Services
We advise foreign investors and Nepal-based investee companies on share investment, market-entry structuring, approval strategy, local compliance, foreign exchange coordination and post-approval filings.
Services
Open Equity Investment or Loan Investment below to review the regulatory regime, eligibility, structures, approval sequence and practical considerations for that category on its own.
Share Investment
Foreign share investment in Nepal is built around two linked questions: whether the proposed business activity is open for foreign investment, and which approval, notification and foreign exchange steps apply to the selected transaction route. Kharel & Pant Law Associates helps investors convert that regulatory analysis into a clear closing plan.
Baseline minimum investment per company, subject to current gazette notices and sector-specific rules.
Department of Industry approval generally applies up to NPR 6 billion; larger projects move to Investment Board Nepal.
Eligible sectors and investors can qualify for the automatic approval route, with standard Department of Industry review otherwise taking around a week.
Straightforward new-company filings can clear in a few weeks under the standard process; share acquisitions and larger or IBN-track investments often take longer once diligence, valuation and registration are added.
Eligibility
Foreign investment is generally permitted in activities classified as industries, provided the activity is not within Nepal's restricted list and no sector law imposes a separate ownership ceiling or approval gate.
The Industrial Enterprises Act classifies industries across energy, manufacturing, agriculture and forestry products, mining, infrastructure, tourism, information and communication technology, and services.
Foreign investment is restricted in areas such as small and cottage industries, personal service businesses, retail business, internal courier, certain tourism activities, mass media, national-language motion pictures and several consultancy services.
Regulated industries can require additional review. Banking, insurance, telecommunications, aviation, payment services, hydropower and special economic zone projects may involve sector authorities beyond DOI or IBN.
Transaction Route
A foreign investor may establish a new company or invest through a joint venture after foreign investment approval and subsequent foreign exchange coordination. The structure should be aligned with industrial registration, tax registration, licensing and initial capital injection.
Subscription into a new issue of shares may require DOI or IBN approval, and foreign exchange notification or approval depending on whether the investment changes the existing shareholding ratio and the current NRB framework applicable to the transaction.
Acquisition of existing shares requires careful sequencing: foreign investment approval, sector consent where required, valuation and diligence materials, transaction documents and foreign exchange recordal or approval under applicable NRB rules.
Approval Path
Test the activity against the industry classification, restricted list, ownership ceilings and licensing rules.
Settle whether the transaction is a new company, share subscription, capital increase or share purchase.
DOI generally handles investments up to NPR 6 billion; IBN handles larger projects and certain large hydropower projects.
Hydropower, banking, insurance, telecom, aviation, payment services and SEZ projects may need sector-specific consent.
Foreign currency inflow, share acquisition and post-approval recordal should be checked against the current NRB bylaws.
Complete banking-channel remittance, corporate filings, tax records, licensing updates and ongoing reporting.
Approval Matrix
Commercial View
Many sectors permit full foreign ownership, but regulated sectors can impose caps. Examples in the supplied material include telecommunications, banking and financial institutions, aviation, consultancy, insurance, internet service providers and payment services.
Corporate records, investor decisions, constitutional documents, project reports, source of funds, financial credibility evidence, power of attorney, passport or identity records and beneficial ownership information should be prepared before filing.
Share purchase transactions usually require enhanced financial diligence, valuation support, local company compliance checks, tax clearance review and blacklisting confirmation before closing.
Dividends, share sale proceeds and return of capital should be structured with tax, company law, foreign exchange and documentary evidence requirements in mind from the start.
Documents
The exact set changes by transaction route, investor type, sector and regulator. The following reflects the practical categories drawn from the supplied document.
This page is prepared from the supplied Foreign Investment document and adapted for foreign investors generally. It is a website overview only. Sector restrictions, investment thresholds, automatic route availability, ownership caps, tax treatment and NRB requirements should be reviewed against current law before filing, signing or closing a share investment.
Loan Investment
Every foreign loan to a Nepali borrower needs prior approval before it is drawn down, and a formal recording step with Nepal Rastra Bank before repayment, interest or other remittances can move through the banking channel. Most foreign loans are approved and recorded directly with Nepal Rastra Bank under its Foreign Investment and Foreign Loan By-laws. Where the borrower's transaction is itself regulated under the Foreign Investment and Technology Transfer Act or the Public-Private Partnership and Investment Act, the loan can instead be cleared with the Department of Industry or the Investment Board Nepal as part of that approval. Kharel & Pant Law Associates helps borrowers and foreign lenders identify the correct approval track, check eligibility against the applicable borrower, lender and ceiling rules, and carry the transaction through approval, drawdown, recording and repayment.
Every foreign loan needs prior approval: most are approved and recorded by Nepal Rastra Bank under its foreign loan by-laws, while loans tied to a transaction already regulated under FITTA or the PPP and Investment Act are cleared with DOI or IBN instead.
Where Nepal Rastra Bank's foreign loan by-laws apply, a written approval or refusal is due within 15 days of a complete application, though practical timelines often run longer.
Approved loans must be recorded with Nepal Rastra Bank within 6 months of the funds being remitted; NRB completes recording and issues a certificate within 7 working days.
Principal repayment and interest must be remitted through the banking channel under the approved and recorded loan documents, with no separate approval needed for the related currency exchange.
Eligibility
Nepal Rastra Bank's foreign loan framework only recognises certain borrower and lender combinations, and rules out foreign loans altogether for a defined list of business activities.
Eligible borrowers include Nepali firms, companies and industries, Nepali citizens, companies and industries with foreign investment, banks and financial institutions, and infrastructure development projects.
Depending on the borrower, lenders can include foreign banks and financial institutions, foreign investors and their holding or group companies, relatives living abroad, non-resident Nepalis, foreign organisations, and foreign pension or hedge funds.
A negative list rules out foreign loans for activities such as primary agricultural production, cottage and small industries, personal services, arms and explosives, real estate other than construction, retail, courier and remittance services, travel and tourism guides, mass media, several consultancy and training services, housing and capital market dealing.
Loan Structures
The right structure depends on whether the borrower already has foreign investment, who is willing to lend, and the loan ceiling that applies to that borrower-lender pairing.
A company or industry with foreign investment can typically borrow from its foreign investor, the investor's holding company or group entities, or foreign financial institutions, generally up to twice the investor's paid-up capital, or more where an earlier investor loan is already outstanding.
Banks, financial institutions and infrastructure development projects can borrow from foreign banks and financial institutions, foreign pension or hedge funds, or Indian banks and financial institutions, generally up to the lender's primary capital, subject to separate currency-specific conditions.
A Nepali citizen, firm, company or industry without foreign investment can typically borrow only from relatives living abroad, non-resident Nepalis or foreign organisations, generally capped at around USD 1 million, or INR 100 million for loans taken in Indian currency.
Approval Path
Check whether the loan is regulated under FITTA or the PPP and Investment Act, which routes approval to DOI or IBN, or whether it falls to Nepal Rastra Bank's foreign loan by-laws, and confirm the borrower-lender pairing and loan ceiling that applies.
Draft or review the loan agreement together with corporate documents, audited financials, tax clearance, a CIB non-blacklist confirmation, repayment and foreign exchange risk plans, and an anti-money-laundering disclosure.
Submit the application to Nepal Rastra Bank, or to DOI or IBN where FITTA or the PPP and Investment Act applies. Under NRB's by-laws, a written approval or refusal is due within 15 days of a complete application.
Bring the loan in through proper banking channels in line with the approved terms, currency and repayment schedule.
Apply to record the loan within 6 months of the funds being remitted. NRB records the loan and issues a certificate within 7 working days, after which no separate approval is needed for the related currency exchange.
Repay principal and interest through the banking channel on schedule. Companies with foreign investment must also have the foreign loan audited with NRB within 1 year of receiving that investment, and records should be kept for ongoing reporting and closure.
Commercial View
Interest rates and fees should be benchmarked and clearly documented, since approval review considers whether the pricing is reasonable. The loan must also be applied to the specific purpose stated in the application and approval.
Security over local assets, shares or receivables, and guarantees from group companies, should be checked for separate approval or registration requirements.
The currency of drawdown and repayment should match the approval, and the loan must be recorded with Nepal Rastra Bank within 6 months of the funds being remitted.
The lender should not be restricted from financial transactions with Nepal. Withholding tax on interest, CIB and anti-money-laundering checks, and the 1-year foreign-investment loan audit should be planned from the outset.
This page is a general overview only. We would recommend taking professional legal advice from us before entering into foreign investment or foreign loan.
