What is Cooperative?

As per Chapter 2 Section 3 (1) of Cooperatives Act 2048 (1992) An association or society as follows may be formed with a view to rendering services and facilities for the economic and social development of its members in consonance with the cooperative principle. a) A preliminary association consisting of at least twenty five persons as its members. b) A sectoral society consisting of at least five associations as referred to in Clause (a) as its members. c) A District cooperatives society consisting of at least five associations or sectoral societies out of those as referred to in Clause (a) or in Clause (b) or both as its members. d) A central cooperatives society consisting of at least twenty five sectoral associations as referred to in Clause (a) or at least five sectoral societies as referred to in Clause (b) as its members. e) A national cooperatives society consisting of at least fifteen societies as referred to in Clauses (b), (c) and (d) as its members. Thus, the Cooperatives Act 1992 A.D (2048 B.S) has firmly accepted the cooperative principles and provided a legal base both for the establishment of co-operative societies/unions/federations and application of co-operative values, norms and principles into practice. At present, the Department of Cooperatives is working under the Ministry of Agriculture and Co-operatives to enhance the local entrepreneurship as well as to develop local leadership through the promotion, regulation and development of Co-operatives for economic, social and cultural development of their members. The generally accepted cooperative principles as approved by the International Cooperative Alliance are: Open and Voluntary Membership, Democratically Controlled by the Members, Members Economic Participation, Autonomy and Independence Cooperative Education Training and information Cooperation among Cooperatives and Concern for Community. Does a co-operative follow a basic organizational structure? Yes, co-operative will need at least the following for its day-to-day operation: General Assembly Board of Directors Accounts Committee Hired management/ paid employees

What is the general assembly? A General Assembly is the highest policy-making body of the co-operative and is the final authority in the management and administration of the affairs of the co-operative. It is composed of members who are entitled to vote, duly assembled and constituting quorum.

The general assembly holds at least one meeting a year; the date of the meeting is fixed in the bylaws, or within three months after the close of each fiscal year. For newly registered co-operatives a special general assembly meeting must be called within six months from the date of approval. What is the board of directors? The Board of Directors is the body that formulates policies, directs, supervises and manages the business of the co-operative. The formation, functions, duties and powers of the board is provided in the Bye-law of the concerned association or society. The tenure of the board is provided in the Bye-law but cannot exceed a period of five years and it has to get a new board selected prior to the expiration of its tenure. What is accounts committee? Accounts Committee is a committee, (may) formed by the general meeting, consisting of three members including one coordinator who may perform internal audit and provide suggestion to the board. Financial Source and Mobilization of Cooperatives a) Sale of shares: An association or society may collect share capital by selling its shares to those persons who are under its jurisdiction and are eligible to become its members, members and other bodies as prescribed, not exceeding 20% of its total capital to the same person or association (not applicable to GoN or its bodies). Cooperatives may sell a maximum of 20% of its total share capital to foreign cooperative which is the member of International Cooperative Alliance (with approval of GoN). b) Power to issue debentures and borrow loans: An association or society may issue debentures and borrow loans from a native or foreign bank or other body (with prior approval from GoN). c) Security of government: GoN may provide security against debentures to be issued by the association or society or loans borrowed from a foreign bank or other body with necessary terms and restrictions in respect of repayment of such debentures or loans. a) Powers to carry on banking transactions: An association or society may accept saving deposits and lend to its member, but has to take prior approval from Nepal Rastra Bank to carry out other banking transactions. Associations or societies can jointly form a cooperative bank. b) Distribution of savings: Cooperatives must deposit at least one fourth of the net savings into the reserve fund and may establish other funds out of the remaining net savings. A dividend or bonus to the extent mentioned in the Bye-law may be distributed from the funds, other than the reserve fund, in consonance with the purpose of such funds. Provided that, the amount of share dividend for a year shall not exceed fifteen percent of the share capital.

Concessions and Facilities to Associations or Society 1. The association or society shall not be required to have registration pass of any instrument relating to its transaction, other than an instrument relating to immovable property. 2. Government of Nepal may, by a notification in the Nepal, exempt fully or partly from chargeable customs tariff or sales tax such machineries, industrial and agro-machines, equipment, spare parts, raw materials, office equipment and means of transport as are imported by an association or society for its use. 3. Government of Nepal may, by a notification in the Nepal Gazette and pursuant to the prevailing law, exempt fully or partly from chargeable excise duty or sales tax the goods produced by any association or society.