Companies

2. COMPANIES:

Companies in Lesotho are governed by the Companies Act of 1967 (as amended). The Act controls most aspects of a company’s formation, business and winding-up.
Companies are an often used form of business entity. They have significant financial and legal advantages, but are also closely regulated and involve a number of formalities.

Establishment procedure: The act of establishing a company is called “incorporation”. The incorporation procedure takes place in the office of the Registrar General in the Law office and is much more complex and expensive but with the help of Corpro solutions and its dedicated team the procedure has been made a whole lot easier and cost effective for you as a client.

Corpro Solutions will act on your behalf to obtain what is called “Certificate of Incorporation” signalling that your company has been incorporated and ready to operate once all other procedures have been successfully completed.

Finance: Finance in a company can ether be raised through borrowing (which the company can do in its own name) or sales of shares in the company.
Continuity of existence: Companies are legal entities in their own right and do not depend on the continuing existence of their members. Therefore, the death, retirement or other withdrawal of a member will not terminate the company and may not even require the reorganisation of the company’s operations.
Limitation of Liability: Liability of members of a company depends on the precise nature of the company. Generally, a member will be liable only to the extent of the capital he or she has contributed (promised to contribute) to the company.
Control of the organisation: Control of the company generally lies with its board of directors. A shareholding does not give the shareholder any proprietory interest in the assets of the business or any say in the direction of the company. However, a large shareholding may give control over the board.
Formalities: There are a number of formalities involved in setting up, running and winding up the company. Apart from those formalities applying to businesses, companies must also comply with requirements as to meetings, filing of returns with the LRA and keeping proper books of accounts.
Admitting new investors: A new investor may be admitted simply by buying shares in the company.
Tax implications: As a matter of law, the company is a separate legal entity from its members, thus pays tax. In most instances, companies are taxed at a flat rate which is significantly lower than the upper ranges of the tax rates applying to individuals. If the company is to make significant profits there can be a large tax saving. The company is also a useful vehicle in tax planning.
Cessation of business: a company can only be terminated (wound-up) in accordance with the provisions of the Companies Act.