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Legal and Other Applendices
(kindly provided by the  Embassy of Peoples Democratic Republic of Laos to the United States of America)

Lao People’s Democratic Republic
Peace Independence Democratic Unity Prosperity
National Assembly
No. 03/NA
Date : 18/7/94

BUSINESS LAW

PART 1
GENERAL PROVISIONS

Article 1 The Business Law aims at promoting all economic sectors investing in business in all sectors in view of developing market economy along the market mechanism adjusted by the State.

Article 2 The rights and interest of local and foreign business people investing in business in the sectors of production, transport, construction, commerce and services are protected by the laws of the Lao People’s Democratic Republic.

Article 3 Lao citizens, foreign residents, persons without nationality residing in the Lao People’s Democratic Republic and expatriates are all entitled to conduct or participate in business operations in accordance with the laws of the Lao People’s Democratic Republic.

Article 4 Enterprises are business units established for the conduct of business. There are four types of enterprises in the Lao People’s Democratic Republic: private enterprises, state owned enterprises, collective enterprises and joint enterprises (State owned enterprises in joint venture with local or foreign parties, private enterprises in joint venture with local or foreign parties). There are two forms of enterprises: sole-trader enterprises and companies.

Article 5 All types of operations conducted by enterprises in all economic sectors are inter-related and competing on an equal footing before the law.

Article 6 Capital, assets, including the legitimate rights and interests of enterprises are protected by law.

Article 7 All enterprises have the obligation to protect the rights and interest of workers, preserve the environment, perform their obligations towards the State, conduct their businesses in sectors and scope as authorized, implement the accounting regulations and payments according to the bank regulations.

Article 8 This Business Law is applicable in the context of businesses with a registered capital from 1,000,000 Kips and over.

PART II

BUSINESS PERSONS, CONDITION FOR
BUSINESS OPERATIONS AND TRADE CERTIFICATES

Chapter 1 Business Persons

Article 9 Businesspersons are persons conducting business operations as their profession.
Article 10 Intermediaries are business persons, whether individuals of juristic entities, representing and liaising between business persons, or between business persons and customers.

Intermediaries include agents and brokers:


Article 11 Persons prohibited from conducting business as their profession include:

- Children under eighteen years of age:

- Incapacitated persons:

- Persons prohibited from conducting business by court decision:

- Civil servants, unless specifically authorized.

Chapter 2

Conditions for Business Operations

 Article 12 Businesses inconsistent with the laws and regulations of the Lao People’s Democratic Republic are prohibited.

Article 13 Certain important business sectors for national security, economy or society are subject to close control by the State, such as businesses pertaining to:

- Petroleum: - Food:

- Electric power: - Medicines:

- Water supply: - Chemical substances:

- Telecommunications: - Alcohol:

- Wood and minerals: - Cigarettes

- Mining and minerals:

In addition, the government will periodically determine controlled business sectors.

Article 14 Business sectors reserved specifically for Lao citizens will be determined separately by the government.

Chapter 3

Trade Certificates

Article 15 Trade certificates are exchangeable credit contract documents governing payments according to the regulations of financial institutions.

Trade certificates exit in four categories : promissory notes, certificates of deposit, bills of collection and cheque.

Promissory notes are certificates of debt payment by an individual agreeing to pay a sum of money to other individuals at a certain date or placing goods as collateral.

Certificates of deposit are certificates of the deposit of a sum of money from the bank. Bills of collection are bills for the collection of debts whereby the creditor requires the debtor to pay debts to a third person as mentioned in the bills of collection at a certain date.

Cheques are notes used by the bank account holder ordering the bank to pay a certain sum of money to either holder or another person.

PART III

ORGANIZATION OF BUSINESS OPERATIONS

Chapter 1

Creation and Registration of Enterprises

Article 16 Persons having the intention to create an enterprise shall present an application for the creation and registration of such enterprise to the commercial sector. Application procedures for the creation and registration of enterprises will be separately determined by the relevant sectors.

At the receipt of an application, the commercial sector and other concerned sectors shall rapidly consider and give an answer within a period not exceeding 60 days from the day the application is received.

An enterprise will be considered as lawfully created only when properly registered.

Article 17 Enterprise registration shall take place as the sequential and systematic recording of enterprise registration numbers in the "Enterprise Registry" grouping all contracts, by-laws and information of enterprises kept by creditors. After their registration, any change in relation to the enterprises, such as amendment of by-laws, dissolution, liquidation, the person responsible for the enterprise shall notify the concerned officials in order to record such changes in the Enterprise Registry.

Article 18 After the registration of enterprises, the registration of revenues shall be made with the Financial Department.

The revenue registration monitors the performance of annual obligations according to the financial laws and regulations.

Article 19 As their creation is approved, enterprises shall place a sign indicating their names according to the regulations. If such enterprises fail to conduct their business within one year from the day their creation is approved, the enterprise license will become no further valid.

Chapter 2

General Principles of Companies

Article 20 A company is a business unit created by at least two persons or juristic entities on the basis of a contract for the mobilization of properties, capital and labor in view of jointly conducting business operations and sharing the net profit.

A limited company may be created by one person or juristic entity.

Article 21 In the Lao People’s Democratic Republic, there are three forms of companies:

Article 22 A company is created on the basis of written contract between persons providing capital called the company contract which conditions and terms shall be consistent with the Contract Law and other laws of the Lao People’s Democratic Republic, except for limited companies alone. Such contract is the basis of relationships between the providers of capital.

Persons or juristic entities entering a contract governing the provision of capital for the creation of a company may be the capital providers or shareholders.

Capital providers are investors in partnership companies and founders of limited companies or public companies.

Shareholders are other investors in limited companies and public companies, whether businesspersons or not.

Article 23 The companies’ capital is derived from contributions of investors and shareholders. Companies’ capital includes fixed assets and revolving fund.

Article 24 Limited companies, sole-trader limited companies and public companies shall establish reserve funds appropriated at five to ten percent from their net profit.

Reserve and provisional funds are provided in the companies’ by-laws.

Article 25 Investors and shareholders have the following rights and obligations:

Article 26 A company does not operate on behalf of its owner in the same manner as a sole-trade enterprise, but as a juristic entity. A company holds the status of juristic entity from the day it is registered.

The status of juristic entity of a company includes:

* The company’s name which clearly specifies the type of company:

* Local of the company’s headquarters:

* Company’s properties:

* Legal capacity of the company in the exercise of its rights and obligations, and in being a defendant or plaintiff in legal proceedings similarly to normal persons.

 Article 27 All companies shall have written by-laws with the following contents : * Name, surname, occupation, nationality and address of joint investors:

* Name, objectives, duration and location of headquarters of the company:

* Organization chart and management of the company:

* Distribution of dividends and responsibility for losses:

* Meetings and voting procedures:

* Dissolution and liquidation:

* Settlement of disputes.

 Article 28 In the process of conducting a business, a company may bring modifications according to economic conditions, such as amendment of by-laws, capital increase or reduction, merger or division, change into a new type of company or change of the company’s objectives. Any modification to a company shall be subject to the approval of the investors and shareholders general meeting.

Any modification to a company shall be notified to the concerned officials for entry in the Enterprise Registry, to the joint investors, shareholders and the public.

Modifications to a company shall take place within one year from the occurrence of causes for such modification.

Article 29 The increase of a company’s capital shall take place by using reserve funds to increase the existing shares’ value, increasing the number of shares, or by including the company's creditors as shareholders. In the increase of shares, the company’s joint investors and shareholders shall have priority before others.

Only public companies may mobilize funds from the public market and issue debentures.

The decrease of a company’s capital may be conducted through the decrease of each share’s value of the number of shares.

Article 30 Merger of companies may be made through two methods:

Merger may take place between similar or differing types of companies.

The split of a company is its division into several companies of similar or

 differing types.

Article 31 A company may modify its type to another type of company. The modification of company type does not constitute the creation of a new juristic entity.

The modification of company type shall correspond to the regulations governing a newly created type of company, such as in relation namely with the capital, investors and shareholders.

The modification of company type shall not affect its existing debt. The modification of company type shall increase the investors’ and shareholders’ responsibility only when approved by the General Meeting of investors’ and shareholders.

Article 32 The dissolution of a company is the absolute cessation of the company’s operations. A company may dissolve at a determined date or before such date. The dissolution of a company shall be notified to the concerned officials, the joint investors, shareholders, creditors and the public.

Companies may be dissolved for the following reasons:

* Expiration of direction specified in the by-laws:

* Achievement of the company’s objectives:

In addition to the above reasons for dissolution, partnership companies have specific dissolution causes, such as bankruptcy or prohibition from business undertakings by court decision of an investor, incapacity, death, unless otherwise stated in the by-laws. Chapter 3

Private Enterprises

 Article 33 Private enterprises are business units created by individuals or juristic entities for the conduct of profit seeking operations. Private enterprises may be created under the following two forms: Sole trade
enterprise and company.
Sole Trade Enterprise
Article 34 Sole trade enterprises are business units with a minimum registered

capital of 1,000,000 Kips, created by one person who is the sole responsible for the company’s total liabilities. Sole trade enterprises operate on behalf of their owners.

Article 35 The name of a sole trade enterprise may be the name of its owner or business sector or others. The enterprise’s documents shall clearly specify "sole trade enterprise"

Article 36 The owner of a sole trade enterprise manages the enterprise’s activities or may assign another person to manage the enterprise on his behalf, but the enterprise’s owner is responsible for such activities. The enterprise’s owner is the sole person to decide on the use of the made profit
and on other issues.

Article 37 A sole trade enterprise may modify its objectives or business sector subject to the concerned officials’ prior approval and the enterprise registration officials’ notification. The owner of a sole trade enterprise may apply for its dissolution to the enterprise registration officers, but shall notify the creditors and ensure payment of the company’s total debts.

II. Partnership Company

Article 38 A partnership company is a company created namely on the basis of trust between joint investors.

Joint investors in a partnership company are businesspersons and jointly responsible in an unlimited manner for the company’s total liabilities.

Article 39 A company may use the name of one or several joint investors as the company’s name or otherwise, but shall include "Partnership Company"

The company’s capital is derived from contributions of joint investors. Such contributions may be in cash, kind, labor or intellectual property, which shall be evaluated in money.

The contribution and payment of shares shall take place as determined by the company’s manager.

A partnership company’s shares are not transferable.

Article 40 All joint investors may be joint managers, unless otherwise determined by the company’s by-laws.

In case the manager is not a joint investors, the manager’s appointment shall be unanimously approved by all joint investors, unless otherwise provided by the by-laws.

Article 41 In the relationship with joint investors, the manager is entitled to conduct management activities for the company’s interest, unless otherwise stated by the by-laws.

Activities of the manager in relation with outside persons pertaining to the company’s objectives shall be the company’s responsibility.

The Manager is legally responsible before the company in case of personal faults in management causing losses to the company, such as : abuse of power, transgression of the company’s by-laws.

The manager who is a joint investor may be dismissed only with the joint investors’ unanimous approval, while the manager will not have the right to vote on the matter.

The manager who is not a joint investor shall be dismissed in accordance with the company’s by-laws.

Article 42 A partnership company may have an auditor. The auditor has the duty to control the accounts and certify the accuracy and compliance with the principles and rules pertaining to accounting documents, to present a report thereon to the general meeting of joint investors.

Auditors are appointed by the general meeting of partners.

Article 43 All partners has the following rights and obligations:

Partners are not entitled to conduct business in the same sector as their partnership Companies, unless such business existed before and there has been no objections after the company’s creation.

All partners are jointly and unlimitedly responsible for the company’s liabilities. New partners are responsible for the company’s prior liabilities and partners having withdrawn from the company are responsible for the liabilities the company has incurred before such withdrawal.

Article 44 The meetings of partners are held as required at least once a year. The manager convenes and notifies the agenda of meetings at least fifteen days before the meeting’s opening.

The meetings of partners shall consider issues pertaining to the company’s activities, namely the appointment or dismissal of the manager, term of office and salary of the manager, the company’s financial regulations, the auditor’s appointment, adoption of the annual financial statements, transfer of shares, the continuation or dissolution of the company and modification of the by-laws.

Decisions on a partnership company’s important issues shall be unanimously approved by the meeting of partners, unless otherwise stated by the by-laws..

Issues requiring unanimous approval include:

Dismissal of the manager who is a partner, and who is not entitled to vote on this matter:

Consideration on the continuation or dissolution of the company in case the manager who is a partner is dismissed or in case a partner ceases to be a businessperson:

* The transfer of shares to others than a partner:

* And modification of the company’s by-laws.

III. Limited Companies

Article 45 A limited company is a type of company created by dividing the capital into shares of equal value with two or more founding shareholders. The shareholders of a limited company shall not exceed twenty persons who will be responsible for the company’s liabilities not exceeding value the unpaid portion of their shares.

Article 46 The shares of a limited company may be paid in cash or in kind. Shares paid in kind shall be remitted on the company’s creation and evaluated by the share contribution control committee or by the company’s constitutional meeting. Fifty percent at least of the value of a share to be remitted in cash shall be paid on the company’s creation. The remainder shall be paid within two years from the company’s registration.

Article 47 The shares of a limited company may be transferred to persons within or outside the company. Transfer of shares to outside persons shall require the approval of the majority of the shareholders representing at least two third of the company’s capital.

Share certificates of a limited company are not transferable.

Article 48 The name of a limited company may be related to its objectives of business sector, but shall include the words "Limited Company".

The company’s minimum registered capital shall not be less than 5,000,000 Kips, except if the government has provided for more in the case of certain businesses.

The company may use the capital derived from share contributions only when the company is registered.

Article 49 The management of a limited company is conducted by one or several managers. The manager is appointed by the meetings of shareholders or according to the company’s by-laws. The manager may be selected from the shareholders or outside persons.

The term of office of the manager is decided by the meeting of shareholders on the day of the company’s creation or during the company’s operation.

The manager’s salary is determined by the by-laws of the meeting of shareholders.

Article 50 The manager is entitled to sign on behalf of the company. Any signature not related to the company objectives is considered as null and void as for the company. The manager is entitled to conduct business activities related to the company’s activities as provided in the by-laws, such as the right to obtain loans and extend credit.

In his relationship with the shareholders, the manager is entitled to conduct all management activities for the company’s interest, unless otherwise stated by the by-laws.

The manager shall implement the decisions of the general meeting of shareholders.

The manager has the obligation to use his abilities to conduct the company’s activities and is and is not entitled to conduct activities constituting a violation of the company’s laws or by-laws.

Article 51 The manager is responsible before the company and outside persons as provided by law in case of violation of this Law of the company’s by-laws or faults in the company’s management causing loss to the company.

The manager shall be dismissed by decision of the general meeting of shareholders representing over half of the company total shares.

Article 52 A limited company with a minimum capital of 100,000,000 kips shall employ one auditor.

The auditor is appointed by the general meeting of shareholders and is selected from the list of accountants registered with the certified accountants’ organization.

The auditor has a term of office of three years and may be reappointed.

The auditor has the duty to:

- Verify accounts and certifies the accounting document accuracy:

- Present a report to the annual general meeting and send a summary report to the shareholders fifteen days before the general meeting:

- The auditor is entitled to request relevant documents from all departments of the company.

The general meeting of shareholders shall determine the auditor’s fee.

In the implementation of such duties, the auditor shall be responsible before the law and the ethical code of conduct provided by the certified accounting organization.

The auditor shall perform such duties independently, and may be dismissed only by court decision or by the certified accounting organization.

Article 53 The shareholders have the following rights and duties:

Article 54 The general meeting of shareholders shall take place at least once a year. In addition, general meeting of shareholders may be held as required by the company’s business.

The general meeting shall take place only when shareholders and proxies representing over half of the company’s capital are present.

The manager shall convene and notify the agenda of general meetings fifteen days at the latest before their opening.

In addition, meetings may be convened by:

Article 55 The general meeting of shareholders has the duty to: Article 56 The general meeting of shareholders may amend the company’s

by-laws, subject to the approval of shareholders representing at least two third of the company’s capital.

Article 57 A one-person limited company is a business unit created by a single person and shall have a minimum registered capital of 5,000,000 Kips. Such person will be responsible for the company’s liabilities only to the extent of the company’s registered capital.

The single shareholder of a one-person limited company may be a person or a juristic entity.

The single shareholder of a one-person limited company, which is a person, is not entitled to create several one-person limited companies.

Article 58 The manager of a one-person limited may be the shareholder or a third person. In case the shareholder is a juristic entity, the manager shall be a third person.

The manager, who is the shareholder, is entitled to conduct all activities of the companies and to decide on all matters of the company. As for the manager who is not the same person as the shareholder before deciding on any important issue of the company, shall obtain prior approval from the shareholder, as provided in the company’s by-laws. Decisions of the manager shall be recorded in the company’s register according to the by-laws.

Article 59 The shareholder of a one-person limited company may empower a third person to conduct the company’s activities in totality or in part.

In case the shareholder of a one-person limited company passes away, the company may be further conducted by one of several heirs, unless otherwise provided by the by-laws. If there are more than one heir, the one-person limited company will become a general limited company. In case of the dissolution of a one-person limited company, liquidation will take place only when there are no heirs.

In addition to the rules and principles contained in Article 57 and 58 of his Law, the creation and activities of a one-person limited company shall comply to the rules and principles governing general limited companies.

IV. Public Company

Article 60 A public company is a type of company created with the distribution of shares of equal value between a minimum of seven founding shareholders who will be responsible for the company’s liabilities to the extent of the unpaid portion of their shares.

The shareholders must be businesspersons.

Article 61 A public company’s shares may be paid in cash or in kind.

Payment of shares in cash shall be made on the day of the company’s creation and shall be at least equal to twenty five percent of the shares’ value to be paid, while the remainder shall be paid within a period of three years from the day the company is registered as provided by the Executive Council.

Shares paid in cash shall be evaluated by the share contribution control committee or by the constitutional meeting of the company, and shall be paid to the company on the day the shares are subscribed.

The value of each share in such company shall not exceed 10,000 Kips.

Article 62 A public company’s shares may be transferred to persons within or outside the company. Where shares are transferred to persons outside the company, the Executive Council shall be notified within seven days from the transfer.

Article 63 The name of a public company may be related to its business sector, its objectives and others, but shall include the words "public company".

The capital of a public company, in addition to the contribution of capital and shareholders, may also be publicly mobilized outside and the sale of debentures. The company shall make use of such capital only when property registered.

A public company’s minimum registered capital shall be 50,000,000 Kips, except if provided at a higher rate by the government for certain businesses.

Shares of public companies are transferable.

Article 64 The management of a public company is conducted by the Executive Council which includes from five to seventeen persons, among which one or two representing the workers.

A member of the Executive Council has a term of office three years. A member is appointed and may be dismissed by the ordinary general meeting of the shareholders. A member of the Executive Council may be re-appointed.

Article 65 Members of the Board of Directors shall be shareholders, except for representatives of workers.

Members of the Executive Council represent the company and are entitled to conduct activities only on behalf of the Executive Council. If a member of the Executive Council is also a worker, such member shall receive benefits, such as insurance and others, similarly to other employees.

Fees to be paid to members for the meetings of the Executive Council shall be decided by the by-laws or by the general meeting of shareholders.

Article 66 The Executive Council has the following rights and duties:

Article 67 The Executive Council may call a meeting at all time as

required by the business. A meeting of the Executive Council may be convened only if at least half of the total members of the Executive Council is present.

The meetings of the Executive Council are convened by:

President has not convened the meeting.

The resolution of the meeting of the Executive Council shall be effective with the simple majority of the members and proxies present at the meeting. In case of tied votes, the President’s vote will be decisive.

Article 68 Members of the Executive Council shall assume joint civil responsibilities for the company and outside persons in case of violations of laws and regulations, or the company’s by-laws or fault in the company’s management entailing loss. If such loss occurs from the fault of a member of the Executive Council, such member will be solely responsible for the loss. In addition, members of the Executive Council may be liable for criminal acts in case of criminal offenses.

Article 69 The Executive Council elects one of its members as the President of the Executive Council. A juristic entity may not become the President of the Executive Council. The President has equal term of office as other members of the Executive Council and may be re-elected unless otherwise provided in the company’s by-laws.

The President of the Executive Council may be dismissed by the Executive Council. In case the President’s absence, a member of the Executive Council shall act as approved by the Executive Council.

Article 70 The President of the Executive Council calls and chairs the meetings. In addition, the detailed rights and duties of the President of the Executive Council are provided in the company’s by-laws.

All activities conducted by the President with outside persons will fall under the company’s responsibility, except if the company has proof that such outside persons had knowledge that the President’s acts derogated from the company’s objectives.

The President shall approve guarantees made on behalf of the company only when specifically authorized by the Executive Council.

As a member of the Executive Council, the President has similar responsibilities as other members of the Executive Council as provided in Article 68 of this Law. In addition, the President shall also be responsible for his personal wrongful acts in the conduct of the company’s activities.

Article 71 The Executive Council may elect a person as director at the President’s proposal.

The Director may be selected among the members of the Executive Council or from outside. The President of the Executive Council may be appointed as Director on the Executive Council’s proposal and will be called "President Director"

The Director may be dismissed by the Executive Council. The Director’s salary is determined by the Executive Council. The term of office and duties of a director who is not a member of the Executive Council is determined by the Executive Council. The Director who is also a member of the Executive Council has a term of office of three years and may be re-elected.

The Director is responsible for directing the general activities of the company, and conduct business activities on behalf of the company within the company’s objectives.

Article 72 The general meeting of shareholders is the supreme authority of the public company.

There are two kinds of general meetings:

Article 73 The ordinary general meeting is a meeting of shareholders held at

least once a year for the consideration issues related to the company’s activities.

The ordinary general meeting may be called by: The notice of meeting and agenda shall be sent to the shareholders at least fifteen days before the opening date.


An ordinary general meeting is convened only then shareholders and proxies representing at least half of the total shares are present. In case such meeting may not be held, at the second call, the meeting may unfold without regard of the number of participants. The resolutions of ordinary general meetings are approved at the majority of the total shares represented by the participating shareholders. The voting procedure is one share, one vote.

Article 74 The ordinary general meeting has the following rights and duties:

Article 75 The extraordinary general meeting may be convened at any time to consider the amendment of the company’s by-laws, such as extension of term of office, increase or reduction of the company’s capital. The procedures for calling an extraordinary general meeting is the same as for calling an ordinary general meeting.


An extraordinary general meeting may be convened only when shareholders and proxies representing at least two thirds of the total shares are present upon the first notification, and at least half of all the shareholders upon second notification. In case the shareholders do not participate in numbers as mentioned above, the meeting shall be postponed to another date within two month at the latest, and upon such notification, the meeting shall unfold without regard of the number of participants.

The resolution of an extraordinary general meeting will be effective with two-thirds of the vote of the shares held by the shareholders participating in person or by proxies to the meeting.

Article 76 The shareholders of a public company have the same rights and duties as the shareholders of a limited company.
 
 

Chapter 4

State Owned Enterprises

Article 77 A state owned enterprise is a business unit created and invested by the State alone or in joint venture with other enterprises where the State has a minimum equity of fifty one percent.

A state owned enterprises or the State may acquire shares in two forms of companies only : limited and public company.

Article 78 The State may contribute equity as follows:

l. State owned enterprises Article 79 A state owned enterprise is fully responsible for its liabilities.

In addition to the State’s equity, a state owned enterprise may increase its capital through:

Article 80 The Minister of Finance, representing the government which is the owner of the state owned enterprise’s capital: Article 81 The Ministry of Finance coordinates with the concerned sectors for

the authorization of state owned enterprise’s creation with the Prime Minister’s approval, and thereafter such state owned enterprises shall register with the Minister of Commerce and register their taxes with the Ministry of Finance.

State owned enterprise should be established on the basis of conditions, criterion of capital and others as provided in this law and regulations outlined by the concerned sectors.


Article 82 State owned enterprises are managed by an Executive Council
from three to eleven members, among which:

The Executive Council and its members have a term of office of three years. Members of the Executive Council may be re-appointed.

Article 83 The Executive Council has the following rights and duties:

Article 84 The Executive Council convenes an ordinary meeting every 3

months, while extraordinary meetings may be convened at any time as required by the business directly by the President of the Executive Council or at the proposal of half of the total members of the Executive Council.

The Executive Council acts as supervisor but does not directly participate in the management of the director’s daily activities, unless a member of the Executive Council is appointed as Director.


Article 85 The Director of a state owned enterprise is appointed or dismissed
by the Minister of Finance on the proposal of the Executive Council.

The Deputy Director is appointed by the Executive Council of the state owned enterprise on the Director’s proposal.


Article 86 The Director has the following rights and duties:

Article 87 The total capital and reserve funds, together with the profit of the

state owned enterprise from its creation as contained in the inventories constitute the State’s equity in the state owned enterprise.

The use of the state owned enterprise is decided by the Executive Council on the basis of the outlined rules and principles, while the remainder is owned solely by the State. The state owned enterprise’s annual profit after the payment of various taxes according to the regulations shall be allocated following priority goals, such as: ll. Joint State Owned Enterprise   Article 88 A joint state owned enterprise is a business entity created on the basis of a joint venture between another type of enterprise with the State and in which the State’s equity represents a minimum of fifty one percent of the total capital but less than one hundred percent.

The Shareholders of a joint state enterprise are responsible for the company’s liabilities only within the extent of the unpaid portion of the shares they hold.

Shares of joint state enterprise may be paid in cash or in kind according to the regulations governing public companies.

Article 89 A joint state enterprise manages and operates according to the regulations governing public companies, except in certain cases as follows:

number of members with the enterprise’s capital, among which there is one president appointed by the Minister of Finance with the approval of the concerned ministry: one vice president representing the private sector as approved by the Minister of Finance on the concerned private entity’s proposal: the representative of employees-workers appointed by the Minister of Finance: Article 90 A joint venture between the State and other types of enterprises is

where the State holds less than fifty percent of the equity. The State shall enter into joint ventures with limited and public companies only. The organization, management and activities shall comply with the by-laws of limited or public companies in which the State has entered.

Chapter 5

Collective enterprise

 Article 91 A collective enterprise is a business entity created by a collective

of a minimum of two families for the purpose of conducting profit seeking activities. A collective enterprise conducts its business according to the form of a business cooperative.

Article 92 A business cooperative is a collective organization created on the basis of the will of farmers, handicrafts and small traders to join their funds and labor for the conduct of production, trade and services in view of gaining profit.

Article 93 The capital of business cooperatives is not determined and may be changed any time. In case a business cooperative has less than twenty member families, the management, administration and resolutions shall comply with the regulations on limited companies. However, if there are more than twenty member families, the management and resolutions shall comply with the regulations on public companies.

Chapter 6

Joint Enterprise

Article 94 A joint enterprise is a joint venture between a state owned enterprise with a local or foreign enterprise. The organization, administration and management of joint enterprises shall comply with articles 88,89 and 90 of this Law.

PART IV

FINAL PROVISIONS

Article 95 The content of formerly issued laws, decrees, decisions and instructions conflicting with this Law are abrogated.

Article 96 The Government of the Lao people’s Democratic Republic shall issue provisions for the implementation of this Law.

Article 97 This Law is effective 30 days from its promulgation by the President of the Lao People’s Democratic Republic.

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LAW ON THE PROMOTION AND MANAGEMENT OF FOREIGN INVESTMENT IN THE LAO PEOPLE’S DEMOCRATIC REPUBLIC

Law No. 1 adopted by the National Assembly on 14 March 1994,
Issued by Presidential Decree No. 23 of 21 April 1994 and
coming into force on 20 June 1994
No. 01/94
National Assembly

SECTION ONE : GENERAL PROVISIONS

 Article 1 The Government of the Lao People’s Democratic Republic encourages foreign persons, either individuals or legal entities, to invest capital in the Lao People’s Democratic Republic (hereinafter "the Lao PDR") on the basis of mutual benefit and observance of the laws and regulations of the Lao PDR. Such persons hereinafter shall be referred to as "foreign investors".

Article 2 Foreign investors may invest in and operate enterprises in all fields of lawful economic activity such as agriculture and forestry, manufacturing, energy, mineral extraction, handicrafts, communications and transport, construction, tourism, trade, services and others.

Foreign investors may not invest in or operate enterprises, which are detrimental to national security, the natural environment, public health or the national culture, or which violate the laws and regulations of the Lao PDR.


Article 3 The property and investments in the Lao PDR of foreign investors shall be fully protected by the laws and regulations of the Lao PDR. Such property and investments may not be requisitioned, confiscated or nationalized except for a public purpose and upon payment of prompt, adequate and effective compensation.

SECTION TWO : FORMS OF FOREIGN INVESTMENT Article 4 Foreign investors may invest in the Lao PDR in either of two forms :
    1. A joint Venture with one or more domestic Lao investors : or
    2. A Wholly Foreign-Owned Enterprise.
Article 5 A joint Venture is a foreign investment established and registered under the laws and regulations of the Lao PDR which is jointly owned and operated by one or more foreign investors and by one or more domestic Lao investors. The organization, management and activities of the Joint Venture and the relationship between its parties shall be governed by the contract between its parties and the Joint Venture’s Article of Association, in accordance with the laws and regulations of the Lao PDR.

Article 6 Foreign investors who invest in a Joint Venture must contribute a minimum portion of thirty percent (30%) of the total equity investment in that Venture. The contribution of the Venture’s foreign party or parties shall be converted in accordance with the laws and regulations of the Lao PDR into Lao currency at the exchange rate then prevailing on the date of the equity payment(s), as quoted by the Bank of the Lao PDR.

Article 7 A wholly Foreign-Owned Enterprise is a foreign investment registered under the laws and regulations of the Lao PDR by one or more foreign investors without the participation of domestic Lao investors. The Enterprise established in the Lao PDR may be either a new company or a branch or representative office of a foreign company.

Article 8 A foreign investment, which is a Lao branch or representative office of a foreign company shall have Articles of Association which shall be consistent with the laws and regulations of the Lao PDR and subject to the approval of the Foreign Investment Management Committee of the Lao PDR.

Article 9 The incorporation and registration of a foreign investment shall be in conformity with the Enterprise Decree of the Lao PDR.
 

SECTION THREE: BENEFITS, RIGHTS AND OBLIGATIONS
OF FOREIGN INVESTORS Article 10 The Government of the Lao PDR shall protect foreign investments and the property of foreign investors in accordance with the laws and regulations of the Lao PDR. Foreign investors may lease land within the Lao PDR and transfer their leasehold interests: and they may own improvements on land and other moveable property and transfer those ownership interests. Foreign investors shall be free to operate their enterprises within the limits of the laws and regulations of the Lao PDR. The Government shall not interfere in the business management of those enterprises.


Article 11 Foreign investors shall give priority to Lao citizens in recruiting and hiring their employees. However, such enterprises have the right to employ skilled and expert foreign personnel when necessary and with the approval of the competent authority of the Government of the Lao PDR.

Foreign investors have an obligation to upgrade the skills of their Lao employees, through such techniques as training within the Lao PDR or abroad.

Article 12 The Government of the Lao PDR shall facilitate the entry into, travel within, stay within, and exit from Lao territory of foreign investors, their foreign personnel and the immediate family members of those investors and those personnel. All such persons are subject to and must obey the laws and regulations of the Lao PDR while they are on Lao territory.

Foreign investors and their foreign personnel working within the Lao PDR shall pay to the Lao government personal income tax at a flat rate of ten percent (10%) of their income earned in the Lao PDR.

Article 13 Foreign investors shall open accounts both in Lao currency and in foreign convertible currency with a Lao bank or foreign bank established in the Lao PDR.

Article 14 In the management of their enterprises, foreign investors shall utilize the national system of financial accounting of the Lao PDR. Their accounts shall be subject to periodic audit by the Government’s financial authorities in conformity with the applicable Lao accounting regulations.

Article 15 In conformity with the law and regulations governing the management of foreign exchange and precious metals, foreign investors may repatriate earnings and capital from their foreign investments to their own home countries or to third countries through a Lao bank or foreign bank established in the Lao PDR at the exchange rate prevailing on the date of repatriation, as quoted by the Bank of the Lao PDR.

Foreign personnel of foreign investments may also repatriate their earnings, after payment of Lao personal income taxes and all other taxes due.

Article 16 Foreign investments subject to this law shall pay a Lao PDR annual profit tax at a uniform flat rate of twenty percent (20%), calculated in accordance with the provisions of the applicable laws and regulations of the Lao PDR.

Other Lao taxes, duties and fees shall be payable in accordance with the applicable laws and regulations of the Lao PDR.

For foreign investments involving natural resources exploitation and energy generation, sector-specific taxes and royalties shall be prescribed in project agreements entered into between the investors and the Lao Government.

Article 17 Foreign investments shall pay a Lao PDR import duty on equipment, means of production, spare parts and other materials used in the operation of their investment projects or in their productive enterprises at a uniform flat rate of one percent (1%) of their Imported value. Raw materials and intermediate components imported for the purpose of processing and then re-exported shall be exempt from such import duties. All exported finished products shall also be exempted from export duties.

Raw materials and intermediate components imported for the purpose of achieving import substitution shall be eligible for special duty reductions in accordance with the Government’s applicable incentive policies.

Article 18 In highly exceptional cases and by specific decision of the Government of the Lao PDR, foreign investors may be granted special privileges and benefits which may possible include a reduction in or exemption from the profit-tax rate prescribed by Article 16 and/or a reduction in or exemption from the import-duty rate prescribed by Article 17, because of the large size of their investments and the significant positive impact which those investment are expected to have upon the socio-economic development of the Lao PDR.

In the event of the establishment of one or more Free Zones or Investment Promotion Zones, the Government shall issue area-specific or general regulations or resolutions.

Article 19 After payment of its annual profit tax, a foreign investor shall devote a portion of its profit each year to various reserve funds necessary for the operation and development of the enterprise in order to continuously improve the enterprise’s efficiency, in accordance with the policy and the Articles of Association of the enterprise.

Article 20 Foreign investments approved under this law shall at all times be operated in accordance with the laws and regulations of the Lao PDR. In particular, foreign investors shall take all measures and appropriate to ensure that their investments’ facilities, factories and activities protect the natural environment and the health and social insurance and welfare programs for their workers in conformity with the policy and the laws and regulations of the Lao PDR.

Article 21 In the event of disputes between foreign parties within a foreign investment, or between foreign investors and Lao parties, the disputants should first seek to settle their differences through consultation or mediation.

In the event that they fail to resolve the matter, they shall then submit their dispute to the economic arbitration authority of the Lao PDR or to any other mechanism for dispute resolution of the Lao PDR, a foreign country or an appropriate international organization which the disputants can agree upon.

SECTION FOUR : THE ORGANIZATION OF

FOREIGN INVESTMENT MANAGEMENT


Article 22 The Government of the Lao PDR has established a State organization to promote and to manage foreign investment within the Lao PDR titled the Foreign Investment Management Committee (hereinafter called "the FIMC").

The FIMC is responsible for administration of this law and for the protection and promotion of foreign investment within the Lao PDR.

Article 23 All foreign investments established within the Lao PDR shall be assisted, licensed and monitored through the "1-stop-service" of the FIMC, acting as the central focal point for all Government interactions with the investors, with the collaboration of the concerned ministries and the relevant provincial authorities.

Article 24 A foreign investment shall be considered to be legally established within the Lao PDR only upon the investment’s receipt of a written foreign investment license granted by the FIMC.

Article 25 A foreign investor, which seeks a license for a foreign investment, shall submit to the FIMC an application and such supporting documentation as the FIMC may prescribe by regulation.

The FIMC may grant preliminary approval-in-principle for investment projects being specially promoted by the Government.

Article 26 Upon receipt of a completed application and supporting documentation, the FIMC shall screen them, take a foreign-investment licensing decision and notify the applicant of that decision within 60 days of the application’s submission date.

Within this same overall 60-days period, concerned ministries and provincial authorities consulted by the FIMC for their views shall have a maximum of 20 days in which to reply.

Article 27 Within 90 days of receiving its foreign investment license from the FIMC, a foreign investor shall register that license and commence operation of its investment in conformity with the implementation schedule contained in the investment’s feasibility study and with the terms and conditions of the license granted by the FIMC, and in accordance with the laws and regulations of the Lao PDR.

Article 28 The FIMC has responsibility to coordinate with other concerned ministries and provincial authorities in monitoring and enforcing the implementation of a foreign investment in conformity with the investment’s feasibility study and with the terms and conditions of the investment license, and in accordance with the laws and regulations of the Lao PDR.

The concerned ministries and provincial authorities have the responsibility to perform their respective monitoring and enforcement obligations.

Article 29 If a foreign investor violates the agreement and the terms and conditions of its foreign investment license or the laws and regulations of the Lao PDR, the investor shall be notified of the detected violation and shall be instructed to promptly desist. In the event the investor fails to desist or in case of a serious violation, the investor’s foreign investment license may be suspended or revoked and the investor may additionally be subject to other sanctions under the applicable and regulations of the Lao PDR.
 

SECTION FIVE : FINAL PROVISIONS
Article 30 This law shall come into force 60 days after its ratification.

Upon the entry into force of the present law, the foreign investment law of the Lao People’s Democratic Republic No. 07/PSA dated 19 April 1988 shall cease to have effect, without prejudice to the rights and privileges granted to, and the obligations imposed upon, foreign investments under the laws No. 07/PSA.

Notwithstanding this provision, a foreign investor which received its license under the prior law may elect to petition the FIMC in writing, within 120 days of the coming into force of this law, to become subject to the terms of this law. The FIMC may grant such petitions at its discretion. For a foreign investor whose petition is granted, the rights and benefits previously granted and the obligations previously imposed under the law No. 07/PSA shall thereafter prospectively cease to have effect.

Article 31 The Government of the Lao PDR shall, by decree, issue detailed regulations for the implementation of this law.

Vientiane, 14 March 1994
President of the National Assembly
Signed : Saman Viyaket

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For more information on doing business in Laos, the Embassy of Peoples Democratic Republic of Laos to the United States of America has kindly provided extensive information in the following Guide to Doing Business in Laos.  This can be viewed online or printed to assist you in your research and business efforts.

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