A. Introduction
The Government of Nepal has recently introduced significant amendments to the Industrial Enterprise Act, 2076 (2020) (“Industrial Enterprise Act”) and the Industrial Enterprise Regulations, 2078 (2022) (“Industrial Enterprise Regulations”) ushering in a legal framework for the recognition, registration, and regulation of startup enterprises.
This article provides a detailed overview of the new provisions, the criteria for startup classification, the registration process, and the regulatory and promotional mechanisms established under the amended legal framework.
B. Definition of a Startup Enterprise
Pursuant to the Section 2(q1) and 4A of the Industrial Enterprise Act, a startup enterprise is defined as a firm or company that engages in the development, production, operation, or distribution of goods or services using innovative ideas or technologies. The classification is contingent upon the fulfillment of the following conditions:
| S.N. | Conditions |
| a) | The entity must be registered as a new company, private firm, or partnership firm; |
| b) | The enterprise must utilize innovative ideas and technologies in the production of goods or services; |
| c) | The enterprise must exhibit potential for rapid growth or scalability; |
| d) | The entity must not have surpassed ten years from the date of its initial registration; |
| e) | The annual transaction of the enterprise must not exceed NPR 150 million in any fiscal year following its registration. |
C. Procedure and Documents Required for Registration
The provision for registration and operation of start-up enterprise is provided in Chapter 2A of Industrial Enterprise Regulations.
The general procedure for registration of start-up enterprise is provided in the table below:
| Steps | Procedures |
| Step 1 | A firm or company seeking registration as a startup enterprise must submit an application to the industrial registration authority, along with the required document; |
| Step 2 | Upon review and verification, if the authority finds the applicant enterprise to be in compliance with the eligibility requirements, it will issue a Startup Enterprise Registration Certificate; |
Step 3
| The registering authority maintains a separate and integrated register of all certified startup enterprises; |
Step 4
| A registered startup must commence operations within one year from the date of registration and notify the authority accordingly. |
The documents required for registration of start-up enterprise is provided in the table below:
| S.N. | Documents |
| a) | Copy of Nepalese citizenship certificate or passport (for foreign nationals); |
| b) | Firm registration certificate (for firms) or company registration certificate, Memorandum of Association, and Articles of Association (for companies); |
| c) | Letter of authorization if the application is submitted through a representative |
| d) | Foreign investment approval letter (if applicable) |
| e) | Copy of partnership agreement (if applicable) |
| f) |
|
| g) | A self-declaration regarding the use of innovative technologies or methodologies in the enterprise’s operations; |
D. Grounds for Cancellation and Loss of Status
Rule 15B of the Industrial Enterprise Regulations provide for the cancellation of registration and the revocation of startup status. A startup enterprise will cease to retain its legal status as a startup under any of the following circumstances:
| S.N. | Conditions |
| a) | Upon completion of ten years from the date of its initial registration; |
| b) | If the enterprise’s annual turnover exceeds NPR 150 million in any fiscal year; |
| c) | If its registration is voluntarily cancelled. |
Note: The revocation of startup status does not affect the legal standing of the enterprise to continue operations as an industry under the prevailing laws.
E. Business Incubation Centre
The Government of Nepal, provincial government or local level can establish and operate a Business Incubation Centre in order to promote the startup enterprises or businesses pursuant to Section 4A of the Industrial Enterprise Act.
F. Conclusion;
The amendments to the Industrial Enterprise Act and Industrial Enterprise Regulations signify a landmark development in Nepal’s industrial and entrepreneurial landscape. By formally recognizing startup enterprises as a distinct category of industrial entities, the legislation establishes a comprehensive legal and policy framework to support their growth and sustainability.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice, advertisement, personal communication, solicitation or inducement. No attorney-client relationship is created through this content. Gandhi & Associates assumes no liability for any consequences resulting from actions taken based on information contained herein.
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