Part II - Review of Co-op Laws in Nepal (1997)

This document has been made available in electronic format
by the International Co-operative Alliance (ICA)

Part II - Review of Country Laws in Nepal (1997)

Source: Co-operative Laws in Asia and the Pacific
by G.K. Sharma (pp.125-127)

In Nepal, the Co-operative Department was established in 1956
followed by the first co-operative law in 1959. This law was replaced
in 1986 and again in 1992 which is in operation presently. The law of
1992 has a total of 49 articles. Some of the important provisions of
this Act are mentioned in the preceding paragraphs.

The preamble of the law states "whereas it is expedient to provide for
the formation and operation of various types of co-operative societies
and unions for the social and economic development of the countries
farmers, artisans, people possessing inadequate capital and low income
groups, workers, landless and unemployed people or social workers or
general consumers on the basis of mutual cooperation and cooperative
principles....this law is made".

However, the act does not explain what is meant by Co-operative

Chapter I : deals with Preliminary and Definitions

Chapter II : Formation of Societies
Under section 3 the minimum membership for a primary co-operative
is 25 individuals and for single-purpose union or district union at least
5 co-operatives. The minimum membership for central co-operative
union is 25 co-operatives and for a National Co-operative Federation
at least 15 unions.

Chapter III : Deals with membership qualification for all types of
co-operatives and termination of membership. 

Chapter IV : Operational Procedures
This chapter deals with General Body, Board of Directors and Accounts
Committee. The provisions are quite flexible and leave many things to
be included in the bye-laws. In case an election is not held in time and a
member informs about it the Registrar shall conduct the election within
six months from the date of the expiry of the term of the Board [Section
16 (6)].

Under section 17 an accounts committee of three persons to be elected
by the General Body to conduct internal audit has been provided. The
committee's report has to go to the General Body only and not to
the RCS. 

Section 19 provides formation of sub-committee as provided in the

Chapter V : It deals with the appointment of Registrar.

Chapter VI : Financial Resources and Mobilisation
One interesting provision is that not more than 20% shares can be
subscribed by any foreign co-operative which is a member of the
International Co-operative Alliance. 

Section 24 authorises co-operatives to issue debentures and accept
loan from any bank or other agencies with the approval of the
Government. On request government may guarantee repayment
of debentures ( Section 25).

Under Section 28 co-operatives are not allowed to provide donations
or any other type of economic assistance to any political party or any
other institution or association that works for a particular religion or

Chapter VIII : Information, Records and Audit
Under Section 34 every co-operative has to submit to the  registrar
an annual report of its transactions, audit report, policy and plans of
profit distribution, date of AGM, names and remaining term of Board
Members and any other information sought by Registrar. Non- supply
of information may result in fine of not more than Rs. 1500 (Section 43).

Under section 35 the registrar has been empowered to conduct an
enquiry and under section 36 to arrange inspections. The findings of
the enquiry are to be conveyed to the general body for needful or take
action for cancellation of the registration of the society in case the
society remains defunct for 2 years or performs against its objectives.
[Section 41 (3) Chapter X].

Under section 37 audit has to be done either by the departmental auditor
or by a registered auditor approved by the Registrar within 3 months of
the closing of the accounts.

In case the General Assembly is not satisfied with the audit report, it
can appoint another auditor and get the accounts reaudited.

Chapter IX
Provided many facilities and tax exemptions to co-operatives including
income tax, wealth tax, stamp duty, registration of transactions except
immovable property and may also exempt fully or partly from excise
and customs duties.