Minimum Share Capital Requirements Explained in Nepal

Introduction

Choosing the right amount of share capital is one of the first and most critical legal steps when incorporating a company in Nepal. Capital is more than a number on paper — it reflects credibility, regulatory compliance, investor protection, and the business’s ability to raise funds in the future.

This guide provides a clear breakdown of:

• The statutory minimum capital under the Companies Act, 2006 (as amended).
• The minimum foreign direct investment (FDI) threshold under the Foreign Investment and Technology Transfer Act (FITTA), 2019.
• Practical differences between authorised, issued, and paid-up capital.
• Sector-specific nuances (e.g., banking, hydropower, IT, and other regulated industries).
• Strategic considerations for founders and investors.

Whether you are a local entrepreneur or a foreign investor, this article will help you navigate capital requirements with confidence.

What is Share Capital?

In Nepalese corporate law, share capital represents the funds committed by shareholders when they subscribe to company shares. It is typically divided into three categories:

1. Authorised Capital – The maximum capital a company is permitted to issue, as stated in its Memorandum and Articles of Association.
2. Issued Capital – The portion of authorised capital actually offered to shareholders.
3. Paid-up Capital – The actual money shareholders have paid into the company.

For legal compliance, regulators in Nepal focus primarily on paid-up capital at incorporation.

Minimum Share Capital for Domestic Companies

Private Limited Companies

• The Companies Act, 2006, has not specified the fixed minimum share capital requirement for private companies; however, the authorised capital needed is NPR 100,000.

Public Limited Companies

• A public company must have a minimum paid-up capital of NPR 10 million (1 crore) under the Companies Act.
• Public companies are also subject to stricter disclosure, audit, and governance requirements.

Sector-Specific Requirements

While the general law has relaxed minimums, certain regulated sectors still impose capital thresholds:

• Banking/Financial Institutions (BFIs): Capital adequacy requirements are set by Nepal Rastra Bank (NRB). For example, commercial banks require billions in paid-up capital.
• Insurance: Life and non-life insurers must maintain high capital thresholds under Insurance Board regulations.
• Hydropower Projects: Hydropower developers must meet project-specific equity requirements under the Ministry of Energy and Electricity Act.
• Stock Brokerage and Investment Companies: Subject to capital requirements by the Securities Board of Nepal (SEBON).

Minimum Foreign Direct Investment (FDI) Capital

General Rule

Under the Foreign Investment and Technology Transfer Act (FITTA), 2019, the Government prescribes a minimum foreign investment threshold.

• Current threshold (DOI guidance): NPR 20 million (twenty million rupees) is the minimum required per foreign investment project.
• This requirement applies regardless of whether the foreign investor is an individual or a company.

Automatic Route and Exceptions

• In recent policy changes, Nepal introduced an automatic route for FDI up to a certain cap for eligible industries.
• IT and technology-based industries often enjoy exemptions or relaxed thresholds, meaning smaller foreign investments can be permitted.
• Always verify the latest DOI notice and NRB regulations, as exemptions and thresholds may shift with government policy.

Large Projects

• Investments above the prescribed limit are handled by the Investment Board Nepal (IBN).
• Typically, multi-billion rupee projects in hydropower, infrastructure, or tourism fall under IBN’s jurisdiction.

Sectoral Regulators

Even if FITTA permits entry at NPR 20 million, certain industries (banking, telecom, aviation, etc.) require much higher capital. In such cases, the sector-specific law overrides the FITTA minimum.

Strategic Considerations for Founders and Investors

1. Local entrepreneurs:
   • For private companies, set capital realistically. Too little may undermine credibility with banks and investors; too much may lock in unnecessary funds.
   • Always align capital structure with the business plan and financial forecasts.
2. Foreign investors:
   • Budget at least NPR 20 million unless your project qualifies for an automatic-route exemption.
   • Plan inward remittances carefully — capital must be routed through banking channels in convertible foreign currency.
   • Keep documents ready: project report, Financial Credibility Certificate (FCC), shareholder agreements, and source-of-funds evidence.
3. Public companies and regulated sectors:
   • Be prepared for higher capital obligations.
   • If going public or entering a regulated industry, secure sectoral approvals early.

Risks of Non-Compliance

• Registering a company with inadequate or misleading capital disclosures can trigger Registrar of Companies penalties.
• For FDI, failure to meet minimum capital requirements leads to DOI rejection and potential issues with Nepal Rastra Bank approval for profit repatriation.
• In regulated sectors, undercapitalization may cause license revocation.

Conclusion

Nepal has modernised its corporate law by removing the minimum capital requirement for private companies, making it easier for startups to incorporate. However, public companies, regulated industries, and FDI projects remain subject to stricter thresholds.

Foreign investors should budget NPR 20 million as the current minimum (unless exempt under the automatic route, particularly for IT-based ventures). Meanwhile, domestic entrepreneurs should calibrate their share capital to strike a balance between compliance, credibility, and flexibility.

Practical takeaway: Always verify the latest Department of Industry (DOI) notices, Nepal Rastra Bank guidelines, and sectoral regulator rules before finalising your company’s capital structure.