Specialised Investment Funds: Private Equity and Venture Capital
A Nepali private fund needs NPR 150 million, no more than 200 unitholders, and a manager holding 2 percent of it throughout the fund's life.
The Specialised Investment Fund Regulation 2075 is short, and most of its work is done by four numbers. A manager needs capital. A fund needs a floor. An investor needs a minimum ticket. And the number of investors is capped. Get those four right and the rest of the regime is administrative.
The three fund types
The regulation recognises three fund types, and the type determines what the fund may buy.
A private equity fund invests in convertible securities, in debt convertible into equity, and in equity-linked instruments. A venture capital fund invests in unlisted enterprises and early-stage ventures built on innovative knowledge, skills, technology or intellectual property. A hedge fund may take high-risk positions across sectors.
The manager applies to SEBON for registration as a fund manager (कोष व्यवस्थापक), and then separately registers each fund it raises. Two applications, two fee schedules.
The four numbers
Manager capital. Minimum paid-up capital for a fund manager is NPR 20 million (two crore). That is low relative to the merchant banking licences described in Merchant Banking and Market Intermediaries, where underwriting alone requires NPR 40 million, and it reflects that the manager is not putting its own balance sheet behind investor money in the same way.
Fund size. A scheme must be at least NPR 150 million (fifteen crore). There is no stated maximum. Registration fees scale with size, from NPR 500,000 to NPR 1,000,000, on top of a NPR 50,000 application fee. Manager registration costs NPR 300,000 with an annual renewal of NPR 150,000.
Minimum commitment. Each unitholder must commit at least NPR 5 million (fifty lakh).
Unitholder ceiling. A fund may not have more than 200 unitholders.
Put the last two together and the fund’s shape is determined for you. At the floor of NPR 150 million and a NPR 5 million minimum, thirty investors are enough. At the ceiling of 200 investors, the fund can be very large. What the regulation forecloses is a fund with many small investors, and that is the point. This is a private placement product, sitting outside the prospectus regime the Securities Act imposes on public issues and consistent with its fifty-person exemption.
Who can be a unitholder
The eligible categories are banks and financial institutions; insurance companies; recognised pension, provident and welfare funds; bilateral and multilateral international institutional investors; foreign persons and entities; recognised domestic institutions; Nepali citizens; non-resident Nepalis; and any other category SEBON designates.
The presence of foreign persons and entities on that list is significant and often missed. A Nepali specialised investment fund is one of the few securities structures in the country whose own governing regulation contemplates foreign money on the inside. Whether the capital can actually get in and out is a foreign exchange question rather than a securities question, and it is taken up in Who Can Buy Nepali Securities. FITTA 2075 approaches the same territory from the other side. It defines foreign investment to include investment in a capital investment fund, and section 9 permits an institutional foreign investor to incorporate a company in Nepal and, with SEBON’s approval, establish a venture capital fund, reporting particulars to the Department of Industry every six months.
The manager’s own stake
The manager must hold a minimum two percent stake in the fund, maintained on a continuing basis. The requirement is disapplied where the investors are bilateral or multilateral international institutions, presumably on the view that a development finance institution can negotiate its own alignment terms.
Two percent of a NPR 150 million fund is NPR 3 million, against a manager capital requirement of NPR 20 million. A manager can therefore support several funds off its regulatory capital before the commitment becomes binding, which is a reasonable calibration for a market at this stage. A manager planning a larger fund should model the two percent against its own balance sheet early, because the commitment is continuing rather than a one-off subscription.
Fund life and exit timing
The investment agreement must specify a duration, and the permitted range is five to fifteen years.
Fifteen years is generous. Five is not, and this is where the regulation collides with the rest of Nepali securities law.
The two realistic exit routes for a Nepali portfolio company are a trade sale and a listing. Take the listing route. Under the Securities Registration and Issue Regulation 2073, a company must have completed three consecutive profitable years, hold a credit rating of average grade or better, and offer between ten and forty-nine percent of issued capital to the public. Promoter shares are then locked in for three years from allotment.
If the fund’s holding is classified in the promoter group, and in a control or near-control position it usually will be, the listing does not produce liquidity. It produces a listed but unsellable holding for three more years. A manager on a ten-year fund that invests in year three, gets the company IPO-ready by year six and lists in year seven reaches the end of the lock-in in year ten with no margin. On a shorter fund the sums simply do not work, and the exit has to be a trade sale or a secondary sale of units.
So fund life should be set at the long end of the permitted range unless the strategy is explicitly a trade-sale strategy, and the listing decision has to be made three years earlier than a manager from another market would instinctively make it.
Investment restrictions
The regulation prohibits investment in sectors prohibited by law and confines the fund to the investments described in its own offer document. Allocation to debt instruments within a private equity or venture capital fund is capped by SEBON directive rather than in the regulation itself, and we could not read the applicable directive, so no figure is given here. Concentration and related-party limits are handled the same way.
For a manager drafting a fund’s investment policy, that means the binding constraints sit partly outside the regulation, and the offer document filed with SEBON becomes the operative document. Drafting it narrowly to get approved and then finding the strategy constrained is a real risk.
Reporting and governance
The manager must file annual financial statements within five months of the fiscal year end and hold an annual unitholders’ meeting within the same period. Audited reports carry compliance certifications. Changes in governance, regulatory breaches and changes of management must be disclosed immediately, and material information requested by SEBON must be supplied within seven days.
Five months is longer than the three months the Securities Act allows securities businesspersons. Private funds get more time, which is appropriate for portfolios whose valuations depend on unlisted company accounts that are themselves not yet finalised.
Unresolved questions
Three things are genuinely unresolved as at August 2026.
The first is the English text. SEBON publishes an English version of the regulation that is an image-only scan. A foreign limited partner conducting diligence on a Nepali fund cannot read the fund’s own governing regulation in English from the regulator’s website. That is a small thing with a real effect on the cost of raising foreign capital.
The second is the extent of foreign access. The regulation admits foreign unitholders. FITTA contemplates foreign-established venture capital funds. Whether an offshore institution can subscribe for units in an existing Nepali fund and repatriate the proceeds, and under what Nepal Rastra Bank procedure, is the question that determines whether any of this is usable, and the securities regulation does not answer it.
The third is tax. The treatment of gains realised by a fund and distributed to unitholders, and the interaction with the capital gains regime on listed shares, is dealt with in Capital Gains Tax rather than here. A manager modelling net returns to investors should resolve it before the offer document is drafted, not after.
Sources
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Securities Board of Nepal · 2075 (2018/19), first amendment 2077 (2020/21) · Tier 1 — Primary legal instrument
Supports: Fund manager minimum paid-up capital, registration and renewal fees, fund registration fee bands, minimum fund size, minimum commitment per unitholder, the maximum of 200 unitholders, the categories of eligible investor, the fund life of 5 to 15 years, the manager's continuing 2 percent stake and the exception for bilateral and multilateral investors, the three fund types, annual reporting and unitholder meeting deadlines, and immediate disclosure obligations.
Accessed 26 August 2026
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विदेशी लगानी तथा प्रविधि हस्तान्तरण ऐन, २०७५ (Foreign Investment and Technology Transfer Act 2075)
Department of Industry, Government of Nepal · 2075 (2019); consolidation posted by the Department of Industry · Tier 1 — Primary legal instrument
Supports: That section 2 defines foreign investment to include investment in a capital investment fund under section 9 and investment in listed securities through the secondary market under section 10, and that section 9 permits an institutional foreign investor to incorporate a company and, with SEBON approval, establish a venture capital fund, with six-monthly reporting to the Department.
Accessed 26 August 2026
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Securities Act, 2063 (2007) — English text
Securities Board of Nepal · Authenticated 14 January 2007 · Tier 1 — Primary legal instrument
Supports: The prospectus exemption for an issue to fifty or fewer persons (section 30(2)) and the licensing of securities business by the Board (Chapter 5), which together frame the private placement basis on which specialised investment funds are raised.
Accessed 26 August 2026
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Securities Board of Nepal · 2073 (2016/17), consolidated text posted 24 September 2023 · Tier 1 — Primary legal instrument
Supports: The three-year lock-in on promoter shares from allotment, the 10 to 49 percent public offer band, and the eligibility conditions a portfolio company must satisfy before it can be floated.
Accessed 26 August 2026
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वार्षिक प्रतिवेदन आ.व. २०८१/८२ (Annual Report FY 2081/82)
Securities Board of Nepal · Published 31 December 2025 · Tier 2 — Official publication
Supports: That specialised investment funds are a small and recent part of SEBON's registered universe relative to mutual funds and listed equity, and the FY 2081/82 issue approval totals against which fund activity should be read.
Accessed 26 August 2026
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