Department of Cooperatives unveils Working Procedure on Merger

KATHMANDU, JUN 03 -

The Department of Cooperatives (DoC) has introduced “Working Procedure on Merger”, offering certain facilities for cooperatives going for merger.

The working procedure has come at a time when the regulator is struggling to regulate cooperatives present in large numbers. There are over 27,000 cooperatives registered at the DoC

and a majority of them are savings and credit cooperatives.  With limited manpower and technical skills, the DoC is struggling to monitor them.

“It (the working procedure) is aimed at bringing down the number of cooperatives and to ensure effective regulation of the sector,” DoC Registrar Kedar Neupane said.

The department recently put a moratorium on the registration of cooperatives in urban areas. As per the merger working procedure, the regulator will allow the merger of cooperatives having similar characteristics. It, however, says the department could allow the merger of different types of cooperatives as well if there is overcrowding of cooperatives in a single place. “If different types of cooperatives seek to merge, they have to assure that they will come up with a common objective after merger,” said Neupane.

Besides same types of cooperatives from the same area, cooperatives with same working areas and those willing to give higher benefits to members by reducing costs will be eligible to merge, states the merger procedure.

The merger procedure has also announced number of facilities to cooperatives opting for merger. One of the facilities is allowing the merged entity to operate in the existing working area if the merging entities were previously working in the same area.

If the working area of the merging cooperatives is big, the department can allow opening membership service centre at an appropriate place, according to the procedure. “In case of merger of different types of cooperatives, the department can approve their desired subject and the nature of business,” it states.

The department said it has also planned to provide tax discount facility to merged cooperatives and reduce customs duty on goods imported. Neupane said they have forwarded a proposal to the Finance Ministry seeking such facilities in the budget for the next fiscal year.

As far as the merger procedures are concerned, cooperatives planning to merge will have to first decide on merger through the board of directors and apply to the department or its subordinate offices for a pre-approval.

After the pre-approval, they will have to endorse the board decision through their annual general meeting (AGM) and apply to the DoC for the approval of their merger plan after signing a merger agreement. Then, they will have to apply jointly for the merger.  The department will decide on the merger within 45 days after the joint application is filed, states the merger procedure

The department, through the guideline, has also asked cooperatives to focus on work distribution of employees, board members and accounting committee after merger.

Source: The Kathmandu Post