Financial Source and Mobilization in association or society

Financial Source and Mobilization in association or society

Sale of shares

(1) 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.

(2) An association or society may, with the approval of Government of Nepal, sell a maximum of twenty percent share of its total share capital to a foreign cooperative association or society which is a member of the International Cooperative Alliance.

(3) In selling its shares pursuant to Sub-section (1), an association shall so

sell shares to a person or association that it does not exceeds twenty percent of its total share capital to the same person or association.

              Provided that, this restriction shall not apply to Government of Nepal or an organization or body owned by Government of Nepal.

(4) A member shall be entitled to cast vote only on the basis of one person one vote irrespective of the number of shares subscribed by that person.

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 bodies.

              Provided that, approval of Government of Nepal has to be obtained prior to issuing debentures or borrowing loans.

Security of Government of Nepal may be obtained while borrowing loans

• If an association or society intends to obtain the security of Government of Nepal against debentures to be issued by the association or society or loans borrowed from a foreign bank or other bodies, the association or society has to make an application to Government of Nepal for the same.

• If Government of Nepal, upon consideration of an application made pursuant to Sub-section (1), thinks appropriate, it may provide security against such debentures or loans. In providing such security, Government of Nepal may prescribe necessary terms and restrictions in respect of repayment of such debentures or loans; and the association or society has to make repayment of debentures or loans subject to those terms and restrictions.

*Powers to carry on banking transactions

(1) An association or society may accept saving deposits from its member and lend loans to its members.

(2) An association or society has to obtain prior approval of the Nepal Rastra Bank in order to carry on other banking transactions including acceptance of deposits and disbursement of loans limited only to its members, other than the transactions mentioned in Sub-section (1). Such association or society has to observe the terms and conditions prescribed and directions given by the Nepal Rastra Bank.

(3) An association or society carrying on business after being registered prior to the commencement of this Act has to make arrangements for carrying on transactions pursuant to Sub-section (1) or Sub-section (2) within one year after the date of commencement of this Act.

(4) Notwithstanding anything contained elsewhere in this Act, associations or societies may jointly form a cooperative bank.

(5) If an application, accompanied by a recommendation of the Nepal Rastra Bank, is made for the establishment of a bank pursuant to Sub-section (4), the Registrar may hold the necessary inquiry and register such bank.

(6) A bank registered and established pursuant to Sub-section (5) may carry on the banking transactions under the Commercial Bank Act, 2031(1975) approved by the Nepal Rastra Bank; and the bank has to observe the terms and conditions prescribed by and the directions given from time to time by the Nepal Rastra Bank.

*Amended by the First Amendment.

Distribution of saving

(1) The funds as prescribed may be established out of the amounts that remain after depositing into the reserve fund at least one-fourth of the net saving of an association or society in any year.

(2) 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.

Prohibition on providing financial assistance

No association or society shall provide the donation or any other kind of financial assistance to any organization or association working for any political party or religion or community.

Prohibition on awarding contract

No association or society shall award any contract of that association or society to any member of its board or accounts committee or its employee.

Share or right of member not to be auctioned

The share or right of any member remaining as the principal amount of an association or society shall not be sold by auction of any loan or liability, other than the loan or liability of the same association or society.