Selling a Business or Shares in Nepal: Approvals, Valuation, Tax and Proceeds

Most sale processes in Nepal fail at a step the seller did not think was part of the sale. The share purchase agreement is signed, the price is agreed, the buyer is ready, and then the file goes to the approving body and someone asks for the record of how the seller’s original investment entered the country. That record was created years earlier by people focused on a company registration deadline, and it is now the document on which the entire exit depends.

The four gates

An exit by a foreign shareholder in a Nepali company runs through four gates. They are sequential, and the later ones cannot be started in earnest until the earlier ones are cleared.

Consent to the transfer. Foreign investment in Nepal is approved under the Foreign Investment and Technology Transfer Act 2075 (2019), amended in March 2025 by the omnibus act that also touched the Companies Act 2063 (2006), the Industrial Enterprises Act 2076 (2020), the Special Economic Zone Act 2073 (2016), the Arbitration Act 2055 (1999) and the Foreign Exchange (Regulation) Act. The approval names an investor, a company and an amount. Changing the investor is a change to the approval, and the body that granted it decides. Which body that is depends on the size and sector of the original investment: see which approval route applies.

A valuation the approving body accepts. This is the step that surprises commercial parties. In an arm’s-length market the price is whatever the buyer will pay. In Nepal the transfer price for shares moving to or from a foreign holder must be supported by a valuation acceptable to the approving body, because that price determines both the taxable gain and the amount that may leave the country. We could not obtain the directive or form that prescribes the methodology, and it should be confirmed at the outset. Whatever the methodology, consideration structures that defer or contingently adjust the price sit awkwardly with a system that wants one number approved once.

Tax on the gain. The Income Tax Act 2058 (2002), authenticated on 18 April 2002 and in force as amended, taxes gains on disposal. Section 40 defines disposal expansively: cessation of ownership, distribution by the owner, amalgamation into other property or liability, sale in instalments, lease under a financial lease, cancellation, destruction, loss, expiry and surrender. A structure designed so that no share changes hands may still be a disposal. Rates, the treatment of listed and unlisted shares, and the position of a non-resident seller are in capital gains tax.

Getting paid, offshore. The net proceeds have to leave Nepal, and that is a separate regulated process with a different decision-maker and its own documentary test. We deal with it in full in cross-border money and do not repeat it here. The point that belongs in this article is the dependency. Repatriation of sale proceeds is granted against the record of the original inflow, so an exit is only as clean as the entry.

Corporate mechanics

Underneath the regulatory layer sits ordinary company law. The Companies Act 2063 (2006), whose consolidated text was last amended on 31 March 2025, treats restrictions on share transfer as a matter for the constitution. The memorandum may authorise them and the articles may set them out. Pre-emption rights, transfer approval by the board, tag-along and drag-along provisions all have to survive that framework, and provisions in a shareholders’ agreement that contradict the articles are a familiar source of difficulty. See shareholder agreements and joint ventures.

The Office of the Company Registrar administers the post-incorporation side: changes to share capital, changes to the memorandum and articles, the register of shareholders and debenture holders, mergers, and compliance by companies with foreign investment. A completed sale is not complete until the register reflects it.

For a listed company the route runs additionally through the exchange and the central depository, dealt with in how NEPSE trades and settles, and a foreign buyer faces the separate question of whether it may hold the shares at all, in who can buy Nepali securities.

Where sellers get stuck

Three failure modes recur, and all three originate at inflow.

The shares were issued to the wrong entity. The approval named a holding company, the group funded the investment from a subsidiary, and the shares were allotted to whichever entity the local adviser had on the file. Each variation on its own is minor. Together they mean the person now selling is not, on the record, the person who invested.

The remitted amount and the recorded amount differ. Foreign currency arrived, was converted at the day’s rate, and shares were allotted for a rounded rupee figure. The difference sat unremarked for years and becomes a reconciliation exercise at exit.

The capital was never recorded. Money came in, the business was built, and nobody filed the recording application. There is a functioning company with real value and no repatriable investment behind it.

None of these is fatal. All are expensive and slow to cure at the point of sale, when the buyer’s own timetable is running.

Asset sales

Selling the business rather than the company avoids the change-of-investor approval but creates others. The buyer takes assets and specified liabilities, and the seller is left with a company holding cash, which then has to be extracted and the company closed. Extraction is a dividend or a capital reduction, both regulated. Closure is the process described in closing a company. Where land is involved, transfer taxes and the restrictions on foreign land holding apply, and where licences are involved they generally do not transfer with the assets.

For a foreign seller the share sale is usually the shorter path, provided the entry record supports it. Where it does not, the asset sale is sometimes chosen for a negative reason: the share sale cannot be approved.

Drafting conditions precedent

A sale agreement for a Nepali target should have conditions precedent that name the real decision points rather than a generic regulatory-approval condition. Four are worth separating: approval of the change of investor by the body that approved the original investment; acceptance of the transfer valuation; tax clearance or an agreed provision for the tax on the gain; and, where the seller is foreign, the foreign exchange approval to remit the proceeds.

Bundling these into one condition creates a long-stop date nobody can forecast, because the four are decided by different institutions on different timetables and the later ones cannot begin until the earlier ones have concluded. Separating them lets the parties allocate the risk of each and lets the buyer see which gate is actually holding the transaction.

The point that most often needs negotiating is who bears the difference if the approving body will not accept the agreed price.

What to do first

Before a data room is opened, retrieve four documents: the original investment approval, the inward remittance advice from the bank, the recording of the investment with the central bank, and the current shareholder record from the Registrar. If those four agree with each other, the exit is a transaction. If they do not, the exit is a remediation project with a transaction attached, and the timetable should be written accordingly.

Sources

1. Income Tax Act, 2058 (2002)

   Government of Nepal, as hosted by Nepal Reinsurance Company Limited · Authenticated 2058.12.29 (18 April 2002); in force as amended · Tier 1 — Primary legal instrument

   Supports: That section 40 defines disposal of an asset to include cessation of ownership, distribution by the owner, amalgamation into other property or liability, sale in instalments, lease under a financial lease, cancellation, destruction, loss, expiry and surrender.

   Accessed 26 August 2026

2. Companies Act, 2063 (2006), consolidated text incorporating amendments to 2081.12.18 (31 March 2025)

   Office of the Company Registrar, Government of Nepal · Consolidated to 2081.12.18 (31 March 2025), amended by the Economic and Commercial Environment Improvement and Investment Facilitation (Amendment of Some Nepal Acts) Act, 2081 · Tier 1 — Primary legal instrument

   Supports: That restrictions on share transfer are provided for in the memorandum under section 18(1)(f) and in the articles under section 20(2)(j), and that the Act's most recent amendment is the 2081 omnibus act.

   Accessed 26 August 2026

3. Company Administration

   Office of the Company Registrar, Government of Nepal · Retrieved 26 August 2026 · Tier 2 — Official publication

   Supports: That the Registrar administers changes to share capital, name, memorandum and articles, the register of shareholders and debenture holders, mergers, and compliance by companies with foreign investment, as post-incorporation processes distinct from registration.

   Accessed 26 August 2026