Introduction: Understanding Direct Selling in Nepal
Direct selling is a non-traditional method of selling goods or services directly to consumers without involving retail outlets or intermediaries. The business model typically involves person-to-person sales through online platforms, home-based product demonstrations, and other informal sales channels.
In Nepal, the direct selling business is regulated to ensure consumer protection, fair trade practices, and the prohibition of pyramid schemes. The Direct Sales of Goods (Management and Regulation) Act, 2074 (2017) defines direct selling as the sale or distribution of goods directly from a manufacturing or distribution company to the consumer through a licensed business entity.
Governing Laws for Direct Selling in Nepal
The following laws govern the direct selling business in Nepal:
- Direct Sales of Goods (Management and Regulation) Act, 2017 (2074)
- Direct Sales of Goods (Management and Regulation) Regulations, 2019 (2076)
- Directive Governing Direct Selling Business, 2022 (2078)
Regulatory Authority
The Department of Commerce, Supplies and Consumer Protection (DCSCP) under the Ministry of Industry, Commerce, and Supplies is the regulatory authority responsible for issuing licenses and monitoring the compliance of direct selling businesses in Nepal.
Step-by-Step Procedure to Obtain Direct Selling License in Nepal
Step 1: Incorporate a Company
Register a private limited company with the Office of the Company Registrar (OCR).
Step 2: Tax Registration
Obtain Permanent Account Number (PAN) and VAT registration from the Inland Revenue Department (IRD).
Step 3: Local Government Registration
Register the company at the local municipal or ward office.
Step 4: Capital Injection and Shareholder Registration
Inject the minimum required capital (NPR 1 crore) into the company’s bank account and update the shareholder registry with OCR.
Step 5: Business Registration with DCSCP
Register the company’s profile with the Department of Commerce, Supplies and Consumer Protection.
Step 6: Submit License Application
Submit a formal application for a direct selling license to the DCSCP along with the required documents.
Step 7: Document Review
The department will review all submitted documents for compliance.
Step 8: Business Presentation
The applicant must make a business presentation to DCSCP outlining the company’s operation, structure, and compliance.
Step 9: License Issuance
Upon approval, the DCSCP issues the Direct Selling License.
Required Documents
| S.N. | Document Description |
|---|---|
| 1 | Application, Power of Attorney, and Board Resolutions |
| 2 | Detailed Project Report & Board Approval |
| 3 | Citizenship copy of Directors and Shareholders |
| 4 | Company Registration Certificate, MOA & AOA |
| 5 | Share Registry and Updated OCR Letter |
| 6 | VAT Certificate, Latest Audit Report & Tax Clearance |
| 7 | Action Plan, Commission Distribution Strategy |
| 8 | Price List of Products (Domestic and Foreign) |
| 9 | Quality Certificates for Nepal-made goods |
| 10 | Trademark Certificates of Products |
| 11 | Self-declaration of Non-blacklisting |
| 12 | List of Sellers and Distributors |
| 13 | EXIM Code (for import businesses) |
| 14 | HR Policy / Code of Conduct |
| 15 | Proof of Office Infrastructure |
| 16 | Commitment Letter from Manufacturers |
| 17 | IRD Approval for Billing Software |
| 18 | Billing Software Details |
| 19 | Agreement with Distributors (Schedule 4 Format) |
| 20 | Website URL of the Business |
License Fees and Guarantee Requirements
| S.N. | Particulars | Amount |
|---|---|---|
| 1 | Initial License Fee | 0.2% of Paid-up Capital |
| 2 | Bank Guarantee | 50% of Paid-up Capital |
| 3 | Renewal Fee | 0.1% of Paid-up Capital |
Validity and Renewal of License
- Validity: 2 years from the date of issuance.
- Renewal: Apply at least 60 days before expiry. If applied at least 15 days before expiry, renewal is allowed with double the renewal fee.
Key Business Requirements
To apply for the Direct Selling License, companies must:
- Have minimum paid-up capital of NPR 1 crore.
- Sell at least 50% Nepal-made products of the product is manufactured in Nepal.
- Use IRD-approved billing software, backed up in two separate locations.
- Obtain trademark registration for all products.
- Maintain a functional website and disclose product details.
- Be affiliated with the Social Security Fund (SSF).
- Obtain business insurance.
Prohibited Products in Direct Selling
Direct selling of the following products is prohibited:
- Prescription-only medicines
- Alcohol and tobacco
- Supernatural or fraudulent goods
- Products lacking trademark registration
- Any items banned under Nepali law or notified by the Government of Nepal
Commission and Bonus Limit
The commission and bonus paid to distributors or direct sellers must not exceed 42% of the product’s selling price, which must not be above the maximum retail price (MRP).
Prohibition on Pyramid Schemes
Section 11 of the Direct Selling Act strictly prohibits pyramid-based businesses, including:
- Mandatory subscription before purchasing products
- Incentives based solely on recruiting other sellers
- Misleading gifts or false promotional schemes
- Business plans discouraging retail sales
Foreign Investment Restriction
The DCSCP does not permit foreign investment in direct selling businesses. Even partnerships with foreign individuals or entities are prohibited.
Trademark Registration Requirement
All goods sold through direct selling must have registered trademarks. It takes approximately 8 to 9 months to obtain a trademark certificate in Nepal.
To learn more, read our Guide on Trademark Registration in Nepal.
License Cancellation Grounds
DCSCP may cancel a license if:
- False documents were submitted
- Capital or guarantee requirements were not met
- Pyramid-based business was conducted
- Consumer compensation is delayed
- Taxes or fines are unpaid
- Three violations occur within two years
Offenses and Penalties
| Offense | Penalty |
|---|---|
| Operating without a license | NPR 1 to 5 lakhs or 6 months to 1 year imprisonment |
| Running a pyramid scheme | NPR 5 to 10 lakhs or 3 to 5 years imprisonment |
| Aiding or abetting offenses | Half of the primary punishment |
Why Choose Law Firm in Nepal?
At Onesphere Law Associates, we provide expert legal services for obtaining business licenses in Nepal, including:
- Company incorporation
- Direct selling license application
- Trademark registration
- Legal documentation and compliance
- Regulatory consultations