The Initial Public Offering (IPO) is the primary mechanism through which private companies in Nepal transition into publicly traded entities by offering shares to the general public for the first time. Nepal's capital markets are regulated by the Securities Board of Nepal (SEBON) under the Securities Act, 2063 (2007), with shares traded on the Nepal Stock Exchange (NEPSE). Understanding the legal framework for IPOs and capital markets is essential for companies seeking to raise public capital, for investors participating in public offerings, and for professionals advising on securities transactions. This guide covers the complete IPO process, eligibility requirements, SEBON regulations, post-IPO compliance, and recent regulatory developments.
The Securities Act, 2063 (2007) is the primary legislation governing Nepal's capital markets. It establishes the legal basis for securities registration, public offerings, trading, and market regulation. The Act is supplemented by the Securities Registration and Issuance Regulations, Securities Board Regulations, and various SEBON directives and circulars. Other supporting laws include the Companies Act, 2063 (corporate governance), Nepal Financial Reporting Standards (financial statements), and the Money Laundering Prevention Act (illicit financial activities).
SEBON, established on June 7, 1993, is Nepal's primary capital markets authority. It operates through four departments: Regulation (securities registration, IPO approvals, listing), Supervision (monitoring brokers, listed companies, enforcement), Commodity Market and Research, and Management and Legal. SEBON's core functions include:
| Function | Description |
|---|---|
| Securities registration | Approve and register securities before public issuance |
| IPO approval | Review prospectus, verify eligibility, issue approval |
| Licensing | License stockbrokers, merchant banks, asset managers |
| Supervision | Monitor NEPSE, listed companies, intermediaries |
| Investor protection | Prevent insider trading, market manipulation, fraud |
| Policy advisory | Advise government on capital market policies and legislation |
NEPSE is Nepal's only securities exchange, established in 1994. It provides the platform for secondary market trading of listed company shares. NEPSE operates under SEBON's supervision and facilitates price discovery, market liquidity, and investor participation. After a successful IPO, a company's shares are listed on NEPSE for public trading through licensed stockbrokers.
Only public limited companies can issue IPOs in Nepal. Private companies must first convert to public limited status under the Companies Act. SEBON prescribes the following eligibility criteria:
| Requirement | Details |
|---|---|
| Company type | Public limited company with minimum 7 shareholders |
| Paid-up capital | NPR 100 million (manufacturing) / NPR 50 million (others) |
| Profitability | Net profit in at least 3 of the last 5 years |
| Credit rating | Required for finance, insurance, and telecom sectors (from SEBON-approved agency) |
| Financial statements | Audited under Nepal Financial Reporting Standards (NFRS) |
| Articles of Association | Must permit issuance of shares to the public |
| Public share offering | Minimum 20% of total shares offered to general public |
| Private-to-public conversion | Must have completed 2 financial years as public + approved audit report |
Under the national budget provision (FY 2079/80), certain large companies are legally required to issue IPOs: companies with paid-up capital exceeding NPR 1 billion, companies with annual turnover exceeding NPR 5 billion, and companies using government resources or concessions. This mandatory provision promotes transparency and public participation in Nepal's largest enterprises.
| Step | Action | Details |
|---|---|---|
| 1 | Appoint merchant banker | Hire a SEBON-licensed issue manager to assess IPO readiness and manage the process |
| 2 | Due diligence | Conduct financial and legal audits, prepare NFRS-compliant statements |
| 3 | Prepare prospectus | Draft detailed prospectus with capital structure, financials, risks, management info |
| 4 | Register securities with SEBON | Submit application in prescribed format + prospectus + supporting documents + fees |
| 5 | SEBON review and approval | SEBON conducts inquiry; if satisfied, issues Securities Registration Certificate |
| 6 | Open public subscription | Publish prospectus and open IPO for public applications for prescribed period |
| 7 | Share allotment | Allot shares per SEBON rules; notify SEBON within 7 days of allotment |
| 8 | Listing on NEPSE | Apply for listing; NEPSE admits shares for secondary trading |
The entire IPO process typically takes 6–12 months from initiation to listing, depending on company readiness, market conditions, and SEBON processing time.
The prospectus is the central legal document in any IPO. Under Sections 30–32 of the Securities Act, the prospectus must include: capital structure and shareholder information, description of main business activities, information on legal proceedings and financial condition, management details and qualifications, audited financial statements (assets, liabilities, profit/loss), details of experts who prepared the prospectus, risk factors, and any other information prescribed by SEBON. The prospectus must be approved by SEBON before publication and serves as the primary disclosure document for investors making investment decisions.
Under Section 27 of the Securities Act, companies must register the securities they intend to issue with SEBON before issuance. The registration application requires: prescribed application form, approved prospectus, auditor's reports, valuation reports (if applicable), all documents related to the securities, and prescribed registration fees. SEBON conducts an inquiry and, if satisfied, issues a Securities Registration Certificate — the primary approval to proceed with the public offering.
After the public subscription period closes, shares must be allotted according to SEBON-prescribed procedures. The company must notify SEBON of allotment details within 7 days. SEBON may issue directives to ensure fairness and transparency in allotment. For share pricing, SEBON allows both fixed price and book-building methods. Companies with paid-up capital below NPR 1 billion must wait 3 years after their initial IPO before issuing shares at a premium, protecting retail investors from inflated pricing.
Becoming a public company creates ongoing compliance obligations:
| Obligation | Requirement |
|---|---|
| Continuous disclosure | Promptly disclose price-sensitive information (financial results, contracts, litigation, mergers) |
| Financial reporting | Quarterly and annual reports to SEBON and NEPSE within prescribed timelines |
| Corporate governance | Implement governance standards, independent directors, audit committee |
| Insider trading prevention | Establish policies to prevent insider trading and market manipulation |
| Annual General Meeting | Hold AGM within 6 months of fiscal year end with shareholder disclosures |
| SEBON directives | Comply with all ongoing SEBON circulars and regulatory updates |
Beyond ordinary shares, Nepal's capital markets framework allows several types of securities:
| Security Type | Description |
|---|---|
| Ordinary shares | Standard equity shares with voting rights |
| Preference shares | Fixed dividend priority, limited voting rights |
| Debentures | Debt instruments with fixed interest rate |
| Mutual funds | Pooled investment schemes managed by licensed asset managers |
| Green bonds | Bonds earmarked for sustainable development and climate initiatives (recent addition) |
| Right shares | Additional shares offered to existing shareholders at preferential price |
SEBON has introduced several important amendments through the seventh amendment to the Securities Registration and Issuance Regulations. Key changes include: introduction of green bonds for sustainable development (foreign investors eligible), 10-year minimum operation period for IPO eligibility (primarily targeting hydropower companies), online submission of IPO documents to SEBON, revised definition of paid-up capital, and new conditions for investment companies seeking IPOs (minimum NPR 500 million paid-up capital). Companies planning IPOs should monitor SEBON circulars for the latest regulatory updates.
| Institution | Role |
|---|---|
| SEBON | Primary regulator — securities registration, licensing, supervision, enforcement |
| NEPSE | Stock exchange — secondary market trading platform |
| CDS and Clearing Ltd (CDSC) | Central depository — maintains electronic (demat) share records |
| Nepal Rastra Bank | Central bank — regulates banking sector securities, foreign investment |
| Office of Company Registrar | Company incorporation and public conversion |
| Licensed merchant banks | Issue managers for IPOs and FPOs |
| Credit rating agencies | Provide credit ratings for eligible issuers |
Companies preparing for an IPO should also consider: company registration and conversion requirements, VAT compliance for business operations, foreign investment law if involving foreign shareholders, contract law for underwriting agreements, and intellectual property protection for company assets.
While Nepal Divorce Services is known as Nepal's first specialized divorce and family law firm, our legal team also advises on corporate and business law matters including securities compliance and capital markets transactions. We can assist with company conversion (private to public), prospectus review, SEBON regulatory coordination, corporate governance advisory, and post-IPO compliance requirements.
For legal assistance, contact us at +977 9841114443 or on WhatsApp.
| Topic | Guide |
|---|---|
| Company registration | Company Registration in Nepal |
| Foreign investment | Foreign Investment Law in Nepal |
| VAT law | VAT Law in Nepal |
| Contract law | Contract Law in Nepal |
| IP law | Trademark & IP Law in Nepal |
| E-commerce law | E-Commerce Law in Nepal |
An Initial Public Offering (IPO) is the process by which a private company offers its shares to the general public for the first time. In Nepal, IPOs are regulated by the Securities Board of Nepal (SEBON) under the Securities Act, 2063 (2007). Only public limited companies registered under the Companies Act, 2063 can issue IPOs. After a successful IPO, shares are listed and traded on the Nepal Stock Exchange (NEPSE).
The Securities Board of Nepal (SEBON), established in 1993, is Nepal's primary capital markets regulator. SEBON oversees securities registration, IPO approvals, licensing of brokers and merchant banks, supervision of NEPSE, investor protection, and enforcement against insider trading and market manipulation. It operates under the Securities Act, 2063.
To issue an IPO, a company must:
The IPO process involves: (1) Appoint a licensed merchant banker (issue manager), (2) Conduct financial and legal due diligence, (3) Prepare a prospectus with company details, financials, and risks, (4) Register securities with SEBON and submit required documents, (5) Obtain SEBON approval, (6) Open public subscription for the prescribed period, (7) Allot shares as per SEBON rules, (8) Notify SEBON of allotment within 7 days, (9) List shares on NEPSE. The entire process typically takes 6–12 months.
A prospectus is a legal document that a company must prepare and submit to SEBON before issuing an IPO. It must include: capital structure, main business activities, legal actions and financial condition, management details, audited financial statements (assets, liabilities, profit/loss), expert information, and risk factors. SEBON must approve the prospectus before the company can open public subscription.
Companies must offer at least 20% of their total shares to the general public through the IPO. This requirement ensures broad public participation and prevents excessive concentration of ownership. SEBON may prescribe different percentages for specific sectors.
The Nepal Stock Exchange (NEPSE) is Nepal's only securities exchange, where listed company shares are traded. After a successful IPO, shares are listed on NEPSE for secondary market trading. NEPSE operates under SEBON's supervision and provides the platform for buying and selling shares through licensed stockbrokers. NEPSE was established in 1994 and facilitates price discovery, liquidity, and investor participation.
A merchant banker (issue manager) is a SEBON-licensed financial institution that manages the IPO process. The merchant banker assesses IPO readiness, conducts due diligence, helps prepare the prospectus, coordinates with SEBON, manages public subscription, and handles share allotment. Companies must appoint a licensed merchant banker before initiating the IPO process.
No. Only public limited companies can issue IPOs under the Securities Act. A private company must first convert to a public limited company under the Companies Act, 2063, complete at least 2 financial years of operations as a public entity, and have an approved audit report before becoming eligible for an IPO.
Under the national budget provision (FY 2079/80), the following companies are mandatorily required to issue IPOs:
This mandatory provision promotes transparency, accountability, and public participation in large enterprises.
After listing on NEPSE, companies must: file quarterly and annual financial reports with SEBON and NEPSE, promptly disclose price-sensitive information (financial results, major contracts, litigation, mergers), implement corporate governance standards, prevent insider trading, and comply with continuous disclosure requirements. Failure to comply can result in SEBON penalties, trading suspension, or delisting.
Green bonds are a recent addition to Nepal's capital markets framework. Under amended SEBON regulations, companies can now issue green bonds with funds earmarked for sustainable development projects and climate change initiatives. Foreign investors are also eligible to invest in green bonds issued in Nepal. This aligns with Nepal's international climate commitments.
Yes, but with restrictions. Companies with paid-up capital below NPR 1 billion must wait 3 years after their initial IPO before issuing shares at a premium. The premium price calculation is governed by SEBON regulations and must be certified by the underwriter. This rule protects retail investors from inflated pricing.
The main laws are:
A lawyer can assist with: converting a private company to public, preparing and reviewing the prospectus, coordinating with SEBON for securities registration, ensuring compliance with the Securities Act, advising on corporate governance and disclosure requirements, and handling post-IPO regulatory obligations. Contact Nepal Divorce Services at +977 9841114443 for legal assistance.
At Nepal Divorce Services, Nepal's first specialized divorce law firm, we understand that taking the first step toward divorce can feel overwhelming. Our experienced divorce lawyers are here to guide you through the legal process and help you move forward with confidence and clarity.
Whether you're inside or outside Nepal and need assistance with filing a divorce case, our services are accessible worldwide. Contact us at +977 9841114443, on WhatsApp, or Viber.
