Private companies are the driving force behind Nepal’s growing business sector, providing entrepreneurs and investors with a flexible and less complex structure for starting and operating a business. Recognising their importance, the Companies Act 2063 (2006) introduced special provisions under Chapter 14 (Sections 145–151), specifically designed to address the operational needs of private companies.
Unlike public companies, private companies offer a more intimate setting with fewer shareholders, limited public exposure, and a more informal management structure. These provisions strike a balance between ease of doing business and corporate accountability, empowering entrepreneurs to manage companies efficiently while maintaining transparency and compliance.
What Is a Private Company in Nepal?
Under the Companies Act 2063, a private company is defined as one that is not a public company.
It is a closely held company with a limited number of shareholders and restrictions on share transfers.
Key Characteristics of a Private Company
- Shareholder Limit - A minimum of one and a maximum of 101 shareholders.
- Not Public Offerings - Private companies cannot sell shares or debentures to the public or invest public subscriptions.
- Restricted Share Transfer - Shares can only be transferred to existing shareholders or approved individuals per the company’s agreement.
- Naming Conversation - Every private company must end its name with “Private Limited.”
- Flexible Capital Requirement - Unlike public companies that must maintain NPR 10 million in paid-up capital, private companies have no general minimum capital requirement unless sector-specific rules apply.
These attributes make private companies particularly suitable for family businesses, small enterprises, and professional firms that prioritise control, confidentiality, and operational ease.
Key Provisions Under Chapter 18 of Companies Act
Chapter 14 of the Companies Act 2063 outlines special provisions that simplify governance for private companies.
These sections (145–151) allow for greater flexibility in decision-making, reporting, and management.
The consensus agreement is one of the most powerful tools available to private companies.
It enables shareholders to define how their company will operate, beyond what is specified in the Act.
Here are the key features of the consensus agreement:
- It may include provisions on management structure, share transfers, liquidation rights, or meeting procedures.
- It can set specific rules for types of shares, voting rights, and special privileges.
- Any amendment to the agreement requires the unanimous written consent of all shareholders.
- No Ownership Rights – Debenture holders are creditors, not shareholders. They do not have voting rights in the company.
- New shareholders automatically become parties to the agreement if they acquire shares with prior knowledge of its existence.
Transparency is crucial, even in private entities. Section 146 grants shareholders the right to inspect company documents, ensuring oversight and accountability.
Similarly, company directors must make arrangements to allow shareholders access to these records during office hours.
Private companies are required to submit transaction returns to the Office of the Company Registrar (OCR), thereby maintaining transparency and ensuring proper record-keeping.
Although reporting requirements are lighter compared to those of public companies, this provision ensures that the government maintains an accurate record of all private company activities and any changes in ownership.
Private companies can opt not to hold an Annual General Meeting (AGM) if all shareholders agree by consensus.
Here are two conditions for exemption, which are mentioned below:
- All shareholders must unanimously agree through a valid consensus agreement.
- Without such an agreement, the company must still hold AGMs as per the Act.
This exemption saves time and cost for small, closely held companies where shareholders are in regular contact and can make decisions informally.
Section 149 allows private companies to pass resolutions in writing without convening a formal meeting.
Here are several benefits of a written resolution instead of a meeting:
- Save time and administrative costs.
- Ideal for companies with shareholders in various locations.
- Simplifies decision-making without sacrificing legal validity.
This approach reflects the modern trend toward digital corporate management, where decisions can be made efficiently while maintaining documentation.
Recognising the realities of modern communication, section 150 allows virtual participation in meetings.
This provision modernises corporate governance, making it easier for private companies with shareholders in distinct locations to function smoothly.
The government may grant additional exemptions to private companies engaged in prescribed transactions or industries.
This flexibility helps promote investment and innovation by tailoring regulations to specific business types, particularly in emerging sectors such as technology, renewable energy, and startups.
Benefits of Special Provisions for Private Companies
- Reduced Administrative Burden – No mandatory AGMs or elaborate formalities save time and costs.
- Greater Flexibility – Consensus agreements and written resolutions allow customised governance.
- Enhanced Privacy – Limited disclosure protects confidential business information.
- Faster Decision-Making – Easier to adapt and act quickly in competitive markets.
- Lower Compliance Costs – Simplified record-keeping and reporting reduce operational expenses.
Compliance Obligations and Limitations
Despite the flexibility, private companies must still comply with key corporate requirements:
- Maintain accurate books of account and conduct annual audits.
- File annual returns with the OCR.
- Pay taxes and follow tax laws.
- Keep shareholder and director registers.
- Abide by the Companies Act in areas not exempted.
Private companies cannot issue shares to the public, engage in banking or insurance activities, or respect share transfer restrictions as outlined in their consensus agreement.
Recent Developments and Legal Amendments
Recent reforms, such as the Companies (First Amendment) Act and the 2025 Business Environment Ordinance, have made private company operations more flexible and modern.
We are mentioning the major updates here:
- Single Shareholder Companies – Now allowed to have only one shareholder.
- Digital Governance – Legal recognition of electronic communication and virtual meetings.
- NRN Investment Opportunities – Simplified procedures for Non-Resident Nepalis (NRNs) to invest in and operate private companies.
- Flexible Director Rules – Directors can now serve on multiple boards under specific conditions.
Conversion Between Private & Public Companies
Private to Public Conversion
A private company can become public by:
- Passing a special resolution for conversion.
- Amending its Memorandum and Articles of Association.
- Meeting the minimum capital and regulatory requirements.
- Registering the contract with the Company Registrar.
Public to Private Conversion
A public company may convert into a private company if:
- Its shareholders drop below seven, or
- It fails to meet capital requirements.
- The company must make necessary amendments within six months and comply with all private company provisions.
Conclusion
The special provisions for private companies under Chapter 14 of the Companies Act 2063 strike a thoughtful balance between regulatory compliance and operational freedom.
They empower small and medium-sized businesses to operate efficiently, make informed decisions, and tailor their governance to meet their unique needs.
By enabling consensus agreements, written resolutions, and virtual participation, Nepal’s company law modernises business governance and reduces unnecessary bureaucracy.
However, private companies must still maintain sound record-keeping, transparency among shareholders, and adherence to core corporate obligations.
As Nepal’s economy continues to grow, these flexible legal provisions will remain instrumental in fostering entrepreneurship, encouraging domestic and foreign investment, and shaping a dynamic and transparent corporate environment.
In short, the private company model, empowered by the Companies Act 2063, offers the perfect blend of freedom, flexibility, and accountability for the future of business in Nepal.
