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Executive Summary
In the second quarter of 2026, the Securities Board of Nepal (SEBON) enacted pivotal regulatory updates directly shaping private equity (PE), venture capital (VC), and public equity participation. These directives under the Securities Act, 2063, seek to increase transparency, safeguard local investments, and streamline the operational criteria for Special Purpose Vehicles (SPVs) driving Nepal's infrastructure.
Core Mandate Check: Fund managers and developers must align their compliance checklists with the latest licensing and community sharing rules to avoid delays in public floatation and capital mobilization.
SIF Regulation 2075 Key Amendments
Under the revised Specialized Investment Fund (SIF) Regulations, 2075, SEBON has formalized guidelines to institutionalize private capital. SIF fund managers must adhere to strict financial solvency metrics:
- Minimum Paid-up Capital: Licensed fund managers must maintain a paid-up capital of at least NPR 20 Million (2 Crore NPR).
- Minimum Fund Size: The total corpus size of any individual SIF fund must be at least NPR 150 Million (15 Crore NPR).
- Fund Manager Co-investment: The fund manager is required to invest at least 2% of the total fund size (corpus) as a commitment.
"Pursuant to Rule 18 of the Specialized Investment Fund Regulations, 2075, a licensed fund manager must maintain a minimum paid-up capital of Rupees Twenty Million. Furthermore, the fund manager shall contribute at least two percent of the total fund size (corpus) as a co-investment, which must be locked in for the entire life of the fund." — SIF Regulation 2075, Rule 18
Local Community Equity Rules (10% Allocation)
A core mechanism for benefit-sharing in Nepal is the allocation of equity to project-affected residents. Mandated by SEBON and the Electricity Regulatory Commission (ERC):
- 10% Allocation: Hydropower and large-scale infrastructure SPVs are required to reserve up to 10% of their issued capital for residents of the project-affected areas. This is standard practice to manage community risks and secure social licenses.
- Lock-in Period: To prevent speculation and build long-term local alignment, these shares are subject to a strict three-year lock-in period from the date of allocation.
- IPO Physical Progress Threshold: Under current guidelines, SEBON requires that projects achieve at least 65% physical progress (measured by verified engineering and capital expenditure reports) before they can submit a public floatation prospectus.
Cross-Border Equity Channeling and Tax Compliance
Channeling international capital into local SPVs involves navigating double tax treaties and local corporate regulations. Key considerations include:
Indirect Transfers: Section 57 of Nepal's Income Tax Act, 2058 specifies that a change of 50% or more in the ownership of an entity within a three-year period triggers a deemed disposal of assets, resulting in a capital gains tax liability on the gain. Private equity funds transferring stakes offshore must ensure prior valuation compliance to prevent costly retroactive tax audits.
Quantitative Breakdown and Requirements
The following outlines the quantitative compliance metrics under the current SEBON and regulatory guidelines:
- Fund Manager Minimum Capital: NPR 20 Million (2 Crores) — SIF Regulations, 2075
- Minimum Fund Size (Corpus): NPR 150 Million (15 Crores) — SIF Regulations, 2075
- Fund Manager Minimum Stake: 2.00% of total corpus — SIF Regulations, 2075
- Project-Affected Area Allocation: Up to 10.00% of issued capital — SEBON and ERC Guidelines
- Local Share Lock-in Period: 3 Years from allotment date — SEBON Public Issue Guidelines
- IPO Eligibility Physical Progress: Minimum 65.00% completed — SEBON Hydropower IPO Directives