Obtaining Direct Selling License in Nepal
1. Introduction
Under Nepali law, direct selling and distribution of goods in Nepal refers to the act of a company selling or distributing goods, sourced from a manufacturing company or a distribution company, directly to consumers.
To protect the rights and interests of general consumers, the law regulates businesses engaged in the direct sale or distribution of goods and seeks to make them reliable, transparent and competitive. This framework is set out in three key instruments:
i. Direct Sales of Goods (Management and Regulation) Act, 2074 (2017);
ii. Direct Sales of Goods (Management and Regulation) Rules, 2076 (2019); and
iii. Direct Sales of Goods Directives, 2078 (2021).
2. Governing Authority
The direct selling of goods in Nepal is governed by the Department of Commerce, Supplies and Consumer Protection (the “DOCSCP”).
3. Mandatory Requirement of a License
Any company intends to carry on the business of selling or distributing goods, sourced from a manufacturing company or a distribution company, directly to consumers must obtain a Direct Selling License in Nepal.
4. Process of Obtaining a Direct Selling License in Nepal
To obtain Direct Selling License in Nepal following process should be followed:
4.1 Before Filing the Application for the Direct Selling License in Nepal
The company must first complete the following steps:
- Register the company with the Office of the Company Registrar;
- Complete tax registration at the Inland Revenue Office;
- Register the company with the respective Local Government, i.e. the Ward Office;
- Open a bank account and inject the investment into it;
- Obtain the shareholder registry from the Office of the Company Registrar;
- Register the company with the DOCSCP;
4.2 Filing the Application for the License
Once the preliminary steps are complete, the application proceeds as follows:
- Submit the application for the Direct Selling License to the DOCSCP, along with the required documents;
- The DOCSCP reviews the submitted documents before providing the Direct Selling License;
- The applicant company required to give a presentation before the DOCSCP;
- The applicant pays the government fee and deposits the bank guarantee; and
- The DOCSCP grants the license within 90 days of receiving the application.
5. Requirements for a Direct Selling License in Nepal
5.1 Capital Requirement
The company applying for the Direct Selling license must have a paid-up capital of at least NPR 1,00,00,000 (Nepalese Rupees One Crore).
5.2 Physical Infrastructure Requirement
The licensee must:
i. establish the required sales units before starting the direct sale or distribution business;
ii. maintain adequate physical infrastructure, appropriate to the nature of the goods, to ensure their quality during storage and to prevent adverse impacts on public health and the environment;
iii. establish business software and information technology systems for the transparent and proper recording of direct sales and distribution transactions;
iv. ensure that the business software, IT systems and related infrastructure used for direct selling remain under the licensee’s control;
v. use software approved by the Inland Revenue Department (IRD) for electronic billing; and
vi. maintain backups of its business software and database at two separate locations within Nepal to ensure data security and continuity.
Note: The DOCSCP may inspect the licensee’s infrastructure to verify compliance. If the required infrastructure is found inadequate, the DOCSCP may order the licensee to establish or rectify it within a prescribed period not exceeding three months. In addition, upon request by the DOCSCP, the licensee must provide administrative view access to the business software used for its operations.
5.3 Commission, Bonus, Service Fees and Facilities
A licensee engaged in direct selling or distribution must comply with the following requirements regarding payments to its sellers or distributors:
i. Ceiling of 42%: The total amount payable to the company’s sellers or distributors as service fees, facilities, commissions or bonuses must not exceed 42% of the selling price of the goods directly sold or distributed.
ii. Tax deduction: The licensee must deduct the applicable taxes under prevailing law from the amount payable and pay the remaining amount to the seller or distributor.
5.4 Sale or Distribution of Domestic and Foreign Goods
i. The licensee must sell or distribute at least 50% domestic products. This requirement does not apply to products that are not produced in Nepal.
ii. Where similar goods are produced in Nepal, a licensee selling or distributing foreign goods must also sell or distribute domestic goods worth at least 50% of the value of those foreign goods.
iii. The licensee must clearly disclose the quantity and value of the domestic and foreign goods sold or distributed, along with the related inventory, ensuring that domestic goods make up at least 50% of the total transaction value.
iv. Where the relevant goods are not produced in Nepal, the licensee must submit a self-declaration and supporting evidence, including a Certificate of Origin. In the absence of such certification, the DOCSCP may publish a 15-day public notice at the applicant’s cost. If the goods are later found to be produced in Nepal, their sale or distribution will be subject to the requirements applicable to domestic goods.
5.5 Insurance
The licensee must obtain insurance for its direct sale or distribution business.
5.6 Training for Direct Sellers or Distributors
Before engaging direct sellers or distributors in the business, the licensee must provide them with orientation training covering:
1. direct selling laws;
2. prevailing legal provisions on consumer rights, compliance with them, and the duties and obligations of the licensee, direct seller or distributor in protecting consumer interests;
3. the functions, duties and powers of the licensee and of the direct seller or distributor of goods;
4. the quality of the goods to be directly sold or distributed and the method of their use;
5. the services and facilities available to the direct seller or distributor; and
6. the policies, procedures and standards implemented from time to time by the Government of Nepal regarding the direct sale or distribution of goods.
5.7 Consumer Awareness Programs
The licensee must conduct awareness programs from time to time on the goods subject to direct sale or distribution, covering the following matters:
i. legal provisions concerning the direct sale or distribution of goods;
ii. provisions on consumer rights under prevailing Nepalese law;
iii. the functions, duties, responsibilities and liabilities of the licensee and the direct seller or distributor towards consumers; and
iv. Procedures for seeking redress if the licensee, direct seller or distributor acts against the interests of consumers.
In addition, the licensee must, as necessary, broadcast or publish awareness-raising advertisements approved by the DOCSCP on local FM radio, television and in newspapers to raise consumer awareness.
5.8 Social Security Arrangements
Subject to the approval of its Board of Directors, the licensee must make social security arrangements by enrolling its employees, representatives, and direct sellers or distributors of goods in social security.
5.9 Transactions via Electronic Platform
The licensee must use an electronic platform to place or accept orders for goods and to make or receive payments when conducting transactions.
5.10 Submission of Agreements to the DOCSCP
- The licensee must submit a copy of each agreement entered into with a direct seller or distributor of goods to the DOCSCP within seven days from the date of the agreement.
- If the submitted agreement does not clearly set out the matters required under prevailing law, the DOCSCP may order the licensee to resubmit it, with the necessary details clearly specified, within seven days.
6. Goods Not Eligible for Direct Selling or Distribution
A Direct Selling or Distribution License cannot be obtained for the following goods:
i. medicines that, under prevailing law, may be sold only on a doctor’s prescription;
ii. alcohol, tobacco products and other goods that may adversely affect consumers’ health;
iii. goods claimed to have magical, supernatural or fictitious powers, including tantra- and mantra-related products, without scientific evidence;
iv. goods whose trademarks are not registered; and
v. other goods prohibited by prevailing law, or whose export, import, direct sale or distribution has been prohibited by the Government of Nepal through a notice published in the Nepal Gazette.
7. Documents Required For Obtaining Direct Selling License in Nepal
The following documents must accompany the application for a Direct Selling License:
- Application
- Notarized copy of the Company Registration Certificate
- Notarized copy of the company’s Memorandum of Association (MOA)
- Notarized copy of the company’s Articles of Association (AOA)
- Notarized updated company letter
- Notarized PAN and VAT Registration Certificate
- Notarized latest Tax Clearance Certificate
- Business proposal and a copy of the board resolution
- Separate lists of domestically and internationally sourced goods
- For goods not produced in Nepal: self-declaration, recommendation letter, public notice and Certificate of Origin, as applicable
- Notarized copy of the trademark registration certificate of the goods
- Commitment letter from the industry or company producing the goods, confirming their supply
- Clear addresses of the sales units, including the respective local government and ward
- Number of sellers or distributors
- Notarized copies of the directors’ Nepali citizenship certificates
- Self-declaration that the directors are not blacklisted
- Documents showing the status of the business software, company office, sales units, warehouses and other physical infrastructure
- Agreement letter with the sellers or distributors
8. Responsibilities of the Licensee
The licensee must observe the following responsibilities:
i. It must not sell goods in packages that create unlimited liability for the buyer.
ii. It must not force consumers to buy a fixed quantity of goods in order to receive bonuses or commissions.
iii. It must allow consumers to buy goods separately, according to their choice.
iv. It must actually sell or distribute goods, rather than merely appointing direct sellers or distributors.
v. It must not produce, promote, sell or distribute goods that may harm consumers’ health.
vi. It must also comply with other conditions prescribed by law.
9. Validity and Renewal of the License
Validity | Renewal | Cancellation |
The license is valid for 2 years. | The licensee must apply for renewal 60 (sixty) days before the license expires. | If the license is not renewed before expiry, it is automatically cancelled. |
Late applications are accepted up to 15 (fifteen) days before expiry, at double the fee. |
10. Government Fees and Bank Guarantee
The government fees and bank guarantee are as follows:
| Stage | Particulars | Amount |
| On obtaining the license | License fee | 0.2% of the paid-up capital |
| Bank guarantee (must remain valid for 3 months beyond the license period) | 50% of the paid-up capital | |
| On renewal | Renewal fee, if applied 60 days before expiry | 0.2% of the paid-up capital |
| Renewal fee, if applied 15 days before expiry | 0.4% of the paid-up capital | |
| Renewed bank guarantee | 50% of the paid-up capital |
11. Transfer or Change of Ownership
- A licensee wishing to transfer or change the ownership or liability of the company must submit an application to the DOCSCP for approval, clearly stating the grounds and reasons.
- The DOCSCP may then grant approval for the transfer or change of the company’s ownership or liability.
12. Prohibition on Pyramid-Based Schemes
No one may run a pyramid-based business in Nepal. Such schemes typically involve:
i. requiring mandatory subscription or payment before products can be purchased;
ii. forcing members to purchase additional products or expensive packages;
iii. making benefits or returns dependent on recruiting new members or distributors;
iv. collecting fees solely for recruitment, without any actual sale or distribution of goods;
v. recruiting members through unrealistic gifts, commissions or promises of high returns to encourage product purchases;
vi. using a business model that discourages genuine retail sales of products; and
vii. Promoting products with false or supernatural claims, including claims of curing medically incurable diseases.