Structuring and Funding a Startup in Nepal
Decisions taken when a Nepali company is registered determine whether foreign or fund capital can enter it later. What to settle at incorporation.
Most of what goes wrong in a Nepali start-up’s first funding round was settled on the day the company was registered, by people who were not thinking about funding rounds. The share capital was set at a round number that leaves no room for a pool. The founders took shares in proportions that cannot be adjusted without a transfer and a tax question. A cousin abroad put in the first money and received shares — a foreign investment that was never approved. None of these is fatal. All of them cost more to fix than to avoid.
The vehicle
The private limited company under the Companies Act 2063 is the default, and it has no serious competitor for a business that intends to raise equity. The Act was one of six statutes amended by the omnibus act authenticated on 31 March 2025. A private company can have foreign shareholders, can issue different classes of share, and is the only form a fund can hold.
The alternatives are worse for this purpose. A sole proprietorship or partnership registered under the industry or commerce registration route has no share capital to divide. A cooperative has a members-and-shares structure that cannot accommodate an investor seeking preference rights.
Foreign shareholders
Foreign investment in a Nepali company is governed by FITTA 2075. The approval is obtained before the investment is made and before shares are issued, and the investment is then recorded with Nepal Rastra Bank so that dividends and eventual sale proceeds can be repatriated. The sequence is the point. Approval is not a formality applied afterwards to money that has already arrived.
Two consequences follow for cap-table design.
An early foreign angel is a regulatory event before it is a cheque. Founders who accept a small overseas investment informally, assuming it can be papered later, create a shareholder whose holding may not be repatriable and whose presence complicates every subsequent filing.
Then there is the offshore holding company question. Many Nepali founders selling to foreign customers are advised to place a holding company in a jurisdiction their investors recognise, with the Nepali company as a subsidiary providing development services. The structure is common across South Asia. In Nepal it touches three regimes at once. FITTA, because the holding company becomes a foreign investor in the Nepali subsidiary and needs approval. Foreign exchange rules, because the Nepali company is then paid intra-group service fees instead of customer revenue. Income tax, because intra-group pricing becomes a transfer pricing exposure. Three regulators, and the whole thing is far harder to execute once the Nepali company has trading history and shareholders.
The minimum foreign investment amount per investor under FITTA, and whether any reduced threshold applies to information technology or start-up enterprises, is a live and frequently misstated question. We could not verify it against a primary source, and give no figure.
The fintech ownership cap
A founder building a payments product faces a ceiling that does not apply to other sectors. Nepal Rastra Bank’s licensing policy for payment institutions sets minimum paid-up capital of NPR 50 million for a payment service provider without card issuance, NPR 250 million with cards, NPR 400 million for a payment system operator and NPR 800 million where international payment operations are involved. It caps foreign investment in such an institution at 15% of paid-up capital.
That single clause determines the shape of Nepali fintech. A foreign strategic investor cannot take control. A foreign venture fund cannot take a position large enough to matter to its own portfolio construction. The capital that scales a payments business in Nepal has to be domestic, and the domestic pool is small. Founders in adjacent categories — software that serves banks rather than moving money, say — sometimes structure specifically to stay outside the licence perimeter. That is a product decision driven entirely by a shareholding rule.
Where a product does need to touch the regulated perimeter, the regulatory sandbox operative from 14 May 2026 is the formal route. It requires incorporation in Nepal, a team including at least two full-time technical staff and a project manager with two or more years of fintech experience, and runs a maximum six-month test extendable once by six months. The application window is 45 working days and evaluation up to 120 working days, so a founder should budget the better part of a year between application and a graduation decision.
Domestic funding sources
Institutional risk capital in Nepal is licensed by the Securities Board of Nepal as specialised investment fund management. The register lists 19 licensed managers, among them Adhyanta Fund Management, Alpha Plus Ventures, Apex Funds, Avasar Equity, CWEDA Equity Fund, Global Equity Fund, Laxmi Sunrise Capital, Maverick Kautilya Venture, Mogha Infrablocks and Multiply Capital Management. The regime sits under the Specialised Investment Fund Regulations 2075, as amended.
Those regulations are published by SEBON only as a scanned image, from which no text could be extracted. Fund size minimums, minimum investor commitments and manager capital requirements are therefore not reproduced here. A founder negotiating with one of these managers should ask which fund the money is coming from, when it closed, and what its remaining investment period is, because a Nepali fund’s constraints on cheque size and holding period are set by its own licence terms rather than by negotiation.
On the exit side, SEBON published Securities Issuance and Trading Regulations for Small and Medium Sized Organised Institutions 2081 on 23 April 2025, creating a distinct issuance and trading regime for smaller companies. Its eligibility thresholds sit in another scanned document and are not stated here. The regime matters even so. For the first time a growth company has a listing route that does not require it to meet main-board requirements.
Employee equity
The FY 2083/84 Finance Act added section 8(3)(e) to the income tax law, exempting from taxable income the amount equivalent to sweat-equity shares received as remuneration for employment in the information technology industry. Until then, an employee receiving shares in lieu of salary faced an income tax charge on receipt, payable in cash, for an asset with no market. That charge is what made option and equity schemes impractical for Nepali technology employers.
The company-law half is unchanged. A private company still needs authorised capital headroom to issue into, a shareholders’ agreement that permits the issue, and a mechanism for handling leavers. Founders who intend to run a pool should set the authorised capital and the articles to accommodate it at incorporation, rather than amending them under time pressure during a round.
Four decisions to make early
Whether any shareholder will ever be non-resident, and if so obtaining FITTA approval before issuing to them. Whether the group will be Nepali-parented or offshore-parented, settled before there is trading history to unwind. Whether the product will sit inside or outside Nepal Rastra Bank’s licence perimeter, because the 15% ceiling follows the licence. And whether there will be an employee pool, because the authorised capital and articles have to be built for it in advance.
Sources
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विदेशी लगानी तथा प्रविधि हस्तान्तरण ऐन, २०७५ (Foreign Investment and Technology Transfer Act, 2075)
Nepal Law Commission — prevailing laws, Volume 8 (Industry, Commerce and Supply) · 2075 (2019), in force; amended by the omnibus act authenticated 31 March 2025 · Tier 1 — Primary legal instrument
Supports: That FITTA 2075 is the operative foreign investment statute and remains listed among prevailing laws.
Accessed 26 August 2026
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Specialised Investment Fund Managers — register of licensed intermediaries
Securities Board of Nepal (SEBON) · Register as displayed 26 August 2026 · Tier 2 — Official publication
Supports: That SEBON licenses specialised investment fund managers and that 19 are on the register, including Adhyanta Fund Management, Alpha Plus Ventures, Apex Funds, Avasar Equity, CWEDA Equity Fund, Global Equity Fund, Laxmi Sunrise Capital, Maverick Kautilya Venture, Mogha Infrablocks and Multiply Capital Management.
Accessed 26 August 2026
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Securities Board of Nepal · 2075 (2018/19), first amendment subsequently · Tier 1 — Primary legal instrument
Supports: The existence and current status of the regulations under which venture and private equity funds are licensed. Text could not be extracted; no figures are taken from this source.
Accessed 26 August 2026
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Securities Board of Nepal · Published 23 April 2025 · Tier 1 — Primary legal instrument
Supports: The existence and date of a dedicated SME securities issuance and trading regime. Text could not be extracted; no thresholds are taken from this source.
Accessed 26 August 2026
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भुक्तानीसम्बन्धी कार्य गर्ने संस्थालाई प्रदान गरिने अनुमति नीति (प्रथम संशोधन, २०८०), २०७९
Nepal Rastra Bank, Payment Systems Department · Policy 2079; first amendment notified 9 July 2023 · Tier 1 — Primary legal instrument
Supports: Minimum paid-up capital by licence category (NPR 50m / 250m / 400m / 800m) and the 15% ceiling on foreign investment in a licensed payment institution.
Accessed 26 August 2026
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Guidelines on the Regulatory Sandbox
Nepal Rastra Bank, Payment Systems Department · Operative 14 May 2026; notified 18 June 2026 · Tier 1 — Primary legal instrument
Supports: Eligibility (incorporation in Nepal; two full-time technical staff and a project manager with two years' fintech experience), six-month testing period extendable by six months, 45 working day application window and 120 working day evaluation.
Accessed 26 August 2026
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Nepal Budget 2083/84 (2026/27) — Key Highlights
NBSM (chartered accountants, Kathmandu) · Budget presented 29 May 2026 · Tier 6 — Professional or news source
Supports: New income tax section 8(3)(e) exempting sweat-equity shares received as remuneration for employment in the information technology industry.
Accessed 26 August 2026
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