Profit Not Distributing Company Registration in Nepal 2026

A founder in Nepal who wants to run a not-for-profit operation has three legitimate vehicles, not one: a company registered as a profit-not-distributing entity under Section 166 of the Companies Act 2063, a non-governmental organisation (NGO) registered under the Association Registration Act 2034, or, where the funder is international, an INGO branch office authorised by the Social Welfare Council. Each sits under a different statute, a different registering authority, a different governance regime, and a different tax framework. Choosing the wrong vehicle costs years — the structure cannot be retro-fitted without dissolving and re-registering.

This guide is the 2026 (2083 BS) practitioner's deep-dive on profit-not-distributing company registration in Nepal — the Companies Act 2063 Chapter 19 framework, the five-promoter minimum, the permitted objectives, the dividend-prohibition rule, the Office of Company Registrar (OCR) process and fees, the PAN and local-ward formalities, the Social Welfare Council (SWC) enlistment trigger, the Income Tax Act 2058 Section 2 tax-exempt certificate, and the practical choice between PND, NGO, and INGO. For the broader corporate framework see our company registration guide; for the formation document set see our company formation documents guide; for the corporate-types overview see our types of companies in Nepal.

What is a profit-not-distributing company under Nepal law?

A profit-not-distributing company (commonly abbreviated PND, PNDC, or simply Section 166 company) is a corporate body incorporated under Chapter 19 of the Companies Act 2063 (2006) for the pursuit of social, scientific, academic, professional, or charitable objectives without the distribution of profits to its members or employees. It is a distinct legal person — it can hold property, sign contracts, sue and be sued, and outlive its founders — but it cannot pay dividends, bonuses, or any other share of its surplus to its members. Every rupee the entity earns or receives must be applied to the attainment of its stated objectives or to the augmentation of its capital base.

Section 166 is the gateway provision. It permits the registration of a company whose objectives are limited to those listed in the section and the Companies Directives — professional and trade-development associations, learned societies, scientific and academic bodies, social and charitable organisations, benevolent funds, and similar collective-purpose entities. The next several sections — 167 to 170 — set the prohibition on dividend distribution, the rule on member liability (no personal liability for company debts unless written acceptance of a specified limit), the donation-and-gift power, and the bar on merger with a profit-distributing company. Together they constitute a self-contained regime for not-for-profit incorporation within the broader Companies Act framework.

How is a PND company different from an NGO or INGO?

The three not-for-profit vehicles in Nepal address different needs. A PND company is registered at the Office of Company Registrar under the Companies Act 2063, has a minimum of five promoters, no statutory share capital, and is governed by the same OCR machinery that supervises private and public companies — making it appropriate for founders who want corporate-style governance (board of directors, statutory meetings, audited accounts, AGMs), Nepal-resident control, and a vehicle that can hold property and sign commercial contracts comfortably. PNDs are popular with professional associations, alumni bodies, academic societies, research institutes, and policy-research foundations.

An NGO under the Association Registration Act 2034 is registered at the District Administration Office of the district where it is based, with a minimum of seven founding members and a statutory 33% female composition in the founding body. NGOs renew annually with the DAO, hold a general meeting at least once a year, and are the traditional vehicle for community-development, advocacy, and humanitarian work. NGOs receiving foreign funds must additionally affiliate with the Social Welfare Council under the SWC Act 2049. An INGO is a foreign-incorporated not-for-profit operating a branch office in Nepal under SWC authorisation — appropriate where the originating organisation is registered outside Nepal and seeks to deliver programmes locally.

The practical decision usually turns on three questions: who governs (corporate-style directors vs general-body of members), where the funds come from (domestic-only vs foreign-donor), and what activities are intended (advocacy and grassroots delivery sit more naturally with NGOs; professional and academic activities with PND companies; cross-border programme delivery with INGOs).

What are the permitted objectives of a PND company?

The Companies Directives issued by OCR limit PND objectives to three broad classes. First, the promotion of a profession, occupation, or trade — bar associations, chartered accountant societies, engineers' councils, contractors' federations, hoteliers' associations, and similar professional bodies fall here. Second, the protection of collective rights and interests — consumer protection bodies, environmental advocacy groups, professional unions, and rights-defence organisations. Third, scientific, academic, social, charitable, or benevolent activities — learned societies, research institutes, scholarship trusts, museum trusts, cultural-heritage associations, public-health and welfare bodies, and similar collective-purpose entities.

What is not permitted is the use of a PND structure for ordinary commercial trading. The entity may earn income incidental to its objectives (membership subscriptions, publication revenue, conference fees, training-programme fees, grants), but it cannot operate as a trading company that happens to give its profits away — that distinction is the most common cause of OCR objection at the registration stage and of subsequent compliance challenge. The MOA objective clause must be drafted to track Section 166 and the Directives precisely; ambitious language about "any other lawful activity" of the kind used in ordinary private-company MOAs will be struck out at OCR review.

Who can register a PND company in Nepal?

The Companies Act requires a minimum of five promoters at the formation stage. Promoters may be Nepali citizens or, subject to sector-specific restrictions and Foreign Investment and Technology Transfer Act 2075 (FITTA) clearance, foreign persons; in practice, PNDs with foreign promoter participation face additional scrutiny and most domestic-purpose PNDs are formed by Nepal-resident citizens. The promoters must be of full age, of sound mind, not disqualified from acting as a director or company officer under the Companies Act, and not in current default of an OCR filing in another company.

Membership of a PND is non-transferable: a member cannot sell or assign their membership to another person, and membership lapses on death, resignation, or expulsion under the AOA. New members are admitted by the procedure set out in the AOA — typically by board resolution on application and payment of the prescribed admission fee. This non-transferability is a defining feature of the PND form and is what distinguishes it from a private limited company where shares (and the membership rights they carry) are freely transferable subject to any pre-emption clauses in the AOA.

What documents are required for PND registration?

The registration document set comprises three categories. The constitutional documents are the Memorandum of Association (MOA), which states the name, registered office, objectives, capital position, and promoter particulars, and the Articles of Association (AOA), which sets out the internal governance rules — board composition, member admission and removal procedure, general meeting frequency, decision-making thresholds, audit and accounting rules, amendment procedure, and dissolution mechanism. Both must be drafted to track Sections 166 to 170 precisely and the Companies Directives objectives list; a private-company template adapted lazily for PND use will be rejected at OCR.

The promoter-identity documents are: a citizenship certificate copy for each Nepali promoter (or passport copy plus FITTA approval for foreign promoters); a recent passport-size photograph of each promoter; and the promoter consent form signed before a notary or authorised officer. The procedural documents are: the online name-reservation confirmation from the OCR portal; the registered-office consent letter (rent agreement or ownership document plus consent from the landlord); the proposed-director consent letters; and the registration-fee deposit voucher (NPR 15,000). Where the proposed objectives touch a regulated sector (education, health, finance, foreign-funded humanitarian work), additional sector approvals may be required as pre-registration conditions.

How does the OCR registration process work step by step?

The end-to-end process runs through seven discrete stages. Step 1 — Online name reservation is filed at the OCR portal (ocr.gov.np). The promoter proposes a name, the system checks against existing registrations and reserved-name lists, and on approval the name is reserved for 35 days. A name including a profession-descriptor ("Bar Association of X", "Engineers' Society of Y") must satisfy the Directive that the descriptor reflects the actual objectives of the entity — vanity names get rejected.

Step 2 — Drafting the MOA and AOA is the substantive legal work. The MOA must state the name, registered office address, objectives (tracking Section 166 and the Directives), the no-share-capital declaration, the dividend-prohibition clause from Section 167, the donation power from Section 169, and the promoter particulars. The AOA must set out the board composition (typically odd-numbered to avoid deadlock), the membership categories and admission rules, the general-meeting frequency, the decision-making thresholds (ordinary resolution vs special resolution), the audit-and-accounting framework, the amendment procedure, and the dissolution mechanism with surplus-application rules.

Step 3 — Physical submission at OCR involves filing the constitutional documents together with the identity and procedural documents listed above. The OCR cashier issues a receipt for the NPR 15,000 registration fee. Step 4 — OCR review verifies the document set against the statutory and Directives requirements; the file is returned with marked corrections if any element is incomplete or non-compliant. On clean submission the registration certificate (incorporation certificate) is issued — typically within 10 to 15 working days.

Step 5 — PAN registration at the Inland Revenue Office follows immediately after incorporation. The PAN is required for every receipt-and-payment transaction the entity makes. At the same time the entity should apply for tax-exempt-entity status under Section 2 of the Income Tax Act 2058. Step 6 — Local ward registration at the municipal ward office of the registered-office location enables the entity to display its signboard and discharge the ward business-registration formalities. Step 7 — SWC enlistment is triggered only when the entity prepares to receive foreign funds.

How much does PND registration cost?

The headline OCR registration fee is NPR 15,000 — paid as a single deposit at the time of document submission. There is no graduated fee scale based on share capital, because PND companies do not have share capital. There is no annual OCR renewal fee — the annual obligation is the filing of the audited annual return, which carries no fee provided it is filed within the statutory deadline (late filing attracts penalty under the Companies Act schedule).

The other cost components are: legal fees for drafting the MOA, AOA, and promoter resolutions (typically NPR 25,000 to NPR 75,000 depending on complexity); notary fees for promoter consent and authentication; the PAN registration (no fee, but tax-exempt application has nominal administrative cost); the local ward business registration (varies by municipality, typically NPR 1,500 to NPR 5,000 annually); and, where SWC enlistment is required, an SWC processing fee plus the audit-and-reporting overhead that the SWC framework imposes. For a domestic-funded PND with a clean file, the all-in cost to live operation rarely exceeds NPR 75,000 to NPR 100,000 inclusive of professional fees.

How long does PND registration take?

The base case — clean MOA and AOA, complete promoter documents, undisputed name — completes in 10 to 15 working days from physical submission at OCR to issue of the incorporation certificate. Add three to five days for the post-incorporation PAN application at the Inland Revenue Office, and a further three to five days for the local ward registration. The all-in timeline from first concept to fully operational registered entity is typically four to six weeks for a domestic-purpose PND.

Where SWC enlistment is required, the timeline extends meaningfully — the SWC process involves a project-brief submission, an objectives-and-budget review, and a board-level approval that runs typically two to four months depending on the case-load and the donor profile. Where foreign promoters are involved, the FITTA approval at the Department of Industry adds another two to three months. Where the objectives touch a regulated sector (a research institute touching biotechnology, a health-services charity, a financial-literacy foundation regulated by Nepal Rastra Bank), the sector approval becomes the critical-path item and the timeline becomes case-specific.

What are the dividend and distribution rules?

Section 167 of the Companies Act 2063 imposes the defining prohibition on a PND company: the entity shall not distribute dividends, bonuses, or any other amount from the profits earned by it to its members or employees. Surplus must be applied either to the augmentation of the entity's capital base or to the attainment of its objectives. This rule is the entire reason the form exists, and OCR enforces it strictly at the annual-return review. Indirect distributions — inflated salaries to officers who are also members, lease payments to related parties at above-market rates, "consulting fees" to founders for nominal services — are looked through and treated as profit distribution. Repeat breach is a ground for OCR enforcement action including, in serious cases, court-ordered dissolution.

The mirror prohibition in Section 170 bars a PND company from being merged with a company distributing profits. A PND can be wound up under the ordinary Chapter 20 voluntary winding-up framework (see our company liquidation guide), with the surplus on dissolution applied to a similar-objective entity as specified in the AOA — never returned to members.

How does tax-exempt status work for PND companies?

Incorporation as a PND company does not by itself confer tax-exempt status. Tax exemption is a separate determination made by the Inland Revenue Department under Section 2 of the Income Tax Act 2058 on application by the entity after PAN registration. The application establishes that the entity's objectives are exclusively the not-for-profit objectives permitted under the Act, that no part of the surplus accrues to members, and that the activities are conducted in line with the constitutional documents. On approval, the entity receives a tax-exempt-entity certificate; the certificate is renewable and is subject to verification at any time by the IRD.

The tax exemption covers income arising from the entity's not-for-profit activities — donations, grants, membership subscriptions, conference and training receipts incidental to objectives, and similar revenues. It does not cover income from purely commercial activities incidental to but not exclusively for the objectives (for example, rental income from a property held for investment rather than for the entity's own use, or trading-style publication sales). Where the entity does receive such income, it must account for it separately and pay tax at the ordinary rate, even though the entity as a whole remains tax-exempt on its core activities. This separation is the most common cause of IRD assessment disputes for PND companies and must be set up correctly in the chart of accounts from year one.

When is Social Welfare Council enlistment required?

The Social Welfare Council Act 2049 requires any not-for-profit entity that receives funds from foreign donors — INGOs, foreign governments, foreign individuals, multilateral agencies — to enlist with the SWC and to channel the foreign funds through the SWC project-approval framework. Enlistment is not required for a domestic-funded PND: an entity that runs on member subscriptions, domestic grants, Nepali donations, and local-government project payments operates fully outside the SWC framework and reports only to OCR and IRD.

The enlistment process involves an application setting out the PND's constitutional documents, its annual budget, its proposed projects, the donor identification, and the bank-account structure for the foreign-fund receipt. SWC reviews and either approves the enlistment in principle, requests additional documentation, or rejects with reasons. Once enlisted, every individual project funded from abroad requires a separate SWC project-approval before funds are received and disbursed. SWC also conducts post-project audits and may impose monitoring requirements. Many founders structure the entity for domestic funding initially and add the SWC enlistment only when an actual foreign-funding opportunity arises — keeping the early-years compliance light.

What are the ongoing compliance obligations?

A registered PND company has continuing obligations on four fronts. OCR requires the annual general meeting to be held within six months of the financial-year end, the annual audited accounts to be filed within the statutory window, and any change in directors, registered office, MOA, or AOA to be notified within the prescribed deadline using the standard OCR change forms. IRD requires the annual income-tax return and the tax-exempt-entity status verification; even tax-exempt entities must file the return showing zero or nominal liability and supporting accounts. The local ward requires the annual business-registration renewal and any signboard-tax payment.

Where SWC enlistment is in place, SWC requires per-project approvals, semi-annual progress reports, completion reports, and project-level financial audits. The audit standard for SWC-enlisted entities is more demanding than the OCR baseline — typically requiring a sector-experienced auditor and donor-specific reporting formats. Failure on any of these tracks can attract penalty, certificate suspension, or in serious cases dissolution. Disciplined annual-cycle compliance is the difference between a PND that remains an active, well-regarded entity and one that quietly accumulates penalties until it is forced to wind up.

What are the most common reasons PND registration fails or is delayed?

From the OCR queue, the recurring choke-points are: MOA objectives drafted in ordinary private-company language rather than tracking Section 166 and the Companies Directives precisely (objectives clause is the first thing reviewers check, and lazy templates fail); promoters with current default in another OCR registration (the system blocks the new filing until the default is cleared); names that conflict with reserved-name lists, trademarks, or existing professional-body registrations (the name-reservation step should always be run before any MOA work begins); citizenship-document scans that are illegible or expired; registered-office consent letters that do not satisfy the OCR template (rent-agreement details, landlord consent, mapped address); and AOAs that fail to include a complete dissolution-and-surplus clause meeting Section 167. Each is preventable with disciplined pre-submission review.

Post-registration, the recurring compliance failures are: indirect-distribution arrangements that flunk the Section 167 prohibition (founder salaries set at above-market rates, related-party consulting fees, related-party lease rents); failure to maintain separate accounting for tax-exempt versus taxable activities (causing the entire entity's tax-exempt status to come under threat at IRD audit); SWC project-approval applications filed after the foreign funds have already arrived (the SWC framework requires approval first); and lapses in annual OCR return filing leading to default-list inclusion and ultimately to forced-strike-off action.

How does Alpine Law Associates handle PND company registration in Nepal?

Alpine Law Associates starts every PND engagement with a structure-choice analysis — comparing PND company, NGO under the Association Registration Act 2034, and INGO branch under the SWC Act 2049 against the actual governance preferences, funding profile, and operational plan of the founders. We then draft the MOA and AOA from scratch (never adapted from a private-company template) to track Sections 166 to 170 and the Companies Directives precisely, prepare the full promoter document set, manage the OCR online name reservation and physical submission, and walk the file through registration to incorporation certificate. For tax-exempt status we file the Income Tax Act Section 2 application with IRD and set up the chart of accounts to separate exempt and taxable income from day one. For foreign-funded operations we coordinate the SWC enlistment timeline so the entity is ready to receive the first donor disbursement on day one. For founders facing OCR objection on objectives, name conflict, or document deficiency we resolve the issue and refile rather than re-start. Speak with our lawyers today →