How to Register a Profit Not Distributing Company in Nepal

A company not distribute profits are company entities that operate for social, educational, or other purposes without the objective of attaining personal gain or profits for its owners and shareholders. These companies may qualify for tax exemptions under Nepali law. There shall not be required share capital to incorporate a company not distribute profits. Provided, however, that the company may receive any donation or gift under law for the accomplishment of the objectives. No member of the company shall be liable for the debts and liabilities of the company except in the case where any member accepts such liability in writing, with the specification of the limit of such liability. The company shall not distribute dividends, bonuses, or any other amount from the profits earned by it to its members or employees, and the profits earned by the company shall be used to increase the capital of the company or for the attainment of its objectives. Any company not distributing profits shall not be merged with any company distributing profits.

Process of Registering a Profit Not Distributing Company in Nepal

• Step 1: Reserve the company name online through the Office of the Company Registrar (OCR) website.
• Step 2: Prepare and submit the physical copies of required documents, including the Articles of Association (AOA) and Memorandum of Association (MOA), to the OCR.
• Step 3: Complete the company registration process at the OCR.
• Step 4: Obtain a Permanent Account Number (PAN) from the Inland Revenue Office.
• Step 5: Register the business with the respective local ward office.
• Step 6: If applicable, register the company with the Social Welfare Council.

Step 1: Online Reservation of Company Name from OCR Website

Before starting a company, you must reserve a unique name through the Office of the Company Registrar (OCR) website. This ensures that no other company has the same or a confusingly similar name.

Step 2: Drafting and Submission of Documents (AOA & MOA) to OCR

Once the name is approved, the next step is to draft the company’s legal documents, Articles of Association (AOA) and Memorandum of Association (MOA), which outline the company’s structure, purpose, and rules. These must be physically submitted to the OCR.

Step 3: Registration of the Company at OCR

After verifying the documents, the OCR formally registers the company, making it a legal entity authorized to operate in Nepal.

Step 4: PAN Registration at the Inland Revenue Office

The company must then apply for a Permanent Account Number (PAN) at the Inland Revenue Office. This is necessary for tax purposes and to conduct any financial transactions.

Step 5: Business Registration at Local Level Ward Office

To operate locally, the company must register at the ward office of the municipality or rural municipality where it is based. This ensures compliance with local regulations.

Step 6: Enlisting the Company at the Social Welfare Council (if required)

If the company is a nonprofit or NGO involved in social work, it must also register with the Social Welfare Council. This step is only required for certain types of organizations.

Documents required for registering a profit not distributing Company in Nepal

These are the relevant documents that are to be submitted to OCR.

1. Application
2. MOA
3. AOA
4. Citizenship / NID in case of Nepali and Passport in case of Foreigner.
5. Prior approval or license from relevant authority (If required)
6. Copy of approval of DOI (In case of a foreign investor)
7. Power of attorney.

Minimum Number of Promoters:

At least 5 promoters are required to register a non-profit company in Nepal.

These promoters act as the founding members and are responsible for submitting the necessary documents such as the Articles of Association (AOA), Memorandum of Association (MOA), and the application for company registration.

Share Capital Requirement:

• No minimum share capital is required.
• In fact, non-profit companies do not issue share capital like profit-making companies.
• Members (promoters) contribute to the organization’s objectives through donations or other means, but they do not hold shares or receive dividends.

Liabilities of the Members:

• The liabilities of members are limited, but only up to the amount they have guaranteed to contribute in the event of the company’s winding up.
• This guarantee is stated in the Memorandum of Association.
• Members are not personally liable for the company's debts beyond their pledged contribution.

A company not distributing profits serves as a valuable legal structure for promoting social, educational, religious, or charitable objectives without the aim of personal financial gain. These companies are not required to issue share capital and do not provide dividends or bonuses to members or employees. Instead, all income and profits are reinvested into the organization to fulfill its stated purposes. Members are not personally liable for the company’s debts, except where a written commitment has been made, ensuring limited liability protection. The registration process in Nepal involves reserving a company name, submitting the AOA and MOA, completing registration at the Office of the Company Registrar, and obtaining a PAN. Local ward registration and, if applicable, registration with the Social Welfare Council are also required. With at least five promoters and the ability to accept lawful donations, such companies play a crucial role in advancing public welfare while operating transparently under the law.