Minimum Amount required for foreign Investment in Nepal

The minimum amount required for foreign investment in Nepal, as well as other money-transfer mechanisms

Foreign investments can be made in a number of different ways. The first step is to develop a project plan, which will then be submitted to the industry department. Following foreign investment approval, the amount to be invested may be brought into the country with permission.  Aside from direct investment, all other investments or share subscriptions are considered capital instruments. The term “capital instruments” refers to the Nepali company’s equity shares, debentures, preference shares, and share warrants.

How much FDI (Foreign Direct Investment) is required?

Businesses benefit from foreign investment by receiving capital. Because domestic entrepreneurs must compete with the products of foreign investors, more capital may facilitate market competition, increasing domestic entrepreneurs’ efficiency.

Although there is no legal requirement for a minimum amount of foreign investment, the Department of Industry requires a minimum of Rs 50 million in practice.

How and when will foreign investment be brought into the country?

Within a Year- Foreign investors granted permission to invest in the country must bring in funds equal to 25% of the total commitment within a year of approval.

If the investment is $25 million, then 15% of the total commitment should be brought into the country. If the investment is between $25 million and $1 billion, 10% of the total commitment should be brought into the country; if the investment exceeds $1 billion, 5% of the total commitment should be brought into the country.

2. Prior to production

Prior to the production of their products, foreign investors will be required to invest 70% of their total investment commitment.

3. After production

Foreign investors should invest 30% of their total commitment after the company is established and production begins.

4. Share investments

If a foreign investor wants to invest in shares that are currently in operation under the Nepali investor, the foreign investor must purchase the share within a year of the approval.

5. Foreign Investment Fund Management in Nepal

Several multinational banks operate in Nepal. There aren’t many industries in Nepal, but there are a lot of banks, which means banks have reserve funds and liquid investments.

All of the major international banks operate in Nepal and offer a wide range of banking services, including loans to foreign-owned businesses.

6. Loans from foreign banks

In order to invest in Nepal, a loan from a foreign bank is required.

7. Loan from a Nepali bank

Foreign investors can invest by pledging land as collateral and outlining their business plan and potential profits.

8. FUNDING OPTIONS FOR FOREIGN DIRECT INVESTMENT (FDI)

A foreign investor can fund or invest in Nepal through the channels listed below:

1. Equity capital – Nepalese businesses can issue equity shares. The authorized capital specified in a company’s Memorandum of Association limits the amount of equity capital that can be issued. In such a case, the said equity shares are used by Nepalese banks to make loans.
2. Preference share capital – The issuance of preference share capital is one way for foreign investors to invest in a Nepalese company. Foreign direct investment (FDI) is defined as investments made through convertible preference shares that must be converted into equity shares.
3. Debentures and borrowings – Businesses can raise funds by issuing debentures, bonds, and other debt securities. They can also get money by taking public deposits. Debentures can be redeemable, perpetual, bearer or registered, convertible or non-convertible, convertible or non-convertible, and convertible or non-convertible. Foreign investments in convertible debentures that can be converted into equity shares
4. External commercial borrowings – External commercial borrowings are debts raised in foreign currency by a Nepali company (from internationally recognized sources) that are governed by Nepal Rastra Bank.

9. METHODS OF PAYMENT FOR FOREIGN DIRECT INVESTMENT IN A NEPALI COMPANY

A Nepali company that issues shares/convertible debentures under the FDI Scheme to a person residing outside of Nepal shall receive the amount required to be paid for such shares/convertible debentures through inward remittance through normal banking channels.