1.What does it mean to be a cooperative?
A cooperative is an autonomous organisation of individuals who voluntarily join together to meet their common economic, social, cultural, and environmental needs and aspirations through a business that is owned and run democratically by its members.
2. What are the cooperative’s guiding principles?
Self-sufficiency, accountability, democracy, equality, equity, and solidarity are basic principles; ethical principles include honesty, openness, social responsibility, and concern for others.
3. What features characterize a cooperative?
a) No profit: No profit from the labor of others or the higher price paid by others.
b) Not relying on goodness: Not expecting the well-being of others.
c) No non-member businesses: Cooperatives are only open to professional service organizations’ members.
4. What are the seven international cooperative principles?
Members’ democratic control financial participation of members Autonomy and independence of members Information, education, and training Cooperation among cooperatives Concern for the community
5. What are the regulatory bodies for the cooperative sector?
Federal – Ministry of Land Management, Cooperatives and Poverty Alleviation and Department of Cooperatives,
State – Ministry of Land Management, Agriculture and Cooperatives and Department of Cooperatives or Division,
Local – Metropolitan, Sub-Metropolitan, Municipality, and Village Municipality
6. Who can join a cooperative?
Nepali citizens over the age of sixteen who live within the cooperative’s jurisdiction, Government of Nepal, state government bodies, local level as well as cooperative schools and community schools, guthis, local clubs, non-profit organizations formed at the local level, production and service organizations, consumer groups within the jurisdiction of the organization
A member is a person who has invested in the organization in accordance with the rules and limitations established by the organization by using the cooperative’s services, whereas directors are individuals chosen from among such members in accordance with Section 41 of the Cooperatives Act, 2074 BS.
- Has the organization held a regular meeting on time
- Have all members been treated the same
- What areas have the loans been invested in
- What is the interest rate on the loan investment
- What is the reference interest rate of the regulatory body
- Are the interest rates on loans made by members and directors different or the same
- Is interest imposed on the capital (capitalized) if the loan investment income is not paid within the time limit?
- Is the cooperative linked to the Department’s Cooperative and Poverty Management Information System (COPOMIS)?
- Has the organization complied with all applicable cooperative law and regulations?
9. What exactly is a cooperative fund?
Cooperative funds are various types of funding available for the promotion and upliftment of cooperative members and the community as a whole.
10. What exactly is a dividend?
A dividend is the annual return on investment that shareholders receive from a cooperative.
11. What is a general meeting, where do they take place, and when do they take place?
The term “general meeting” refers to the annual regular meeting attended by all of the organization’s shareholders. According to Article 39 of the Cooperatives Act, 2074 BS, the general meeting must be concluded within six months of the fiscal year’s end.
This committee, along with members of the Board of Directors and the Accounts Supervision Committee, makes policy decisions for the organization. The general assembly’s report must be submitted to its authoritative body within 15 days.
The Accounts Supervision Committee’s Meaning and Functions:
The General Meeting appoints the Accounts Supervision Committee in accordance with Article 48 of the Cooperatives Act, 2074 BS. Every four months, it conducts an internal audit of the cooperative, examines and evaluates financial and economic transactions, closely monitors the performance of the board of directors, makes any necessary recommendations, and reports to the general meeting.
- Subject-specific cooperatives or associations:
- Producers’ organization or union
- A consumer organization or a union
- Labor organization or union
- Financial institution or union
- Multipurpose organization or union
12. What exactly is dual membership?
A double membership occurs when a person joins more than one Organization of the same nature at the same local level. Double membership is a punishable offense under Article 32 of the Cooperatives Act of 2074 BS.
13. What exactly is a non-member business?
Any transactions the cooperative has with individuals who are not shareholders are referred to as non-member business. The current cooperative law forbids such activity.
14. What is the primary transaction of the organization?
According to clause (h) of section 2 of the Cooperatives Act, 2074, a “main transaction” of a cooperative is a transaction with a 30 percent or greater share in liability of savings mobilized in commercial activities or in purchase or sales transactions of members up to the most recent fiscal year.
15. What is the reference interest rate, and what is the current interest rate?
The maximum interest rate limit that a member must pay back after borrowing money from a cooperative is referred to as the reference interest rate. Since 2077/07/15, an interest rate of 14.75 percent has been in effect.
16. What is the service charge and how much does it currently cost?
A service charge is the amount that a cooperative charges to cover administrative costs incurred when investing a loan. The Department has set a service charge of 1% for cooperatives conducting Savings and Loan transactions and 1.5 % for cooperatives conducting microfinance transactions on collective security, effective 2077/10/01.
17. What is the concept of a merger?
Section 87 of the Cooperatives Act of 2074 defines merger as the act of combining two or more cooperatives into a single organizational unit. Members of the previous organization will become new members as a result of the merger. Liabilities and assets are combined.
18. What exactly is the Member Centrality Index (MCI)?
Member centralism is the idea that every cooperative action and benefit should be done with the members’ interests at the forefront. In order to determine how this concept is applied in the organization, indicators such as fundamental concern, protective bond, and operational activism have been identified, and the list of these indicators is known as the member centrality index.
19. What exactly are PEARLS?
Pearls are a type of integrated indicator that is used to assess risk in cooperative capital, debt, assets, and liabilities. Although many different indicators are used for this purpose around the world, the Department of Cooperatives currently evaluates them using 14 indicators.
20. What is the application of PEARLS?
PEARLS is an acronym that stands for Protection Indicators, Effective Financial Structure, and Asset Quality. R denotes Rate of Return and Cost, L denotes Liquidity, and S denotes Sign of Growth.
21. What types of grants are available to cooperatives?
22. Contributions in Kind:
Capital grants are funds provided to organizations to assist them in managing their infrastructure and fixed assets, thereby increasing their capital. This type of grant provides capital grants for joint ventures by evaluating projects of organizations other than those involved in the savings and loan business.
Programme Grants:
Program grants are awarded to cooperatives on an annual basis for the execution of priority projects based on partnerships for the promotion of the cooperative sector and the implementation of general development programs.
A seed capital grant is a financial investment made by a cooperative comprised of employees, landless farmers, and members of marginalized communities.
To a project aimed at providing those individuals with self-employment opportunities This type of grant should be kept in the cooperative as seed capital.
23. What exactly is money laundering?
Money laundering is the practice of generating money through illegal means and then using various methods to make it legal.
24. What is money laundering prevention?
Preventing money laundering entails limiting, discouraging, investigating, and punishing criminal activity, revenue generation through various means, and property legality through various means.
25. Who is the Compliance Officer?
According to Section 24 of the Directive issued to the cooperative association, the Compliance Officer is the person appointed to act as the liaison point for coordination, monitoring, reporting, and anti-money laundering on behalf of the concerned cooperative or association.
26. What exactly is Suspicious Transaction?
Section 20 of the Directive issued to cooperatives related to the Prevention of Money Laundering,2074 BS, states that any business without a satisfactory basis and reason is suspicious.
27. What exactly is Threshold Transaction?
Threshold Transaction any type of transaction without a satisfactory basis and reason is a daily transaction of NPR 10 lakhs or more, according to Section 19 of the Directive, 2074 issued to the Cooperatives for Prevention of Money Laundering.
28. What is an Exceptional Transaction?
Apart from satisfactory grounds and reasons, any transactions of NPR 3 million or more are unusual, according to the Directive issued to cooperatives related to the Prevention of Money Laundering, Section 14 of 2074 BS.
29. What exactly is the Financial Information Unit (FIU)?
The Financial Information Unit is the Rastra Bank unit responsible for collecting and analyzing information relating to asset laundering. It has been designated by the Nepal Rastra Bank to act in accordance with Section 9 of the Prevention of Money Laundering Act, 2064 BS.
This unit collects and submits data on specifics such as odd transaction reports, suspicious transaction reports, and border transaction reports (TTRs) from all financial transaction organizations.
30. What exactly is Know Your Member / KYM?
According to Section 3 of 2074 of the Directive issued to cooperatives regarding the Prevention of Money Laundering, the details collected by cooperatives regarding the identities of their members are member identities (KYM).
31. When should the cooperatives’ report on money laundering prevention, 2074, be sent to the financial information unit and regulatory body?
| Types of reports | Duration of submitting financial data to the Financial Information Unit (FIU) |
| TTR (Threshold Transactions Report) | Within 15 days of the transaction. |
| STR (Suspicious Transactions Report) | Within 3 days of the transaction. |
| Regular reports on money laundering prevention to be sent to the regulatory body | In the case of cooperatives with annual financial transactions of up to Rs. 50 million. In the case of cooperatives with annual financial transactions, quarterly reports are required. |
Should you have any questions please do not hesitate to contact us at 9745374671 or by email: info@corporatelawyernepal.com
Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.
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