1.What is a Startup in Nepal?

In Nepal, a startup is defined as an enterprise or business that is commercially operated by a firm or company undertaking innovative research and creative thinking in the development, production, operation and distribution of goods or services and processes.

The Industrial Enterprise Act 2020 specifies that to qualify as a startup, the business must be registered as a new company, private firm or partnership firm, use innovative ideas and technology, have potential for rapid growth, be less than 10 years old from registration date, and have an annual turnover not exceeding NPR 150 million in any fiscal year after registration.

2.Eligibility Criteria for Startup Registration in Nepal

The eligibility criteria for startup registration in Nepal are clearly defined in the Industrial Enterprise Act 2020. To qualify as a startup, a business must meet the following criteria:

1. Legal Structure: The business must be registered as a new company, private firm, or partnership firm.
2. Innovation: The startup should utilize innovative ideas and technology in the production of goods or services.
3. Age of Business: The date of registration should not exceed 10 years.
4. Annual Turnover: The annual turnover of the business in any fiscal year after registration must not exceed NPR 150 million.
5. Commercial Operation: The startup must be commercially operated, engaging in the development, production, operation, and distribution of goods or services.

Additionally, to qualify for startup loans, the business needs to fulfill at least five out of seven specific conditions related to paid-up capital, total income, fixed capital, and number of employees.

3.Procedure of Startup Registration in Nepal

Step1:Choose a Business Structure
Step2: Company Name Reservation and Approval
Step3: Document Preparation and Submission
Step4: Registration Certificate Issuance
Step 5: Application for Startup Status

• Step 1: Choose a Business Structure

Entrepreneurs must decide between registering as a private limited company, limited liability partnership, or one-person company. Each structure has its own advantages and implications for liability, taxation, and management. Factors to consider include the number of founders, capital requirements, and long-term business goals.

• Step 2: Company Name Reservation and Approval

Once the business structure is decided, the next step is to reserve and get approval for the startup’s name. The chosen name must be unique and not similar to existing registered companies. Entrepreneurs should submit a name reservation application to the Company Registrar’s Office. The office will check the name for availability.

• Step 3: Document Preparation and Submission

This step involves preparing and submitting all required documents to the Company Registrar’s Office. For a private limited company, this includes the Memorandum of Association, Articles of Association, and consent letters from directors. Limited Liability Partnerships need to submit the LLP agreement. Documents proving the innovative nature of the business, such as patents or detailed business plans, should also be included. All founders or partners must provide copies of their citizenship certificates or passports. If any founder is a corporate entity, additional corporate documents are required.

• Step 4: Payment of Registration Fees

After document submission, the next step is to pay the required registration fees. The fee amount varies based on the chosen business structure and the authorized capital of the company. For private limited companies, the fee is calculated as a percentage of the authorized capital. Limited Liability Partnerships and One Person Companies have fixed registration fees. Payment can typically be made online through the Company Registrar’s Office portal or at designated banks.

• Step 5: Registration Certificate Issuance

The final step in the startup registration process is the issuance of the registration certificate. The Company Registrar’s Office reviews all submitted documents and fees. If everything is in order, they process the application and issue a Certificate of Incorporation or Registration. This certificate is the official document proving the legal existence of the startup. It includes details such as the company name, registration number, date of incorporation, and registered address.

4.Documents required for Startup Business Registration in Nepal

The documents required for startup registration in Nepal include:

1. Memorandum and Articles of Association (for companies)
2. Partnership deed (for partnerships)
3. Citizenship certificates or passports of all founders
4. Proof of registered office address
5. NOC from relevant authorities for sector-specific startups
6. Bank statements or proof of capital
7. Passport-sized photographs of founders
8. PAN/VAT registration (if applicable)
9. Signed consent letters from directors/partners

5.Timeline for Startup Registration

The timeline for startup registration in Nepal typically ranges from 2 to 4 weeks, depending on the complexity of the business and the completeness of submitted documents. Name approval usually takes 2-3 days. Document verification and processing by the Company Registrar’s Office can take 1-2 weeks. If additional approvals are required from sector-specific authorities, this may extend the timeline.

6.Registration Costs and Fees

The costs associated with startup registration in Nepal vary based on the business structure and authorized capital. For private limited companies, registration fees are calculated as a percentage of the authorized capital, starting from NPR 1,000 for capital up to NPR 100,000. Limited Liability Partnerships have a fixed registration fee of NPR 10,000. One Person Companies typically have lower fees. Additional costs include name reservation fees (around NPR 500), document notarization, and legal consultation fees if required.

7.Post-Registration Compliance in Nepal

After registration, startups in Nepal must adhere to several compliance requirements:

1. Annual returns filing with the Company Registrar’s Office
2. Regular tax filings and payments
3. Maintaining proper books of accounts
4. Conducting annual general meetings (for companies)
5. Updating any changes in company structure or management
6. Renewing business licenses and permits as required
7. Complying with labor laws and social security regulations
8. Adhering to sector-specific regulatory requirements
9. Submitting progress reports to relevant authorities if receiving government support.

8.Legal Framework for Startup Registration

The legal framework for startup registration in Nepal is primarily governed by the Industrial Enterprise Act 2020 and recent amendments introduced through the Ordinance No. 01 of 2081 (2024). The Industrial Enterprise Act provides the definition, eligibility criteria, and regulatory framework for startups. The Ordinance introduced new provisions specifically for “startup enterprise or business” in the Act. This legal framework outlines the registration process, regulatory requirements, and benefits available to startups.

9.Regulatory Authorities

The primary regulatory authority for startup registration in Nepal is the Company Registrar’s Office. This office is responsible for registering companies, including startups, and maintaining records of registered businesses. For industry-specific registrations, the Department of Industry and the Department of Cottage and Small Industries play key roles. Additionally, the Ministry of Industry, Commerce and Supplies oversees broader policy formulation and implementation related to startups and industrial enterprises in Nepal.

10.Types of Startup Structures

• Private limited company

A private limited company is a popular structure for startups in Nepal. It offers limited liability protection to shareholders, separating personal assets from business liabilities. Private limited companies have restrictions on share transfers and a maximum of 101 shareholders.

• Limited liability partnership

Limited Liability Partnerships (LLPs) combine the benefits of partnerships and companies. Partners have limited liability, and the structure offers flexibility in management.

• One Person Company

One Person Company (OPC) is a relatively new concept in Nepal, allowing a single individual to incorporate a company. This structure provides limited liability protection and is suitable for solo entrepreneurs or small-scale startups. OPCs have simplified compliance requirements compared to other company structures.

11.Benefits of registering as a startup

Registering as a startup in Nepal offers numerous advantages:

1. Access to government support programs and incentives
2. Tax benefits and exemptions for qualifying startups
3. Simplified regulatory compliance procedures
4. Eligibility for startup-specific funding and grants
5. Access to mentorship and incubation programs

12.What is eligibility criteria for Startups in Nepal?

To be eligible as a startup in Nepal, a business must be newly registered, use innovative technology, have growth potential, be less than 10 years old, and have an annual turnover not exceeding NPR 150 million. It should also demonstrate innovative research and creative thinking in its operations.

13.What is the process of Startup Registration in Nepal?

The startup registration process in Nepal involves choosing a business structure, reserving a name, preparing and submitting required documents to the Company Registrar’s Office, paying registration fees, and obtaining a registration certificate. The process typically takes 2-4 weeks to complete.

14.What tax benefits are available for startups?

Startups in Nepal may be eligible for various tax benefits including income tax exemptions for a certain period, reduced corporate tax rates, VAT exemptions on certain transactions, and customs duty exemptions on imported equipment. The specific benefits depend on the startup’s sector and compliance with eligibility criteria.

15.Can foreign entrepreneurs register startups in Nepal?

Yes, foreign entrepreneurs can register startups in Nepal. However, certain sectors have restrictions on foreign investment. Foreign investors need to obtain approval from the Department of Industry and comply with the Foreign Investment and Technology Transfer Act regulations.

16.Are there government grants for startups?

The Nepali government offers various grants and funding programs for startups. These include innovation grants, research and development funding, and sector-specific support programs. Startups need to meet specific criteria and go through a competitive application process to access these grants.

17.Are there government grants for startups?

The Nepali government offers various grants and funding programs for startups. These include innovation grants, research and development funding, and sector-specific support programs. Startups need to meet specific criteria and go through a competitive application process to access these grants.

18.What is the minimum team size for startup registration?

There is no specific minimum team size requirement for startup registration in Nepal. A startup can be registered by a single founder (as a One Person Company) or have multiple founders. The team size does not affect eligibility, but the startup must meet other criteria related to innovation and growth potential.

19.How does Nepal define an “innovative” business model?

Nepal defines an innovative business model as one that introduces new products, services, or processes, or significantly improves existing ones. This can include technological innovations, new market approaches, or creative solutions to existing problems. The innovation should demonstrate potential for scalability and market impact.

Please note that this guide is published for information purposes only and should not be considered as legal advice. You are requested to seek legal advice for specific factual situations. If you need further information on this matter, please contact us at Legal Access Nepal Pvt. Ltd. 

Advocate: Yogesh Bhandari and Sushma Dahal

Contact no. 9851249077/ 9851346722