Webber Newdigate - Business

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)
Sole proprietorships

Formation of a Business

Banks

The issue of banking licences is governed by the provisions of the Financial Institutions Act No 6 of 1999. A minimum paid up capital of not less than M10 million is required. One Maloti (M1.00) equals one South African Rand (R1.00).

Companies

The private limited company is the most common entity used in practice:

the minimum authorised and issued share capital is M1,000.00;
there must be a minimum of 2 shareholders (and a maximum of 50) with a minimum of 1 director;
a portion of the share holding in the company must be held by Lesotho citizens in situations where specific trading licenses are needed or where it is intended to acquire title to land by lease from the State (under the lease-hold 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 M5,000.00 which includes all fees payable to the Registrar of Companies but which does not cover licensing and related procedures.
On 2 May 2012 the new Companies Act 18 of 2011 came into effect in
Lesotho. The commencement notice for the new act was published in the
Government Gazette no. 46 of 20 April 2012. The act totally repeals the
Companies Act of 25 of 1967.
The intention behind the new act is to simplify company procedures, to
update the legislation regulating companies so as to keep up with changing
business practices, and to make company law in Lesotho more responsive to the
changing needs of the economy.
As from 2 May 2012, companies now have to be registered according to the
provisions of the new act. The act envisages electronic company registration,
as well as electronic regulatory filing, but the office of the Registrar has
advised that they are not yet set up to facilitate this. Therefore, until such
time as this has been done, applications for registrations as well as
regulatory filings have to be submitted manually.
Existing companies registered under the old act continue to exist, and
such companies need not file amended statutory documents. Look out for details
of the implications of the new Companies Act on this website, or contact our
office for further information.

External Companies

A foreign company may register as an external company in terms of section 11 of the Companies Act of 2011 , and must do so with within 10 days of opening a place of business in Lesotho. It will require the nomination of 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.

Insurance Companies

Their establishment and operation are 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 amounts of working capital and margins of solvency.

Please note that a new Insurance Act is presently discussed, and we believe that it will implemented in the near future.

Partnerships

Partnership agreements must be reduced to writing and signed by all the partners before a Notary Public, who shall attest same accordingly. These agreements must be registered 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 South African common law as applicable to Partnerships.

Taxation

The Income Tax Act 1993, as amended, together with the Regulations promulgated thereunder, is applicable.

A residence basis of taxation applies – non residents are taxed at source.

tax rates

a resident manufacturing company is taxed at 15%, and all other resident companies at 25%;
non-resident individuals pay at the standard rate of 25%;
an external company is subject to tax at a rate of 40% on repatriated income in addition to income tax on its chargeable income;
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 applies in Lesotho.

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. Lesotho is also a member of the Preferential Trade Area and Southern African Development Community.

Trading Licences

The issue of licences is governed by the Trading Enterprises Act, 1993 and the Trading Enterprises Regulations, 1999. Certain licences are restricted to local citizens or companies controlled by local citizens.

Intellectual Property

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.