Nepal’s capital market regulatory framework is set for a major reform as a new draft Company Act proposes mandatory conversion of stock exchange operators and brokerage firms into public limited companies.

The “Company Act, 2082 (draft of the proposed Company Act, 2083)” being prepared by the Ministry of Industry, Commerce and Supplies requires both the Nepal Stock Exchange (NEPSE) and all brokerage firms to operate as public limited companies once the law is enacted.

Currently, NEPSE is the only stock exchange operator in Nepal, while around 92 brokerage firms operate in the secondary market, most of which are registered as private limited companies.

Once the law is implemented, these firms will be required to convert into public companies, significantly changing the structure of Nepal’s capital market intermediaries.

A key concern has emerged among investors and market participants: whether becoming a public company will automatically require an IPO.

Legal interpretation suggests the answer is no. The draft law only mandates conversion into a public company structure, not compulsory issuance of shares to the public.

However, the Securities Board of Nepal (SEBON) may later impose specific rules requiring IPO issuance within a defined timeframe for such institutions.

Public company status will, however, bring stronger governance requirements such as mandatory annual general meetings, independent directors, and public disclosure of financial statements, which are expected to improve transparency and market discipline.