Startups

Most VC-backed Nepali startups use a private limited company under the Companies Act 2063. The structure works well for institutional investment, share class flexibility (preference shares are permitted), and ESOP administration. Companies with material non-Nepali shareholding or operations need to layer in FITTA approvals and may consider an offshore holding company — but offshore structures carry their own complexity and should not be set up speculatively. We work through the structuring decision case by case before recommending.

Nepal does not have a separate ESOP tax regime. The general principle: the benefit on exercise — the difference between exercise price and fair market value — is treated as employee remuneration and subject to income tax through payroll. The subsequent sale of shares is subject to capital gains tax under the Income Tax Act 2058. Fair market value at the time of exercise must be defensible; this typically requires a contemporaneous valuation. Plans should be designed with these tax events anticipated rather than retrofitted later.

Private companies above certain capital and turnover thresholds defined in the Companies Act 2063 require statutory audit. Below those thresholds, audit is not legally mandatory but is universally required by VC investors as a pre-investment condition. We recommend startups establish audit readiness from year one — clean bank reconciliations, supported expense claims, properly documented related-party transactions — even when statutory audit is not yet required.

We help prepare the financial section of the data room (audited or reviewed statements, monthly accounts, tax returns, statutory filings, cap table reconciliation, contracts inventory), respond to investor financial DD questions, support the financial model walkthrough, and where the investor commissions a third-party DD review, coordinate the response on the company's behalf. The work begins ideally two to three months before the round closes.

Most startups begin with a monthly retainer covering bookkeeping, tax compliance, and quarterly partner reviews — typically scaling with headcount and transaction volume. Specific projects (fundraising support, ESOP design, valuations) are scoped separately. As the startup grows, we transition to a fractional CFO model for companies in the NPR 50 million to NPR 500 million revenue band, and refer to in-house finance leadership above that.