Did you know that hundreds of Cotiviti employees in Nepal missed out on a transformative financial opportunity due to Nepal's outdated laws?

In September 2024, Cotiviti, a global leader in healthcare data analytics, launched “Prosperiti”, a program allowing over 9,000 employees worldwide to own a stake in the company. This initiative was a step toward aligning employee contributions with financial rewards and shared success.

While employees in the U.S., Europe, and other regions celebrated this opportunity, employees of Cotiviti Nepal Pvt. Ltd., a critical offshore development hub, were excluded. Why? At the time, Nepal’s Foreign Exchange (Regulation) Act, 2019 (1962) and "Act Prohibiting Investment Abroad, 2021 (1964)" barred Nepali citizens residing in Nepal from owning shares in foreign companies. Yes, both of these laws are more than half a century old. This exclusion was a significant blow for employees who had played critical roles in the company’s success.

Fast forward to today, the Nepalese government has introduced policy reforms to address these missed opportunities. But the question remains: Are these changes enough?

Cotiviti Nepal: A Legacy of Contribution

Established in 2004, Cotiviti Nepal Pvt. Ltd. operates as an offshore development center for Cotiviti Inc., a leading healthcare data analytics company based in the United States. Over the years, Cotiviti Nepal has carved a niche in the software industry, specializing in the design, development, testing, and maintenance of innovative healthcare informatics solutions. The company boasted a team of approximately 300 professionals dedicated to sorting and analyzing vast amounts of data to assist clients in decision analytics.

A Legacy of Excellence

Cotiviti Nepal's journey began as D2Hawkeye Pvt. Ltd., a data analytics and software services company fully owned by D2Hawkeye Inc. in the USA. Co-founded by J. Christian Kryder and Rudra Pandey, D2Hawkeye Inc. was later acquired by Verisk Analytics Inc., leading to a rebranding as Verisk Health. Subsequent acquisitions and rebranding efforts saw the company evolve into Verscend Technologies Pvt. Ltd. and eventually Cotiviti Nepal Pvt. Ltd. Throughout these transitions, the Nepalese subsidiary remained a pivotal support function for its parent company, contributing significantly to healthcare payment accuracy solutions.

The Prosperiti Program: A Missed Opportunity

In September 2024, Cotiviti Inc. launched "Prosperiti," a broad-based employee ownership program designed to allow over 9,000 employees worldwide to share in the company's success. This initiative aimed to reward employees' contributions with ownership, aligning their financial interests with the company's long-term success.

However, due to Nepal's legal framework at the time, Nepali employees residing in Nepal were prohibited from owning shares in foreign companies. As a result, despite their hard work and dedication, Cotiviti Nepal's employees were unable to participate in the Prosperiti program, leading to a significant missed opportunity for financial growth and engagement.

Legal Challenges: The Tax Evasion Allegations

Adding to its challenges, in March 2024, the Department of Revenue Investigation (DRI) filed a case against Cotiviti Nepal Pvt. Ltd., accusing the company of evading income tax and value-added tax amounting to Rs 5.18 billion. The DRI sought to recover a total of Rs 10.36 billion, including penalties. The allegations centered on the company's failure to inform authorities about changes in share ownership and undervaluation of services exported from Nepal.

Rudra Pandey, a prominent figure associated with Cotiviti, criticized the DRI's actions, emphasizing the company's role as an operational expense rather than a revenue-generating entity within Nepal. He argued that such actions could deter foreign direct investment (FDI) in the country.

The Sudden Transition to Infinite Computer Solutions

In a surprising turn of events, Cotiviti exited Nepal in late 2024, transferring all its employees to Infinite Computer Solutions, a global IT services company. The transition happened swiftly, leaving employees uncertain about their roles and benefits.

While Infinite offered continuity in employment, the transition further underscored the vulnerability of employees in global subsidiaries, especially in the absence of policies supporting equity participation and ownership.

Financial Implications of Exclusion

The inability to participate in "Prosperiti" potentially cost former Cotiviti Nepal employees millions in unrealized financial benefits. While employees in other countries gained ownership stakes in Cotiviti, Nepali professionals missed out—not due to lack of merit, but due to restrictive laws.

This missed opportunity raises a pressing question: How can Nepal ensure its talent doesn’t face such exclusion in the future?

Analyzing the Legal Landscape

The Foreign Exchange (Regulation) Act, 2019

The Foreign Exchange (Regulation) Act, 2019, aimed to regulate capital outflow and safeguard Nepal’s foreign exchange reserves. However, the unintended consequence was the exclusion of Nepali professionals from participating in global equity programs, even when offered by their employers.

The Amendment: A Step Forward

In January 2025, the Nepalese government revised Section 10A of the Act to address this issue. The new provision allows:

• Nepali employees of Nepal-based subsidiaries of foreign companies to acquire shares through employee share purchase plans.
• Participation in such programs, provided no convertible foreign currency is transferred out of Nepal.

This amendment is a significant step, opening the door for Nepali professionals to benefit from global equity programs like Cotiviti’s "Prosperiti."

The Remaining Gaps: Sweat Equity and Beyond

While the amendment is progressive, it doesn’t address broader forms of equity participation, such as:

1. Sweat Equity:
   • Common in startups, sweat equity rewards early contributors with ownership stakes. Nepali professionals, especially in tech, remain excluded from this opportunity.
   • This limits their ability to build wealth and influence in global startups.
2. Co-Foundership Opportunities:
   • Nepali professionals often work on groundbreaking projects but are unable to claim co-founder status or equity due to legal restrictions.
3. Outward Investment Flexibility:
   • The requirement to avoid using convertible foreign currency adds a layer of complexity, potentially deterring foreign employers from offering equity schemes.

Comparison: Before and After the Amendment

The Way Forward

For Nepal to fully integrate its professionals into the global economy, further reforms are needed:

1. Allow Sweat Equity:
   • Enable Nepali professionals to receive equity for their contributions to startups.
2. Facilitate Outward Investment:
   • Simplify processes for Nepali citizens and companies to invest abroad, fostering global collaboration.
3. Incentivize Global Employers:
   • Provide clear guidelines and tax incentives to encourage global companies to include Nepali employees in equity schemes.

By addressing these gaps, Nepal can unlock the full potential of its workforce, ensuring its talent thrives as both contributors and stakeholders in the global economy.

The case of Cotiviti Nepal highlights the unintended consequences of restrictive policies. While the 2025 amendment to the Foreign Exchange (Regulation) Act is a step in the right direction, it’s clear that more comprehensive reforms are needed.

By embracing policies that allow sweat equity, co-foundership, and outward investment, Nepal can empower its professionals to not only participate but lead in the global innovation ecosystem.

Let’s ensure the next generation of Nepali professionals doesn’t just contribute to global success—they own it. And one question will continue to haunt the ex-Cotiviti employees: Only if the Nepal Government had acted a bit early!