Company Incorporation for NGOs and INGOs in Nepal

Nepal continues to be a strategic hub for international development organizations, given its unique socio-economic challenges and geographic importance. For international NGOs (INGOs) and foreign donors seeking to establish a formal presence, understanding the framework for company incorporation in Nepal—even as a nonprofit entity—is essential.

Unlike traditional business registration, incorporation for NGOs and INGOs follows a distinct path governed by Nepal’s Social Welfare Council (SWC), Ministry of Home Affairs, and Company Registrar’s Office, depending on the structure.

This guide outlines the legal routes, documentation, and compliance requirements necessary to set up a non-profit operation in Nepal.

NGO vs. INGO in Nepal: Key Distinction

• NGO (Non-Governmental Organization): Typically refers to local non-profit entities formed by Nepali citizens, governed under the Association Registration Act, 1977.

• INGO (International Non-Governmental Organization): Refers to foreign non-profits operating in Nepal, which must register with the Social Welfare Council (SWC) after obtaining government approval.

While both can function as non-profits, only INGOs are directly subject to foreign investment-related scrutiny and diplomatic channels.

Can NGOs or INGOs Use the Company Incorporation Route?

Technically, non-profit companies can be registered under the Companies Act, 2006, as companies not distributing profits. This is particularly relevant for foundations, think tanks, or donor agencies looking to establish a more structured and regulated presence.

However, most development-focused INGOs are registered through SWC as social organizations, not traditional companies.

Two Main Options for Foreign Non-Profits:

1. Register as a Non-Profit Company under the Companies Act (with “not for profit” status)

2. Register as an INGO through the SWC and Ministry of Home Affairs

Each pathway offers different legal standing and operational flexibility.

Option 1: Incorporating a Non-Profit Company in Nepal

Foreign organizations can set up a Section 166 company (Not for Profit) under the Companies Act, which:

• Prohibits profit distribution to members

• Requires approval of objectives aligned with public benefit

• Is regulated by the Office of the Company Registrar (OCR)

Key Requirements:

• Minimum 7 promoters (can be a mix of foreigners and Nepali citizens)

• Memorandum and Articles of Association

• Board resolution and commitment to reinvest profits into organizational objectives

• Registration fee (waived or minimal for non-profits)

Advantages:

• More formal corporate structure

• Legal identity to own assets, open a bank account, or enter contracts

• Easier to comply with foreign donation regulations through banking channels

Option 2: Registering an INGO via the Social Welfare Council (SWC)

Most international charities and aid agencies prefer this route.

Step-by-Step Process:

1. Letter of Intent submitted to the Ministry of Home Affairs (MoHA)

2. Secure approval from relevant line ministries (e.g., Education, Health)

3. Draft and sign a General Agreement (GA) with the Social Welfare Council

4. Prepare and submit a Project Agreement (PA) outlining operational plans and funding

5. Receive SWC registration and formal recognition as an INGO in Nepal

Required Documents:

• Registration certificate from home country

• Constitution/Bylaws of the organization

• Annual reports and audited financials

• Passport copies of key personnel

• Local office address and staff list

Renewal:

INGOs must renew their registration annually and submit progress reports to SWC and relevant line ministries.

Tax and Compliance Implications

While INGOs and non-profit companies are not taxed on grants or donations, they must:

• Maintain transparent financial records

• Register for PAN and Withholding Tax obligations (if employing staff or vendors)

• Comply with Anti-Money Laundering (AML) and Foreign Exchange regulations from Nepal Rastra Bank if remitting or receiving funds

Donor-funded projects may also be subject to VAT exemption processes, but these must be approved on a case-by-case basis.

Key Differences Between Company and INGO Setup

Common Challenges for INGOs in Nepal

1. Bureaucratic Delays – Especially in obtaining Ministry approvals and renewing annual agreements.

2. Currency Controls – Foreign fund inflows must follow strict NRB procedures.

3. Local Representation Requirement – Must hire a Country Representative who is either a Nepali citizen or approved foreign national.

4. Misalignment of Objectives – If objectives are not clearly aligned with Nepal’s national development priorities, registration may be delayed or rejected.

Final Thoughts

If you are a foreign non-profit seeking company incorporation in Nepal, your path depends on your intended activities. For long-term, structured operations with legal identity, setting up a non-profit company may offer stability. However, for program-based humanitarian or development work, going through the SWC route as an INGO remains the most practical and recognized approach.

Engaging local legal and accounting advisors can help navigate the nuanced and evolving regulatory landscape and ensure compliance at every stage.