Company Conversion Process in Nepal: Procedure & Requirements
Insights & Analysis
Company Conversion Process in Nepal: Complete Legal Procedure, Requirements & Costs
Advocate Suman Dhungana • Sep 15, 2026
Insights & Analysis
— Sherpa Law
Every growing business eventually outgrows the structure it started with, and the company conversion process in Nepal exists precisely for that moment. Whether a private company is scaling up towards a public listing, a public company is stepping back into private hands, or a sole proprietorship is ready to become something more formal, converting a company's legal structure is a defined statutory process under the Companies Act, 2063 (2006), and the Company Directives 2072, not simply a matter of updating paperwork.
This guide walks through the full procedure, eligibility requirements, documentation, timelines and costs involved.
Key Takeaways
Company conversion in Nepal is governed primarily by the Companies Act, 2063 (2006), with Sections 13 (private to public company) and 14 (public to private company), alongside the Company Directives, 2072, Numbers 13, 14, and 17, which detail the main conversion routes.
A private company converting to public must pass a special resolution approved by at least 75% of shareholders present and voting.
Public companies need a minimum paid-up capital of NPR 10 million and at least 7 shareholders.
A public company must convert to private within 6 months if its shareholders fall below 7 or it fails to maintain its minimum paid-up capital.
After that 6-month conversion, the company has 30 days to apply to the Office of Company Registrar (OCR), which then has 60 days to issue the conversion certificate.
Private-to-public conversion involving a share offering also requires review by the Securities Board of Nepal (SEBON), separate from OCR approval.
Conversion and NEPSE listing are related but legally distinct steps; a company can complete conversion without immediately listing.
Sole proprietorships and partnerships can't be directly "converted"; the existing business must be closed and settled before a new private company is incorporated and the business is formally transferred into it.
Total conversion costs vary significantly by conversion type, covering OCR fees, legal and audit costs, due diligence, valuation and, for public offerings, issue manager and underwriter fees.
Post-conversion compliance, updated records, regulator notifications, governance changes and ongoing reporting are just as important as the conversion process itself.
What Is Company Conversion in Nepal?
Company conversion refers to the legal process of changing a company's registered structure from one class to another under Nepalese law, for example, from a private limited company to a public limited company, or vice versa. It's governed principally by the Companies Act, 2063 (2006), and involves shareholder approval, amendment of the company's constitutional documents, and formal recognition by the Office of Company Registrar (and, where relevant, other regulators). Conversion changes the company's legal status and the rules it operates under, it isn't the same as simply rebranding or restructuring internally.
Why Do Businesses Convert Their Company Structure?
Scaling up business operations
Attracting new investors
Enhancing credibility and public trust
Complying with industry-specific regulations
Optimising tax structures
Preparing for a public listing
Separating personal and business liabilities
Creating a more structured governance system
Expanding access to formal funding opportunities
What Types of Company Conversions Are Possible in Nepal?
Private Limited Company to Public Limited Company
Converting to public status opens the door to public capital-raising and the ability to offer shares publicly, but it comes with significantly higher regulatory and disclosure requirements.
Public Limited Company to Private Limited Company
This route reduces the regulatory burden and limits the company to fewer shareholders. It's governed by Section 14 of the Companies Act, and in some cases becomes mandatory rather than optional (see below).
Company Limited by Shares to Company Limited by Guarantee
Relevant to certain non-profit or organisational structures, this conversion route is addressed under Section 166 of the Companies Act.
Sole Proprietorship to Private Limited Company
This isn't a direct legal "conversion" in the statutory sense, it involves formally closing and settling the existing business, incorporating a new private company, and transferring assets, liabilities, contracts and employees across.
Partnership to Private Limited Company
Similarly, moving from a partnership to a private limited company brings limited liability protection and more structured governance, achieved through new private company incorporation alongside a formal transfer arrangement, not a direct conversion of the partnership itself.
Foreign Company Branch to Subsidiary
Converting a Nepal branch of a foreign company into a locally incorporated subsidiary creates a separate legal entity in Nepal, with its own operational and tax implications distinct from the parent's branch structure.
Non-Profit to For-Profit and Vice Versa
This type of conversion changes the fundamental purpose of the organisation, along with the tax and legal framework that applies to it, and requires careful assessment on a case-by-case basis.
Private to Public Company Conversion Process in Nepal
Step 1: Call a Special General Meeting
The board of directors calls a special general meeting of shareholders, with notice that clearly states the conversion agenda and explains the rationale and implications for shareholders. The company secretary prepares the meeting documents and draft resolutions in advance.
Step 2: Pass the 75% Shareholder Resolution
At the meeting, shareholders discuss the proposed conversion, including the benefits and challenges of public-company status. The resolution requires approval from at least 75% of shareholders present and voting, once passed, it authorises the board to proceed with the conversion.
Step 3: Amend the MOA and AOA and Prepare Conversion Documents
This stage involves preparing the amended Memorandum of Association, amended Articles of Association, the conversion application itself, audited financial statements for the past three years, a due diligence report, the board resolution, a draft prospectus, and other relevant corporate and regulatory records.
Step 4: Submit the Application to the Office of Company Registrar
The conversion application, along with the special resolution, amended MOA/AOA and financial statements, is submitted to OCR. OCR reviews the application to check legal eligibility and the proposed structural changes.
Step 5: Obtain Securities Regulatory Review
Where the conversion involves a public share offering, a draft prospectus is submitted to the Securities Board of Nepal (SEBON). SEBON reviews disclosure requirements, investor protection, financial position and business prospects, and may raise comments or require revisions before issuing a letter of intent for the public offering.
Step 6: Proceed With the IPO
Once SEBON's requirements are satisfied, the company appoints issue managers and underwriters, publishes the approved prospectus, opens public share applications, and processes applications and share allotment, all in line with SEBON's requirements on IPO timing, pricing and allocation.
Step 7: Complete the Conversion and Move Toward NEPSE Listing
Final documents, including proof of share allotment and the updated shareholder register, are submitted to OCR, which verifies completion and issues the company conversion certificate. From there, the company can apply for listing on the Nepal Stock Exchange (NEPSE). Conversion and stock exchange listing are related but legally distinct steps; a company doesn't have to list immediately, or at all, simply because it has converted to public status.
What Are the Eligibility Requirements for Private-to-Public Conversion?
Under Section 13 of the Companies Act and Company Directive 13, a private company seeking conversion into a public company must satisfy the following statutory conditions:
Requirement
Reference Criteria
Minimum paid-up capital
NPR 10 million, or a higher amount where a specific type of company is legally required to maintain one
Shareholders
Minimum 7
Special resolution
Required (75% majority of shareholders represented at the general meeting), or an equivalent decision by an authorised person/committee where the company doesn't hold general meetings
Net assets
Must equal and exceed paid-up capital plus non-distributable restricted reserves
Financial performance
Profitability for at least 3 consecutive years
Debt-equity ratio
Not exceeding 4:1
Board composition
Independent directors as required for public companies
Audited balance sheet
Prepared for a period no more than six months before the application date, audited and certified by an auditor
Auditor's declaration
Written declaration confirming net worth meets the threshold as at the balance sheet date
Directors' declaration
Written declaration that all conditions for conversion have been complied with
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Two further points are worth noting. First, from the date OCR issues the conversion certificate, all provisions of the Act applicable to public companies apply to the converted company. Second, under Directive 13(7), a company converted under this route must obtain OCR approval to commence business within three months of conversion.
Where the conversion is being undertaken specifically to raise capital through a public offering, SEBON applies its own additional criteria at the securities registration and prospectus approval stage, covering matters such as financial track record, capital structure and governance; these sit separately from the OCR conversion conditions above and should be confirmed against SEBON's current requirements for your specific issue.
What Documents Are Required for Company Conversion in Nepal?
Statutory documents under Company Directive 14
For a private-to-public conversion, Directive 14 sets out exactly what must accompany the application to OCR:
Document
Copies
Special resolution passed by the general meeting (or the decision made under the AOA/unanimous agreement where no general meeting is held)
1
Memorandum of Association and Articles of Association incorporating the proposed amendments
2
Balance sheet and profit and loss account prepared under Section 13(4)
1
Auditor's written declaration under Section 13(5)
1
Directors' written declaration confirming all conditions for conversion have been complied with
1
Supporting documents commonly required in practice
Beyond the statutory list, companies are generally expected to have the following available, particularly where a public offering or sector-specific approval is involved:
Company registration certificate
PAN/VAT registration certificates
Existing shareholder list with shareholding details
Directors and key management details
Compliance certificates from relevant regulators
Valuation report of company assets
Bank statements and company account details
Due diligence report and draft prospectus, where a public offering is planned
Documents may vary according to the type of conversion and the applicable regulator; it's worth confirming the exact requirements for your specific conversion route before compiling documentation.
Which Authority Approves Company Conversion in Nepal?
Office of Company Registrar (OCR)
OCR maintains company registration and statutory company records, reviews conversion applications, records the change in company status, and issues the company conversion certificate where applicable.
Securities Board of Nepal (SEBON)
Relevant where conversion involves a public offering, SEBON reviews the prospectus and securities-related compliance.
Inland Revenue Department (IRD)
IRD maintains PAN/VAT and tax-related records, and conversion can carry tax implications following the structural change.
Nepal Stock Exchange (NEPSE)
Relevant after public-company conversion, where the company chooses to seek a listing.
Industry-Specific Regulators
Additional approvals may apply depending on the company's business activity, particularly for regulated sectors such as banking, insurance or telecommunications.
Public Company vs Private Company: What Changes After Conversion?
Aspect
Private Company
Public Company
Shareholders
Maximum 101
Minimum 7, no maximum
Capital raising
Cannot offer shares publicly
Can raise capital through public share offerings
Share transfer
Restricted
Freely transferable
Disclosure
Limited financial reporting
Extensive disclosure requirements
Stock exchange
Not listed
Can be listed
How Does Public-to-Private Company Conversion Work in Nepal?
When Must a Public Company Convert to Private?
Under the Companies Act, conversion becomes necessary in two circumstances:
The number of shareholders becomes less than seven.
The public company fails to maintain the paid-up capital required under Section 11, including where this happens because of a capital reduction under Section 57.
An exception applies to the company referred to in Section 11(2), which should be checked against the specific circumstances involved.
Six-Month Deadline for Making the Conversion
Once either circumstance occurs, the company must amend its MOA and AOA and convert into a private company within six months.
Thirty-Day Application Deadline
The company must then apply to OCR within 30 days after making that amendment, attaching the amended MOA/AOA and the prescribed fees.
OCR's 60-Day Certificate Period
OCR records the conversion in the company register and issues the company conversion certificate within 60 days of receiving the application.
What Happens to Assets and Liabilities?
Under Section 14(5), all assets and liabilities of the public company devolve on the successor (now private) company; the underlying legal entity continues, just under a changed status.
What Happens to Shareholders Above the 101 Limit?
Private companies are normally capped at 101 shareholders, but Company Directive 17 provides an important exception for companies converting from public to private because they couldn't maintain the minimum paid-up capital:
Existing shareholders can be retained. If the company already had more than 101 shareholders at the point of conversion, that number can remain in place after conversion.
But the number can't grow. No share transfer or sale is permitted that would push the shareholder count above the number existing at the time of conversion.
No public issuance. A company converted into a private company under this route cannot issue its shares or debentures publicly.
To take the Directive's own illustration: if a public company with 120 shareholders converts to private after failing to maintain NPR 10 million in paid-up capital, it may keep all 120 shareholders, but it cannot transfer or sell shares in a way that takes the count beyond 120.
Can a Sole Proprietorship or Partnership Be Converted Into a Private Limited Company?
Close and Settle the Existing Business
The existing sole proprietorship or partnership must be formally closed, outstanding tax obligations settled, and VAT/PAN cleared or deregistered with the Inland Revenue Department where applicable.
Incorporate a New Private Limited Company
This involves reserving a company name, preparing and submitting the MOA/AOA, completing standard OCR incorporation requirements, and completing biometric verification.
Transfer the Business Into the New Company
Assets, liabilities, contracts and employees need to be legally documented as transferred into the new company. This documentation matters, without it, there's a risk of the old and new entities being treated as legally distinct in ways that create gaps in liability, contractual continuity or employee entitlements.
What Are the Legal Provisions Governing Company Conversion in Nepal?
Companies Act, 2063 (2006)
Section 13: Conversion of private company into public company
Section 14: Conversion of public company into private company
Section 166: Conversion of company limited by guarantee into company limited by shares
Company Directives, 2072
The Directives set out the operational detail behind the Act's conversion provisions:
Directive 13: Conditions and process for converting a private company into a public company, including the special resolution requirement, the alternative decision route for companies that don't hold general meetings, the paid-up capital and net worth thresholds, the seven-shareholder minimum, the audited balance sheet and auditor's declaration requirements, and the three-month deadline to obtain approval to commence business.
Directive 14: The specific documents, and number of copies, to be submitted to OCR for a private-to-public conversion.
Directive 17: Shareholder number rules for a private company converted from a public company, including the exception permitting more than 101 shareholders, the prohibition on increasing that number, and the bar on public issuance of shares or debentures.
Foreign Investment and Technology Transfer Act, 2075 (2019)
Industrial Enterprises Act, 2076 (2020)
If your business is instead considering winding down rather than converting, our guide tocompany liquidation in Nepal covers that process in detail.
What Are the Implications of Converting a Company?
Legal Structure and Liability
Conversion changes liability protection and revises the company's governance and decision-making framework.
Capital and Financial Reporting
It opens new opportunities, or introduces new restrictions, for raising capital, along with changes in financial reporting obligations and potential changes to tax treatment.
Ownership and Control
Shareholder rights can change, and a public offering in particular can lead to ownership dilution for existing shareholders.
Regulatory Compliance
Conversion typically means increased (or, for public-to-private, decreased) regulatory oversight, along with new reporting and disclosure requirements.
Business Operations and Management
Management and operational flexibility can be affected, alongside new governance requirements the company must meet.
Market and Stakeholder Perception
Conversion affects credibility and public trust, and can reshape relationships with customers, suppliers and business partners.
Employee and Organisational Impact
It can open the door to employee ownership programmes or benefits, and often brings changes to company culture and organisational structure as the business adapts to its new status.
How Long Does the Company Conversion Process Take in Nepal?
Key Time-Dependent Stages
Shareholder approval, document preparation, OCR review, SEBON review (where applicable), the IPO process (where applicable), final OCR conversion documentation, and NEPSE listing (where applicable) all affect the overall timeline.
Statutory Timeframes for Public-to-Private Conversion
6 months to make the conversion after the relevant circumstance occurs
30 days to apply to OCR after the amendment is made
60 days for OCR to record the conversion and issue the certificate
What Can Delay Conversion?
Incomplete documentation
Financial or compliance issues
MOA/AOA amendments that need revision
Regulatory comments
Prospectus revisions
Tax or corporate record discrepancies
What Does Company Conversion Cost in Nepal?
Total cost depends heavily on the type of conversion and the regulatory requirements involved. Costs to budget for typically include:
Cost Component
Tentative Range (NPR)
OCR conversion/registration fee
10,000–100,000+ (statutorily set at 50% of the standard new-registration fee for the target company type under Section 13, so it scales with authorised capital)
Legal and professional fees
100,000–500,000+
Audit and financial reporting costs
100,000–300,000+
Due diligence expenses
50,000–200,000
Asset valuation costs
50,000–150,000
Prospectus preparation
100,000–300,000+
Issue manager and underwriter costs (IPO)
Often a percentage of the issue size (commonly in the region of 1–3%), or a fixed fee typically starting from around 500,000
Regulatory and listing-related expenses (SEBON/NEPSE)
100,000–500,000+
Documentation and administrative costs
20,000–50,000
A simpler conversion without a public offering, such as a public-to-private conversion or a company limited by guarantee converting to shares, sits at the lower end of this range, largely OCR fees, legal fees and documentation costs, without the audit, prospectus, valuation, or issue manager costs tied to an IPO.
These figures are indicative only and can vary significantly based on the company's authorised capital, the complexity of its financial position, and the specific professionals engaged. Given the number of variables involved, particularly for private-to-public conversions with a public offering, it's worth getting a scoped estimate for your specific circumstances rather than relying on a generic figure.
What Must a Company Do After Conversion?
Update Corporate Records
Modify internal records, and update the shareholder register and share certificates to reflect the new structure.
Notify Relevant Authorities
Inform the IRD, update banks and financial institutions, and notify industry-specific regulators where applicable.
Meet New Governance Requirements
Implement any required governance changes, maintain proper board records, and hold regular board meetings.
Maintain Financial and Regulatory Reporting
Submit quarterly and annual financial statements, conduct internal and external audits as applicable, and submit required reports and returns to OCR, SEBON and other relevant regulators.
Communicate the Structural Change
Employees, customers, suppliers, investors and shareholders, and business partners should all be informed of the change in an appropriate and timely way.
Align Operations With the New Structure
Update accounting practices, review tax obligations, revise internal policies, and update the website and marketing materials to reflect the company's new status.
Company Conversion Checklist: What to Prepare Before Applying
Confirm the correct conversion route
Check statutory eligibility under Section 13 and Directive 13
Confirm the seven-shareholder minimum is met
Review paid-up capital against the NPR 10 million threshold (or any higher sector-specific requirement)
Confirm net worth is not less than paid-up capital plus non-distributable reserves
Check debt-equity position
Prepare board resolution
Call the required shareholder meeting, or follow the AOA/unanimous agreement route where no general meeting is held
Pass the required shareholder resolution
Amend MOA and AOA
Prepare the audited balance sheet, dated no more than six months before the application
Obtain the auditor's written declaration on net worth
Prepare the directors' written declaration of compliance
Prepare due diligence documentation and prospectus, where a public offering is planned
Obtain valuation where required
Prepare the conversion application
Submit to the appropriate authority
Obtain approval to commence business within three months of conversion
Complete tax and regulatory updates
Complete post-conversion compliance
How Sherpa Law Associates Help
Company conversion touches company law, securities regulation, tax and corporate governance all at once, getting any one part wrong can delay the whole process or create compliance issues down the line. Sherpa Law Associates advises businesses through every stage of company conversion in Nepal, from assessing the right conversion route and preparing shareholder resolutions and amended constitutional documents, through to OCR and SEBON filings and post-conversion compliance.
If your business is considering a change in structure, whether to raise capital, formalise operations, or meet regulatory requirements, our corporate lawyers can help you plan the process properly from the outset.
Converting to a public company opens access to capital markets, allows the company to offer shares to the public, can enhance credibility and visibility with investors and customers, and provides an exit route for early investors.
Can a Public Company Convert Back To Private?
Yes. This can happen voluntarily, or it becomes mandatory under Section 14 of the Companies Act where a public company's shareholders fall below seven or it fails to maintain its required paid-up capital.
What Is The Minimum Capital For Public Companies?
The minimum paid-up capital for a public company in Nepal is NPR 10 million, unless a higher threshold applies under sector-specific rules.
Can a Company Convert without Holding a General Meeting?
Yes. Under Company Directive 13(2), a private company that doesn't hold general meetings can have the conversion decision made by an authorised person or committee under its Articles of Association or a unanimous shareholder agreement, and that decision is treated as equivalent to a general meeting resolution.
Can a Company Converted from Public to Private keep More than 101 Shareholders?
Yes, in one specific situation. Under Directive 17, a company that converted from public to private because it couldn't maintain the minimum paid-up capital may retain the shareholder count it had at conversion, even if that exceeds 101. However, it cannot increase that number through share transfers or sales, and cannot issue shares or debentures publicly.
How long does a Converted Company have to Commence Business?
Under Directive 13(7), a company converted into a public company must obtain approval from OCR to commence business within three months of the conversion.
How To Identify Viable Household Business Ideas?
Viable household business ideas generally align with your skills, available capital, local demand and any relevant regulatory requirements. For businesses expecting to grow beyond a household scale, it's worth considering early how the eventual company structure, including any future conversion, will need to accommodate that growth.
What Is Household Activity Business Conversion Nepal?
This generally refers to formalising a small-scale, home-based business activity into a registered legal structure, such as a private limited company, following a process similar to the sole proprietorship conversion route outlined above.
Who Can Register a Home-Based Business In Nepal?
Nepali citizens and, in many cases, eligible foreign or Non-Resident Nepali (NRN) individuals can register a home-based business, subject to the applicable registration and sector-specific requirements.
Where To Register a Household Business In Nepal?
Business and company registration in Nepal is generally handled through the Office of Company Registrar, alongside local ward-level registration and tax registration with the Inland Revenue Department, depending on the nature and scale of the business.
Get Legal Assistance With Company Conversion in Nepal
Conversion can involve OCR filings, shareholder resolutions, amended MOA/AOA, tax records, financial documentation and, for public-company conversion, SEBON and IPO requirements. Professional legal assistance can help businesses identify the correct route and avoid procedural errors that cost time and money to fix later.
Speak with business lawyers in Nepal about your proposed company conversion. Contact us for legal asisstance with company conversion process in Nepal.
Disclaimer: This article provides general information on the company conversion process in Nepal and does not constitute legal advice. Statutory requirements, fees, timelines and eligibility criteria under the Companies Act, 2063 (2006) and related legislation may be amended or interpreted differently over time. Readers should seek professional advice specific to their company's circumstances before initiating or relying on any conversion process described here.
company conversion process in nepal
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