How to Start a NPO in Nepal

What is Non-Profit Organization

The Company Act of 2006 classifies companies into three types, and one of them is called a not-for-profit company (known as non-profit company). A non-profit company is created with the condition that it cannot share or distribute any profits, dividends, or money to its members. Instead, it uses the earnings and savings to achieve specific social well-being objectives. This type of company has non-commercial purposes and focuses on benefiting society. According to the Company’s Act, at least five (5) members are needed to register a not-for-profit company, and there’s no maximum limit on the number of members.

Restriction on profit distribution

Non-Profit Companies have certain rules they must follow. They cannot give out any profits they earn to their members or employees as dividends or bonuses. Instead, any profit they make must be used to improve their services or grow their business for the benefit of the community.

The money and assets of the company cannot be distributed to the people who started it, its members, directors, officers, or anyone connected to them. Everything must be used to support the company’s mission and the reason it was created in the first place.

General objectives of a Not-for-profit company

To develop and promote any profession or occupation.
To protect the collective rights and interests of the persons engaged in a specific profession or occupation.
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.

Required documents for Not-for-profit-company

Following documents are required for registering a non-profit company.

Two signed copies of the memorandum of association of the proposed company: This document outlines the company’s objectives and rules.
Two signed copies of the article of association of the proposed company: This document defines the company’s internal workings and regulations.
Notarized copies of citizenship certificates of all members: These are certified copies of the identification documents of all the members involved.
The power of attorney: This document grants someone else the authority to act on behalf of the directors or founders.
If the promoter is a company, provide a copy of their certificate of registration, MOA, AOA, and board resolution.

How many members/promoters are required for registration?

To register a company that doesn’t distribute profits, you need at least five promoters according to the Companies Act 2063. There’s no limit to how many promoters you can have.
The membership in this type of company cannot be transferred to someone else. It ends only in cases like death, cancellation of registration, dissolution, voluntary resignation, or merging with another company.
Anyone, including individuals, trustees of public trusts, or corporate bodies, can create a company that doesn’t distribute profits.

Procedure for the registration of a Non-profit Organizations

Step 1: Apply the proposed name online, just like other companies do.

Step 2: Submit the memorandum of association and the article of association along with the registration application.

Step 3: The Office of Company Register will examine all the documents and provide a registration certificate.

Step 4: Apply for business registration at the relevant ward office.

Step 5: Apply for a permanent account number (PAN) registration at the appropriate Inland Revenue Office.

Step 6: If your company receives foreign grants, you must register with the Social Welfare Council. However, if you don’t receive foreign grants, it’s not mandatory to register with them.

Is it compulsory to enlist a Company-Not-Distributing-Profits at the Social Welfare Council?

Enlistment at the Social Welfare Council is compulsory for those organizations which plans to receive grants from foreign countries or entities.

What is the timeline for registration?

It generally takes around 10 to 15 days the completion of the registration process in the Office of Company Registrar. For Social Welfare Council, you can consider 2-3 days extra.

What are the share capital requirements and liabilities of the members?

Share capital is not required for establishing a company not distributing profits, and such a company is not permitted to distribute dividends to its members.
The company may receive membership fees from its members and can receive donations, and gifts pursuant to law, for the accomplishment of its objectives.
The liability of the members is limited to the extent of the limit s/he has accepted in writing only. The members are not liable for the debts and liabilities of the company.

Tax provisions and registration fees for NGOs

To register a non-profit corporation, you need to pay a government tax of Rs 15,000 at the OCR. There’s no renewal fee for this registration. Additionally, you must register your NGO at your ward office, which charges around Rs. 2000 plus 10% of the rent (TDS).

When registering, you don’t need to pay anything at the IRD office. If you obtain a Tax exemption certificate, you won’t have to pay income tax on any profit your non-profit organization makes.

Advantages and Disadvantages of Non-Profit Organizations

Pros

Focused on a specific mission for community well-being
Exempt from taxes, leading to more efficient resource deployment
Diverse funding and donation sources

Cons

Revenue streams may vary due to changing donor preferences and abilities
Must comply with regulations and donor stipulations
Faces competitive disadvantage when hiring compared to for-profit entities

How can Company Khata will Help You?

Company Khata is a startup that helps you with registration, branding, accounting, taxation and various compliance related issues. We guarantee you hassle-free and timely services along with state-of-art communication and filing system.

Company Khata provides you following services:

a. Company Registration

b. Amendments in Company

c. Company Update

d. Accounting & Taxation

e. Trademark Registration

f. EXIM Code Registration

g. Web related services