Regmi Research (Private) Ltd. Regmi Ville,

Nepal Miscellaneous Series, Lazimpat, Kathmandu

Vol. 4/2001 Telephone: 4-11927

Kathmandu: April 15, 2001

(For private study and research only)

Cooperatives Act, 1992

(A law enacted to provide for cooperative societies and

unions)

History

May 15, 1992 First promulgated. Nepal Rajapatra,

Vol. 42, No. 7 (E), Jestha 2, 2049

December 6, 2000 First Amendment. Nepal Rajapatra,

Vol. 50, No. 45 (E), Marga 21, 2057

Consolidated Text

Preamble: Whereas it is desirable to make arrangements

relating to the formation and operation of cooperative

societies and unions of different categories for enabling the

farmers, artisans, low capital and income groups, laborers,

landless and unemployed people, or social workers, of the

country to work for the economic and social development of

the general consumers on the basis of mutual cooperation and

cooperative spirit, now therefore, the Parliament has enacted

this law in the 21st year of the reign of His Majesty King

Birendra Bir Bikram Shah Dev.

Chapter 1

Preliminary

1. Short Title and Commencement

(1) This law may be called the Cooperatives Act, 1992.

(2) It shall come into force at once.

2. Definitions

Unless otherwise meant with reference to the

subject or context, in this Act,

(a) Society or Union means a cooperative society or

union registered under Section 5.

(b) Member means any individual, society, association,

or other agency acquiring membership of a society

or union by purchasing its shares according to its

bye-rules.

(c) Board means the Board of Directors of the society

or union formed according to its bye-rules.

(d) Registrar means the Registrar appointed under

Section 21.

(e) General Assembly means the General Assembly of the

concerned society or union.

(f) Bye-Rules mean the bye-rules of the concerned

society or union.

(g) Prescribed or as prescribed means prescribed or in

the manner prescribed in the rules framed under

this Act.

Chapter 2

Formation of Society or Union

3. Formation of Society or Union

(1) Societies or unions may be formed as follows with

the objectives of providing services and facilities

for the economic and social development of the

members according to cooperative principles:

(a) A primary society comprising at least 25

members.

(b) A union dealing in any particular field with

at least five societies according to Clause

(a) as its members.

(c) A District Cooperative Union with at least

five societies as mentioned in Clause (a), or

unions dealing in any particular field as

mentioned in Clause (b), or both, as its

members.

(d) The Central Cooperative Union with at least 25

societies as mentioned in Clause (a), or at

least five unions dealing in any particular

field as mentioned in Clause (b), as its

members.

(e) The National Cooperative Union with at least

15 unions as mentioned in Clause (b), (c), and

(d) as its members.

(2) Notwithstanding anything contained in Sub-Section

(1), several district cooperative unions, or unions

dealing in a particular field of the same nature in

the same district, or several central cooperative

unions of the same nature, shall not be formed.

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(3) The jurisdiction of a society or union shall be as

prescribed in its bye-rules.

4. Application for Registration of Societies or Unions

(1) The concerned members must submit an application to

the Registrar for the registration of a society or

union formed under Section 3.

(2) The application mentioned in Sub-Section (1) must

be accompanied by two copies of the bye-rules of

the concerned society or union, its work plan, and

particulars of the shares which the members have

agreed to subscribe, and must have been signed at

least by the members mentioned in Section 3.

5. Registration of Society or Union

(1) On receipt of application for the registration of a

society or union according to Section 4, the

Registrar shall conduct necessary investigations to

ascertain whether or not the bye-rules of such

society or union conform to cooperative principles.

(2) If, after conducting investigations under Sub-

Section (1), the Registrar so deems appropriate, he

shall issue a certificate of registration in the

prescribed manner after registering such society or

union.

6. Registration May Be Refused

(1) If, after conducting investigations under Sub-

Section (1) of Section 5, the Registrar considers

it necessary to make any amendment, he shall notify

the persons who have applied for the registration

of concerned society or union for such amendment

within 15 days.

(2) In case the applicants refuse to make amendments

according to the notice issued under Sub-Section

(1), or do not do so within 35 days after receiving

such notice, the Registrar may refuse to register

such society or union. He must notify the

applicants accordingly, indicating the reasons why

registration has been refused.

(3) In case the Registrar has refused to register any

society or union according to Sub-Section (2), the

applicants may submit a complaint to HMG if they

are not satisfied.

7. Society or Union To Be Corporate Body

(1) The society or union shall be an autonomous and

corporate body with perpetual succession.

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(2) The society or union shall have a separate seal of

its own for all of its business.

(3) The society or union may acquire, use, and

otherwise dispose of movable and immovable property

like an individual.

(4) The society or union may sue or be sued in its own

name like an individual.

8. Liability of Society or Union to be Limited

(1) The liability of a society or union shall be

limited.

(2) Every society or union shall use the word

"Cooperative" in its name and the word "Limited" at

the end.

Chapter 3

Membership of Society or Union

9. Membership of Society

(1) Nepali citizens of the following categories may

become members of the society:

(a) Persons who have applied for the registration

of the society.

(b) Persons residing in the area under the

jurisdiction of the society who desire to

obtain the services of the society by

purchasing the shares sold under Section 23,

agree to bear the responsibility of

membership, and fulfil the conditions

mentioned in the bye-rules.

(c) Agencies which purchase the shares sold under

Sub-Section (1) of Section 23.

(2) A person who desires to become a member of the

society must apply to its Board.

(3) In case the Board refuses to grant membership to

any applicant, the latter may complain to the

General Assembly. The decision made by the General

Assembly in that respect shall be final.

(4) Persons who have become members by virtue of their

compulsory savings having been converted into share

capital shall ipso facto lose their membership

after they get refundment of their savings.

10. Membership of Union

(1) Societies coming under the jurisdiction of a union

dealing in any particular field may acquire its

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membership in accordance with the arrangements made

in its bye-rules.

(2) All societies within the concerned district, as

well as all unions dealing in any particular field,

may become members of a district cooperative union

according to arrangements made in its bye-rules.

(3) Societies and unions dealing in any particular

field may become members of the central cooperative

union in accordance with the arrangements made in

its bye-rules.

(4) All unions, as well as other agencies as provided

for in the bye-rules of the National Cooperative

Union, may become members of the National

Cooperative Union.

(5) Agencies which purchase shares sold according to

Sub-Section (1) of Section 23 may become members of

the concerned union.

11. Termination of Membership

The membership of societies or unions shall

terminate in the prescribed circumstances.

Chapter 4

Working Procedure

12. Bye-Rules

(1) Subject to this Act and the rules framed hereunder,

a society or union may frame bye-rules to run its

business. Such bye-rules shall come into force

after they are approved by the Registrar.

(2) The operation and management of every society or

union shall be in accordance with its bye-rules.

(3) The bye-rules must mention the name of the society

or union, its address, its jurisdiction,

objectives, procedure of operation, and other

prescribed particulars.

(4) Bye-rules may be amended by the two-thirds majority

of the members of the concerned society or union

present at a general meeting.

(5) The bye-rules amended according to Sub-Section (4)

shall come into force after these are approved by

the Registrar.

13. General Assembly

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(1) Every society or union shall have a General

Assembly.

(2) All members of a society shall be members of its

General Assembly.

(3) The General Assembly of a union shall comprise

members as mentioned in its bye-rules.

14. Functions, Duties, and Powers of the General Assembly

The functions, duties, and powers of the General

Assembly shall be as follows:

(a) To examine and endorse the annual accounts of

the society or union.

(b) To elect the Board of Directors and the

Accounts Committee, and take decisions on the

question of removing any Director or

dissolving any Committee.

(c) To discuss the reports of the Board of

Directors and the Accounts Committee, and

issue directives.

(d) To take decisions on the question of amending

the bye-rules.

(e) To take decisions on the question of dividing

a society or union, or its amalgamation with

any other society or union, or its

dissolution.

15. Meetings of the General Assembly

(1) Every society or union must convene a preliminary

general meeting within three months after it is

registered.

(2) Every society or union must convene an annual

general meeting within six months after the expiry

of each fiscal year.

(3) In prescribed circumstances, the society or union

may convene an extra-ordinary general meeting.

(4) The quorum for meetings of the General Assembly

shall be as prescribed.

Provided that while amending the bye-rules,

the presence of 51 percent of the total ordinary

membership of the General Assembly shall be

necessary.

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16. Board of Directors

(1) Every society or union shall have a Board of

Directors.

(2) The composition of the Board, and its functions,

duties and powers, shall be as provided for in the

bye-rules of the appropriate society or union.

(3) The term of the Board shall be as provided for in

the bye-rules, with a maximum term of five years.

(4) The Board shall have elections held for a new Board

before its term expires.

(5) In case the Board does not hold elections within

the time-limit mentioned in Sub-Section (4), any

member may notify the Registrar accordingly.

(6) On receipt of information according to Sub-Section

(4), or even otherwise, the Registrar must hold

elections for the Board of Directors within six

months after the expiry of its term.

(7) Until a new Board is elected according to Sub-

Section (4) or Sub-Section (6), the existing Board

may operate the business of the society or union in

the manner provided for in the bye-rules.

17. Accounts Committee

(1) The General Assembly of every society may form an

Accounts Committee consisting of three members,

including the Convenor, through elections.

(2) The Accounts Committee may have the internal audit

of the society conducted in a regular manner, and

furnish suggestions to the Board.

(3) The Accounts Committee must present its report

about the accounts to the General Assembly.

18. Expulsion of Members of the Board or Dissolution of the

Board

(1) In case the General Assembly approves by a majority

a resolution presented by 5 percent of the members

maintaining that it will be appropriate to expel

any elected member of the Board, or to dissolve the

Board, such member may be expelled, or the Board

dissolved.

(2) In case any member of the Board is expelled

according to Sub-Section (1), another member shall

be elected by the General Assembly to fill up that

seat for the remaining term.

(3) In case the Board is dissolved according to Sub-

8

Section (1), the General Assembly shall make

arrangements for electing a new Board.

(4) All the provisions mentioned in Sub-Section (1),

Sub-Section (2), and Sub-Section (3) shall be

applicable in connection with the expulsion of

members of the Accounts Committee, or the

dissolution of the Accounts Committee as well.

19. Sub-Committees

(1) For the purpose of operating the business of the

society or union, the Board may form Sub-Committee

as provided for in the bye-rules.

(2) The functions, duties, and powers, as well as the

working procedures, of Sub-Committees formed

according to Sub-Section (1) shall be as provided

for in the bye-rules.

20. Appointment of Employees and Advisors

(1) For the purpose of running the business of the

society or union, the Board may appoint employees

and advisors according to need in accordance with

the procedure approved by the General Assembly.

(2) The remunerations and other conditions of service

of employees and advisors appointed under Sub-

Section (1) shall be as mentioned in the bye-rules

of the concerned society or union.

Chapter 5

Registrar

21. Appointment of Registrar

(1) Subject to this Act and the rules framed hereunder,

HMG shall appoint a Registrar to register societies

or unions, and perform other prescribed functions.

(2) The remunerations and other conditions of service

of the Registrar shall be as prescribed.

22. Delegation of Authority

The Registrar may delegate any or all of the powers

vested on him under this Act or the rules framed

hereunder to any subordinate officer.

Chapter 6

Financial Sources and Mobilization

23. Sale of Shares

(1) The society or union may collect share capital

9

through the sale of shares to persons within the

area under its jurisdiction who are eligible to

become members, as well as to members and other

prescribed agencies.

(2) With the approval of HMG, a society or union may

sell shares amounting to not more than 20 percent

of its total share capital to any foreign

cooperative society or union which is a member of

the International Cooperative Alliance.

(3) A society must sell shares according to Sub-Section

(1) in such a manner that no individual or society

gets more than 20 percent of the total share

capital.

Provided that this restriction shall not be

applicable to HMG or a society or agency owned by

it.

(4) Irrespective of the number of shares purchased by

any member, voting shall be only according to the

principle of one person one vote while operating

the business of the society or union.

24. Loan Bonds and Loans

A society or union may issue loan bonds, or obtain

loans from any local or foreign bank or any other

agency.

Provided that before issuing loan bonds, or

obtaining loans from a foreign bank, it must obtain the

approval of HMG.

25. HMG Guarantee for Loans

(1) In case any society or union desires to obtain the

guarantee of HMG for loan bonds issued by it, or

loans to be obtained by it from any foreign bank or

other agency, it must submit an application to HMG

for that purpose.

(2) HMG shall consider the application submitted

according to Sub-Section (1) and, in case it so

deems appropriate, provide guarantee for such loan

bonds or loans. While providing such guarantee, HMG

may prescribe necessary conditions and restrictions

in respect to the redemption of such loan bonds or

loans. The society or union must redeem such loan

bonds or loans subject to such conditions and

restrictions.

26. Power to Undertake Banking Business

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(1) A society or union may accept saving deposits from

its members and also supply loans to them.

(2) A society or union must obtain the prior approval

of the Nepal Rastra Bank in order to engage in

other banking businesses, including accepting

deposits and supplying loans, in addition to the

businesses mentioned in Sub-Section (1), but only

with its own members. Such societies or unions must

comply with the terms and conditions prescribed and

the directives issued by the Nepal Rastra Bank.

(3) Every society or union which has been engaged in

(such) businesses after being registered before the

commencement of this Act must make arrangements for

operating its businesses under Sub-Section (1) or

Sub-Section (2) within one year from the date of

commencement of this Act.

(4) Notwithstanding anything contained elsewhere in

this Act, societies or unions may unitedly

establish a cooperative bank.

(5) In case an application is filed for the

establishment of a bank according to Sub-Section

(4) along with the recommendation of the Nepal

Rastra Bank, the Registrar may conduct necessary

investigations and register such a bank.

(6) A bank established after being registered under

Sub-Section (5) may engage in any such banking

businesses under the 1974 Commercial Bank Act as

are approved by the Nepal Rastra Bank, and it shall

be mandatory for such a bank to comply with the

terms and conditions prescribed and the directives

issued by the Nepal Rastra Bank from time to time.

27. Distribution of Savings

(1) After at least one-fourth of the net savings of any

year is credited to the reserve fund, a society or

union may use the balance to set up funds in the

prescribed manner.

(2) Funds other than the reserve funds may be used for

the distribution of dividends or bonus within the

limits mentioned in the bye-rules according to the

objectives of the funds.

Provided that the amount of dividends in any

year shall not exceed 15 percent of the share

capital.

28. Financial Cooperation Not To Be Provided

No society or union shall make contributions or

provide any other type of financial cooperation to any

political party, or any institution or association which

works for any religion or sect.

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29. Contracts Not To Be Given

A society or union shall not grant its contract to

any member of its Board or Accounts Committee or to any

employee.

30. Shares or Rights of Members Not To Be Sold by Auction

The shares or rights of any member in the principal

capital of any society or union shall not be sold by

auction in consideration of any loan or liability, other

than the loans or liabilities of such society or unions.

Chapter 7

Amalgamation or Division

31. Amalgamation or Division

(1) A two-thirds majority of the General Assembly of

the concerned society or union is necessary for the

amalgamation of two or more societies or unions, or

the division of any society or union into two or

more societies or unions. While taking such

decision, the conditions and procedures of such

amalgamation or division must also be mentioned.

(2) On the basis of the decision taken under Sub-

Section (1), the Registrar may amalgamate or divide

the concerned society or union.

Chapter 8

Notices, Records, and Examination of Accounts

32. Records of Decisions

Every society or union must maintain updated

records of the meetings and other business of its

General Assembly the Board, the Accounts Committee, and

Sub-Committees.

33. Accounts and Other Records

Every society and union must maintain records of

the accounts of its entire business, as well as other

necessary records, in the prescribed manner.

34. Notice To Be Furnished

Every society or union shall submit an annual

report of its business, the audit report, as well as a

report containing the following particulars, to the

Registrar or to an authority designated by him, within

the prescribed time limit.

(a) Policies and plans finalized in respect to the

distribution of savings.

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(b) Names of Directors and their remaining term.

(c) The date fixed for meetings of the General

Assembly, and

(d) Other particulars prescribed by the Registrar

from time to time.

35. Power to Seek Explanations and Clarifications

(1) In case at least 5 percent of the members of any

society or union submit an application to the

effect that such society or union has not worked in

a satisfactory manner, the Registrar may personally

demand explanations or clarifications, or empower

any officer in writing to do so.

(2) In case the Registrar feels that any society or

union is not conducting its business in a

satisfactory manner, he may demand explanations and

clarifications, or have any officer do so.

(3) In case the Registrar, or any officer empowered by

him according to Sub-Section (1) and Sub-Section

(2), demands explanations and clarifications, it

shall be the duty of every member and employee of

the society or union to furnish the information

requested and extend cooperation in every manner.

(4) Notice of the results of the explanations or

clarifications sought according to Sub-Section (1)

or Sub-Section (2) shall be made available to such

society or union in writing.

36. Power to Conduct Inspection and Offer Suggestions

(1) The Registrar, or an officer empowered by him, may

inspect the society or union.

(2) While conducting inspection according to Sub-

Section (1), in case it is found that this Act or

the rules or bye-rules framed hereunder are not

being complied with, the concerned officer may

offer necessary suggestions to make arrangements

consistent with the Act, rules or bye-rules.

37. Examinations of Accounts

(1) A society or union must have the accounts of each

financial year audited by a registered auditor

approved by the Registrar or an officer designated

by him within three months after the expiry of such

financial year.

(2) Notwithstanding anything contained in Sub-Section

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(1), the General Assembly of the concerned society

or union may, with the approval of the Registrar,

appoint a registered auditor for auditing its

accounts.

(3) While appointing an auditor according to Sub-

Section (2), the same person or company shall not

be appointed for more than three consecutive terms.

(4) The report of the examination of accounts must be

presented to the General Assembly for its

endorsement.

(5) In case the General Assembly does not endorse the

report of the examination of accounts presented to

it according to Sub-Section (4), it may appoint

another auditor and conduct investigations or a

fresh audit.

(6) The remunerations and facilities of the auditor

shall be as determined by the General Assembly.

Chapter 9

Immunities and Facilities for Societies and Unions

38. Immunities and Facilities for Societies and Unions

(1) Notwithstanding anything contained in current law,

a society or union shall be entitled to the

following immunities and facilities:

(a) A society or union need not register any

document relating to its transactions, except

in the case of immovable property.

(b) No revenue stamp fee or registration fee shall

be charged on documents relating to

transactions or sale or purchase of immovable

property by a society or union, or in any

other type of document.

(c) No income tax shall be collected on the

profits made by a society or union, and on the

dividends received by its members. No house

and compound rent tax or property tax shall be

collected from a society or union.

(d) Local taxes shall not be collected on goods

dealt in by a society or union.

(2) HMG may wholly or partially waive by notification

in the Nepal Rajapatra according to current law

customs duty or sales tax on machinery, industrial

and agricultural equipment, parts thereof, raw

materials, official equipment, and means of

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transport to be imported by a society or union for

its use.

(3) HMG may wholly or partially waive by notification

in the Nepal Rajapatra according to current law the

excise duty or sales tax due on any goods produced

by any society or union.

(4) A society or union engaged in industrial production

shall be entitled to other immunities and

facilities, as well as protection, due to

industries under current law, in addition to the

immunities mentioned in Sub-Section (1), (2) or (3)

above.

39. Collection of Arrears of Payment Due to Societies or

Unions

The society or union, or the Registrar on its

recommendation, may sell by auction according to the

prescribed procedure the assets of any person who has

defaulted in the repayment of loans obtained from the

society or union, or of other arrears due to such

society or union, or the amount or the value of the

property of the society or union which he has

misappropriated, along with interest thereon.

40. Society or Union to Get Priority

In case any member defaults in the payment of any

amount due to a society or union, provision shall be

made for the settlement of the rights or claims of HMG,

if any, to the property of such member, and the society

or union shall have preemptive right to the balance.

Chapter 10

Dissolution of Society or Union, and Cancellation of

Registration

41. Dissolution and Cancellation of Registration of Society

or Union

(1) A two-thirds majority of the total membership of

the General Assembly of the society or union may

take a decision to dissolve such society or union.

(2) After receiving an application along with a copy of

the decision taken under Sub-Section (1), the

Registrar, or a person empowered by him, may cancel

the registration of such society or union.

(3) In case enquiries conducted according to Sub-

Section (2) of Section 35, or inspection conducted

according to Section 36, reveal that any society or

union has conducted no transaction and has remained

15

inactive for two consecutive years, or in case any

society or union is found to have performed actions

contrary to its objectives, the Registrar, or a

person empowered by him, may cancel the

registration of such society or union. In case

registration is cancelled in this manner, the

society or union shall be dissolved, and the

certificate of its registration shall be ipso facto

invalid.

42. Appointment of Liquidator

(1) In case a society or union is dissolved under

Section 41, the Registrar, or a person empowered by

him, shall appoint a liquidator to implement the

related matter.

(2) The functions, duties, powers and the remunerations

of liquidator shall be as prescribed.

Chapter 11

Fines and Penalties

43. Fine For Failure to Submit Particulars

A society or union which does not submit a report

under Section 34, or does not furnish information

according to Sub-Section (3) of Section 35, shall be

fined with an amount not exceeding Rs 1,500 on the order

of the Registrar.

44. Fine for Conducting Business by Using the Term

"Cooperative"

Any person who engages in trade or other enterprise

in contravention of Section 46, except in the case of a

society or union registered under this Act, shall be

fined with not more than Rs 2,000 on the order of the

Registrar. In case such person repeats the offense, he

shall be fined with an amount not exceeding Rs 5,000 for

each additional offense.

45. Appeals

The concerned society or union, or individual who

is dissatisfied with the cancellation of the

registration of any society or union by the Registrar or

the person empowered by him according to Sub-Section (3)

of Section 41, or with the order issued by the Registrar

under Section 43 or Section 44, may file an appeal to

the Appellate Court within 35 days.

Chapter 12

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Miscellaneous

46. Prohibition to Use The Term Cooperative or Any

Equivalent Term

No person, firm, or institution, other than a

society or union registered under this Act, may use the

term cooperative, or its English equivalent, in his/its

name or business.

47. 1964 Company Act Not To Be Applicable

The 1964 Company Act shall not be applicable in the

case of societies or unions registered under this Act.

48. Power to Frame Rules

(1) HMG may frame necessary rules to implement the

objectives of this Act.

(2) Without prejudices to the generality of the powers

conferred by Sub-Section (1), such rules may

provide for the following matters in particular:

(a) Specimen forms of application for registration

of societies or unions, and certificate.

(b) Powers and working procedures of general

meetings and extraordinary general meetings of

societies or unions.

(c) Financial sources of societies or unions, and

mobilization thereof.

(d) Supervision and inspection of societies and

unions.

49. Repeal and Saving

(1) The 1984 Cooperative Societies Act has been

repealed.

(2) Societies and unions registered under the 1984

Cooperative Societies Act shall be deemed to have

been registered according to this Act.

Royal Seal Affixed on: Jestha 2, 2049 (June 15, 1992).

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