The registration of non-profit distributing companies in Nepal is governed by the Companies Act 2063 (2006) (Act) and Company Directives, 2072 (2015). The Office of Company Registrar (OCR) governs the company registration in Nepal. This article covers the procedures of registering a non-profit distributing company in Nepal.

Companies Act 2006 introduced the non-profit distributing companies for the first time. Section 2(h) of the Act defines “company not distributing profits” means company incorporated under Chapter 19 on conditions that it shall not be entitled to distribute or pay to its members any dividends or any other moneys out of the profits earned or savings made for the attainment of any objectives. There must be atleast 5 members for incorporating non-profit distributing companies.

Chapter 19 has special provisions regarding non-profit distributing companies. Any company may be incorporated to develop and promote any profession or occupation or to protect the collective rights and interests of the persons engaged in any specific profession or occupation or to carry on any enterprise for the attainment of any scientific, academic, social, benevolent or public utility or welfare objective on the condition of not distributing dividends.

The number of promoters shall be at least five for the incorporation of such company; and after the incorporation, it may have any number of its members, with a minimum of five members. The membership of a company shall not be transferable in any manner. The membership shall ipso facto be terminated in the event of death, cancellation of registration or dissolution of such member or amalgamation of such member with another body or company.

Section 167 of the Act has special provisions regarding non-profit distributing companies

The prescribed government fees for the registration of non-profit distributing companies is Rs. 15,000/-

Special Provisions regarding Non-Profit Distributing companies

  • No requirement of share capital in the company, however the company may take membership fees and and receive any donation, gift for the accomplishment of its objectives.
  • No member shall be liable for the debts and liabilities of company except where any member has accepted such liability in writing, and limited to the same.
  • All the provisions applicable for the listed companies shall also be applicable for such companies except the share capital clause.
  • Company shall not distribute dividend, bonus or any other amount from the profits earned by it to its members or employees. The profit earned by the company shall only be used to increase the capital of company or for the attainment of its objectives.
  • These companies shall not be merged with profit distributing companies.
  • Directors shall be appointed from the members with one member one vote.
  • Meeting allowance, salary and facilities can be taken by the officers within the amount specified by the Office by looking at its capital situation and profits. Provided that the administrative expenses shall not exceed 25% of the total expenses.
  • In the case of liquidation of company, if there is any surplus assets, it may transferred to another similar objective non-profit distributing company or shall devolve on the Government of Nepal.
  • If there is violation of any of these mentioned provisions, OCR may cancel the registration of such company by providing the opportunity to defend.
  • While canceling the registration, the Office shall appoint a liquidator and an auditor to complete the liquidation proceedings of such company, specifying the period for completion of such liquidation proceedings.

Difference between Non-Governmental Organizations (NGO) and Non-Profit Distributing Companies

NGO Non-Profit Distributing Companies
Registered and regulated by the Association Registration Act 2034. Registered and regulated by Companies Act 2063.
Incorporated on District Administration Office. Incorporated on Office of Company Registrar.
At least 9 members are needed for incorporation. At least 5 members are needed for incorporation.
Registration at social welfare council is must. No compulsion for enlisting in social welfare council unless it is receiving any grant from foreign countries.
Renewal must be done every year at the DAO. Once incorporated no renewal is needed, however audit report and other annual documents shall be submitted, failure accounts to the fine.
Audit report shall be submitted to the DAO. Audit report shall be submitted to the OCR.
AGM shall be done every year as per the constitution of NGO. AGM shall be done every year as per the AoA.
Administrative expenses can not be more than 20% of the total project cost. Administrative expenses can not be more than 25% of the total expenses; if these are registered on social welfare council then its 20% of the total project cost.
Surplus assets transferred to government of Nepal on case of winding up. Surplus assets may be transferred to another similar company or to the government of Nepal on case of winding up.

 

Disclaimer: This information is presented solely for educational purposes and should not be considered legal advice.

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