Forms of business organisations
Private or public limited liability companies
External companies (being branches of foreign corporate bodies)
Partnerships (which include consortiums and joint ventures)
Formation of a Business
The private limited company is the most common entity used in practice –
the minimum authorised and issued share capital is M1,000 (One Thousand Maloti);
there must be a minimum of 2 shareholders (and a maximum of 50) with a minimum of 1 director;
at least 51% of the share holding in the company must be held by Lesotho citizens in situations where specific trading licences are needed or where it is intended to acquire title to land by lease from the State (under the leasehold land tenure system which applies in Lesotho);
the Public Officer must be resident in Lesotho unless there is a special dispensation;
the financial accounts of the company must preferably be audited by an auditor registered to practise in Lesotho, though the Income Tax Department accepts without query financial statements from external auditors;
the company registration process should not take longer than one month at a cost of approximately M3,000 (three thousand maloti) which includes all fees payable to the Registrar of Companies but which does not cover licensing and related procedures;
A foreign company may register as an external company in terms of the Companies Act of 1967, and must do so with within six months of opening a place of business. It will require the nomination of a chief agent, being a person who is either resident or maintains a full-time office within Lesotho, upon whom notices and processes can be served and further the nomination of the principal place of business of the company in Lesotho.
Partnership agreements must be reduced to writing and signed by all the partners before a Notary Public, who shall attest same accordingly. These agreements are registable in the Deeds Registry under the Partnerships Proclamation of 1957. A Partnership Agreement must likewise be cancelled in writing. Partnerships are restricted to twenty persons. The Proclamation essentially records the common law as applicable to Partnerships.
The issue of banking licences is governed by the provisions of the Financial Institutions Act 6 of 1999. A minimum paid up capital of not less than M10,000,000.00 is required.
Their establishment and operation is governed by the provisions of the Insurance Act, 1976, and regulations promulgated thereunder. A minimum issued share capital of M65,000.00 is required. There are also conditions laid down regarding the amounts of working capital required as well as the margins of solvency.
The Income Tax Act 1993, as amended, together with the Regulations promulgated thereunder apply –
tax rates –
withholding tax must be deducted at source at the standard rate on dividends, interest, royalties, natural resource payments, or management charge, being for a management or administrative service, and at 10% on the gross amount of any payment under a Lesotho-source services contract paid to a non-resident.
capital gains tax does apply in Lesotho subject to certain exemptions.
Exchange Control and Customs Union
Lesotho forms part of the Rand Common Monetary Area. Exchange control applies and is subject to the provisions of the Exchange Control Order and Exchange Control Regulations falling under the Central Bank of Lesotho, which functions in conjunction with the South African Reserve Bank. The commercial banks in Lesotho are appointed as authorised dealers up to certain limits. It is also a member of the Preferential Trade Area and Southern African Development Community.
The issue of licences is governed by the Trading Enterprises Order, 1987 and the Trading Enterprises Regulations, 1989. There is a 1993 Order but no regulations have been promulgated thereunder yet. Certain licences are restricted to local citizens or companies controlled by local citizens.
Protection is provided by statute (and there is a public Registry at Maseru) for patents, trade marks and designs. Protection is also provided by statute for copyright.