after 5 hours of work, where the work can be interrupted. Where the work cannot be interrupted, a break is provided after shifts. The facility of replacement (in-lieu-of) leave is available for workers working on public or weekly holidays.


Remuneration to employees

Employer shall provide remuneration to employee from the first day of employment.

Employee shall get annual salary increment (grade) after completion of each year of service period at a rate of half day’s basic remuneration.

Minimum remuneration prescribed by the Government is as below: (Separate rate for Tea States)

Period                         Basic Pay                   Dearness Allowance             Total

Monthly                       8,455                           4,995                                            13,450

Daily                               325                              192                                                 517

Hourly                               43                                26                                                  69


Retirement Benefits

  • Rate: 10% of basic remuneration.
  • Eligibility: since the first day of employment.
  • Time of Allocation: Every month (time of payment of remuneration)
  • Deposited in: Social Security Fund. (Previously deposited in EPF or any other approved Retirement Fund; or paid in cash along with remuneration)


  • Rate: 8.33% of basic remuneration
  • Time of Allocation: Every month (time of payment of remuneration)
  • Eligibility: since the first day of employment
  • Deposited in: Social Security Fund (Previously deposited in approved fund, or paid in cash along with remuneration)


  • Rate: at the rate of last drawn salary
  • Accumulation: Home Leave up to 90 days, Sick Leave up to 45 days
  • Encashment: At the time of discontinuation of service


Leave of employee

Employee shall get paid leave as below

  • Weekly leave of 1 day per week
  • 13 days of public holiday including May 1st for (male workers) and 14 days of public holiday including international Women day for female employees
  • Home leave at a rate of 1 day for every 20 days of service
  • Fully paid sick leave of 12 days per year
  • Pregnant woman can get leave up to 14 weeks, fully paid for 60 days. Male employee can get up to 15 days, fully paid paternity leave if his wife is pregnant
  • Mourning leave of 13 days if father/mother died in case of male worker. Also, allowed to female worker if she is required to stay in mourning on the death of her father/mother or her father in law/mother in law
  • Leave in lieu for the employees put in work on public holiday or weekly off Employee can accumulate leave up to 90 days of home leave and 45 days of sick leave and excess accumulation should be encashed every year.


Other Benefits
  • Festival Expenses: An amount equivalent to the monthly remuneration, once a year. The employee not completing 1 (one) year
                        service is entitled to  the expenses on a proportional basis.
  • Death Compensation: The nearest successor is entitled to the applicable amount of accident
  • Medical Insurance Coverage: At least one hundred thousand rupees (NPR 100,000) per year for every worker. (Premium: Half by the                                                                      employer, and half by the employee)
  • Accident Insurance Coverage: At least seven hundred thousand rupees (NPR 700,000) for every worker (Premium: Fully paid by                                                                                  employer)
Contribution Based Social Security Act 2074 (2017 AD)
Contribution to the Fund

Employers are required to be listed in the Social Security Fund within the time prescribed by the government. A listed employer shall regularly deposit contributions to the Fund as specified on a monthly basis (unless otherwise specified or where a full month’s contribution is not required) beginning from the day of listing of an employee until their last day of employment. Contributions shall be deposited to the Fund within 15 days from the end of the month.


Delay in Deposit of Contribution by the Employers

Interest at the rate of 10%, in addition to the amount of the contribution, shall be charged by the Fund for failure to deposit the contribution within 15 days from the month end. A listed employer can, within 30 days following the due date for depositing the contribution, file an application in writing specifying the reasons and the basis of the occurrence of the uncontrollable event, resulting in the delay. If the explanation so provided is considered reasonable, the Fund shall provide a full, or partial, waiver of the interest amount and permit the deposit with or without interest.


Failure to Deposit the Contribution

Where contributions are not deposited, the Fund will notify the related institution of the following actions to be complied within 15 days of the notification:

  • Freeze bank accounts of such employers;
  • Freeze movable and immovable properties of such employers;
  • Abrogate all the facilities received by law;
  • Cancel the license of such employers; and,
  • Freeze the passport of the concerned personnel.


Contribution by Employer on behalf of Employees

Where, for any reason, the related employee is not entitled to a salary and fails to deposit his/her contribution into the fund on a regular basis, in such case, the listed employer should contribute to the fund on behalf of the employee, for a maximum period of 3 months.


Entitlement in Social Security Program

A contributor to the fund is entitled to receive all benefits as prescribed under the Contribution Based Social Security Act 2017 (and in the social security program rules) on a proportionate basis of contribution and for period as specified in the fund.


Contribution to Social Security Fund (SSF)

A total of 31% of the basic pay of an employee should be contributed to the SSF. The contribution ratio between the employer and employee shall be as follows:

Schemes Contribution by Employer Contribution by Employee Total Contribution
Provident Fund 10% 10% 20%
Gratuity 8.33% 8.33%
Social Security Fees 1% 1%
Accident and Disability Protection Scheme 1.4% 1.4%
Dependent Family Protection Scheme 0.27% 0.27%
Total 20% 11% 31%
Bonus Act 2030 (1974 AD)
Bonus Provision

Every profit making enterprise shall make provision of bonus equal to 10 % of its net annual income for the financial year.

In case of government owned enterprises, the rate of bonus and other conditions shall be as decided by the Nepal Government.


Conditions for Bonus 

Employees should have worked at least half of the total period during the financial year to be eligible for bonus. Overtime is not counted for this purpose.

For Employees working less than the prescribed period, Bonus amount shall be deducted proportionately.

Bonus shall be deducted for the period of illegal strikes proportionately.


Limit of Bonus amount        

Employee shall not get bonus in excess of:

  • Amount equivalent to 8 months’ remuneration/wages if the monthly remuneration/wages is up to 2 times of the minimum remuneration fixed by the Government of Nepal.
  • Amount equivalent to 6 months’ remuneration/wages if the monthly remuneration/wages is more than 2 times of the minimum remuneration fixed by the Government of Nepal.


Distribution of Bonus   

Bonus under this Act shall be distributed:

Only in cash.

Within 8 months from the end of the financial year, the period may be extended for 3 months by the Labor Department.


Reporting to Labor Department

After completion of Bonus distribution, a report in the prescribed form shall be submitted to the Labor Department within 7 days.

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