Nepal

The legal framework analysis aims to provide general knowledge of the national cooperative legislation and of its main characteristics and contents, with particular regard to those aspects of regulation regarding the identity of cooperatives and its distinction from other types of business organisations, notably the for-profit shareholder corporation.

It aims to evaluate whether the national legislation in place supports or hampers the development of cooperatives, and is therefore “cooperative friendly” or not, and the degree to which it may be considered so, also in comparison to the legislation in force in other countries of the ICA region, or at the supranational level.

In addition, the research aims to provide recommendations for eventual renewal of the legal frameworks in place in order to understand what changes in the current legislation would be necessary to improve its degree of “cooperative friendliness”, which is to say, to make the legislation more favourable to cooperatives, also in consideration of their specific identity. This webpage presents a snapshot of the legal framework analysis results for Nepal.

The Cooperative Act of 2017 is the only law that regulates cooperative associations in Nepal. There are no special laws on different types of cooperatives in Nepal. However, the current law covers only mutual cooperatives and not social cooperatives.

Main laws relevant to cooperatives in Nepal

Cooperative Act,2017 - One general law for all types of mutual cooperatives.

Constitution of Nepal 2015 - Recognizes cooperatives as an important base of the national economy. Article 50(3) of the Constitution stipulates that the economic objective of the state shall be to achieve sustainable economic development, while achieving rapid economic growth, by way of maximum mobilization of the available means and resources through participation and development of public, private and cooperatives, and to develop a socialism-oriented independent and prosperous economy while making the national economy independent, self-reliant and progressive in order to build an exploitation free society by abolishing economic inequality through equitable distribution of the gains.

Section 2(Pa) of the act refers to the ICA principles of cooperative identity.

Cooperative Friendliness 

Nepal’s cooperative legislation is “quite cooperative friendly”. The key reason for the same is that the Act was made in consultation with the cooperative federation and confederation. Also, Chapter 13 of the Act includes certain concessions and benefits provided to cooperatives.

Key recommendations for improvement

• One would be to remove the complexities in the course of registering a cooperative such as limitations of the savings and credit cooperative within a Metropolitan city and a Sub-metropolitan city, which is not there in other cooperatives.
• Need for a solution to the double regulation of cooperative banks by Nepal Rastra bank and cooperative department.
• Provisions should be there to advance the cooperative model through the principle of self-regulation and not punishment. The Act needs to be amended to include social cooperatives as well.

Conclusions 

The Cooperative Act 2017 has commenced a new stage in Nepal’s cooperative movement. It has given the opportunity to increase the capacity of the cooperative sector in an effective, productive and competitive manner by increasing the capacity of its members and not just by increasing the number of members.

_{The legal frameworks analysis is a tool developed under the ICA-EU Partnership #coops4dev. It is an overview of the national legal frameworks at the time of writing. The views expressed within are not necessarily those of the ICA, nor does a reference to any specific content constitute an explicit endorsement or recommendation by the ICA.}