Law on Enterprises

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

LAO PEOPLE’S DEMOCRATIC REPUBLIC
PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY
________________

President’s Office No. 29/PO

DECREE
of the
PRESIDENT
of the
LAO PEOPLE’S DEMOCRATIC REPUBLIC

On the Promulgation of the Law on the Amendment of the Enterprise Law

Pursuant to Chapter 6, Article 67, point 1 of the Constitution of the Lao People’s
Democratic Republic which provides for th e promulgation of the Constitution and of
laws which are adopted by the National Assembly; and

Pursuant to Resolution No. 55/NA, date d 9 November 2005, on the adoption of
the Law on the Amendment of the Enterprise Law; and

Pursuant to Proposal No. 18/NASC, da ted 18 November 2005, of the National
Assembly Standing Committee.

The President of the Lao People’s Democratic Republic
Decrees That:

Article 1. The Law on the Amendment of the Enterprise Law is hereby promulgated.

Article 2. This decree shall enter into force on the date it is signed.

Vientiane, 9 December 2005

The President of the Lao People’s
Democratic Republic

[Seal and Signature]

Khamtai SIPHANDON

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

LAO PEOPLE’S DEMOCRATIC REPUBLIC
PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY
______________________

National Assembly No. 11/NA
9 November 2005

LAW ON ENTERPRISES

Part I
General Provisions

Article 1. Purposes

The Law on Enterprises determines the principles, procedures and
measures for the incorporation, operation and management of enterprises in the
Lao People’s Democratic Republic with the aims of promoting production,
business and services in all economic s ectors to develop the workforce [engaged
in] production and prod uction relationships
1, and [or promoting] national socio-
economic growth to contribute to nati onal development and improvement of the
livelihood of the multi-ethnic people.

Article 2. Definitions

Terms used in this Law on Enterprises shall have the meanings ascribed
below:

• An enterprise [refers to] a business organisation of individuals or
legal entities which shall have a name, capital, an administration and
management, and an office, and which is registered as an enterprise
under this law. An enterprise is al so referred to as a “business unit”;
• A business [refers to] a business ac tivity in any specific undertaking,
either as part of or as the whole of the process from production to
services, for the purpose of seekin g profit and serving the society’s
common interests;

1 This is a literal translation of the Lao term, which has the connotation of opening up the
possibilities for different relationships in the ownership of means of production.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

• The list of controlled businesses 2 [refers to] the list of business types
that are highly sensitive to nationa l stability, social order, and fine
national traditions and to the environment, which require the
permission of, and inspection
3 by, the relevant aut horities prior to the
registration of the enterprise;

• A sole-trader enterprise 4 [refers to] a form of enterprise owned by an
individual. A sole-trader enterprise operates under the name of its
owner who holds unlimited liability for the debts of the enterprise;

• A partnership enterprise [refers to] a form of enterprise 5 established
on the basis of a contract betw een at least two investors who
contribute capital to joint busin ess operations for the purpose of
sharing profits;

• A general partnership enterprise [r efers to] a form of partnership
enterprise which is jointly operated by the partners primarily based on
mutual trust and where all partners have joint and unlimited liability
for the debts of the enterprise;

• A limited partnership enterprise [re fers to] a form of partnership
enterprise in which some 6 of the partners have unlimited liability for
the debts of the enterprise and are referred to as “general partners”,
and the other partners have limited liability and are referred to as
“limited partners”;

• A company [refers to] a form of enterprise established through the
division of its capital into shares, each share having equal value. A
shareholder is only liable for the company’s debts up to an amount
not exceeding the unpaid portion of [such shareholder’s] shares;

• A limited company [refers to] a form of company with at least two
and no more than thirty shareholders , except in the cases described in
paragraph one, Article 85 of this law, and a limited company with a
single shareholder is called a “one-person limited company”
7;
• A public company [refers to] a form of company with at least nine
shareholders who are the promoters, and the company’s shares can be
freely transferred and open ly offered to the public;

2 This term is sometimes also referred to as the “negative list”.
3 In the Lao language, the same word is used to represent all of the following related (but slightly
different) concepts: “control”, “inspection”, “supervision”, “audit” and “monitoring”. The translators have
chosen “inspection” (and its variants) as the most appropriate English equivalent but readers should note
and bear in mind the other meanings that might have been intended.
4 This term is sometimes also translat ed as “sole-proprietorship enterprise”.
5 In the old Business Law, this form of enterprise was called a partnership company. In this law, the
term has been changed to “partnership enterprise”.
6 There must be more than one general partner in this type of enterprise.
7 This term is sometimes also tr anslated as “sole limited company”.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

• A public offering of shares [refers to] an offering of shares to the
public in the stock exchange market or outside the stock exchange as
described in laws and regulations;
• A State company 8 [refers to a company] es tablished by the State and
managed under rules app licable to companies and it shall not sell
more than forty-nine percent of its shares
9;
• A joint company [refers to] a company jointly established between
the State and another sector 10[,] whether domestic or foreign[,] in
which each party holds fifty percent of the shares;
• Shares represent the capital of a partnership enterprise or company
and may be divided into unequal or equal value depending on the
form of partnership or company as stipulated in this law;
• An ordinary share [refers to] a t ype of share which the owner cannot
redeem;
• A preferred share [refers to] a type of share which the owner may
redeem, and which has specific rights and obligations that are
different from ordinary shares;
• A share certificate [refers to] an important legal document of title
representing the rights and the propo rtion of ownership of a partner in
a partnership enterprise or a shareholder in a company;
• A debenture [refers to] a loan certi ficate issued by a company without
collateral which gives the debentur e holder legitimate rights that
guarantee the repayment of princi pal and interest as agreed;
• A dividend [refers to] the mone y distributed to partners or
shareholders from the net profit ge nerated by a partnership enterprise
or a company after deduction of the cost of capital, expenses and
debts;
• A quorum [refers to] the minimum number of participants in a
meeting required to convene a meeting;
• Commercial confidentiality [refer s to] important information about
the production process, business or serv ices of an enterprise that may
result in loss to the stability and fi nancial status of that enterprise if
they are disclosed;
• A liquidator [refers to] a person appointed by the court or an
enterprise to perform rights and dutie s in the attachment of the assets
of a dissolved or bankrupt enterprise in order to pay the creditors and
distribute the remaining amount to the owners
11, partners or
shareholders of the concerned enterprise.
8 This entity is different from a State-owned enterprise in the old Business Law.
9 The literal translation of this phrase is “may sell shares up to less than 50%”.
10 The literal translation on this phrase is “w ith a party from the non-governmental sector”.
11 This term is not limited to investors but rather could include, e.g., the owner of a sole-trader
enterprise.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 3. Right to Establish Enterprise

Lao citizens, foreign residents, apatrids 12 residing in the Lao PDR and
foreigners, including their organisations, ar e entitled to establish enterprises or
participate in business transactions in acco rdance with the laws and regulations of
the Lao PDR.

Article 4. Equality in Business Transactions

All economic sectors, domestic and foreign, are equal before the law in
business activities, and may compete and cooperate in expanding production
forces, [and in] extending their production, business and services.

Article 5. Obligatio ns of Enterprises

Enterprises have the ob ligation to conduct their business operations in
accordance with their business purposes, to keep accounting books, to perform
fiscal obligations towards the government, to protect the workers’ legitimate
rights and interests, to preserve the e nvironment, and to uphold other relevant
laws and regulations of the Lao PDR.

Article 6. State Policy and Protection of Rights and Interests of Enterprises

The State encourages and promotes domestic and foreign persons and
organisations to establish enterprises or to participate in business activities in all
non-restricted sectors by issuing customs and tax policies, regulations, [and] measures, [and by] providing informati on, services and other facilities to
enterprises to contribute to socio-economic development.

The legitimate rights and interests of enterprises, namely their capital and
property, are protected by laws.

Article 7. International Cooperation

The State promotes international relations and cooperation in business
activities by exchanging lessons and info rmation, by mobilizing capital, sciences,
technologies and experience in business management that is advanced
13, [and also
promotes] the opening up of the market, [and] regional and global integration.

12 Readers may wish to refer to the Law on Lao Nationality for the distinction between aliens,
apatrids (i.e. persons unable to certif y their nationality) and foreign individuals.
13 In the original Lao text, it is unclear whether this adjective qualifies business management or all
other nouns preceding it.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 8. Scope of Application

This law applies to private enterprises, both dome stic and foreign, State
enterprises 14 and joint enterprises established and operating in the Lao PDR.

Cooperative enterprises and small retail traders do not fall under the scope
of application of this law and will be dealt with in detail separately.

Part II
Enterprises

Chapter 1
Types, Forms and Categories of Enterprises

Article 9. Types of Enterprises

There are four types of enterprises in the Lao PDR: private enterprises,
State enterprises, 15 joint enterprises and collective enterprises.

A private enterprise may elect to use any form or category of enterprise
stipulated in Article 10 and Article 11 of this law for the establishment and
operation of its enterprise.

A State enterprise and a joint enterp rise may be established and operated
in the form of a company only. A State enterprise is referred to as a “State
company” and a joint enterprise as a “joint company”.

Article 10. Forms of Enterprises

The form of an enterprise [refers to ] the business organisation that is the
basis for the establishment and business ope rations of all types of enterprises.

Enterprises are classified in three forms:

1. Sole-trader entreprise;
2. Partnership enterprise;
3. Company.

14 The Lao term here is a different word from “State company”.
15 In the original Lao text, the same words are used here for State-owned enterprises and mixed
enterprises as were used in the Business Law. However, the translators have used different English words
for these enterprises in this law because the nature of these entities is different.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 11. Categories of Partnership Enterprises and Companies

Partnership enterprises and companies are classified in the following four
categories:

1. Partnership enterprises are classified in two categories:

• General partnership enterprise;
• Limited partnership enterprise.

2. Companies are classified in two categories:

• Limited company, including one-person limited company;
• Public company.

Chapter 2
Registration of Enterprises

Article 12. Registration of Enterprises

Enterprise registration [refers to] the acceptance of a notification for
enterprise registration 16 as lawful recognition by th e State of an individual or
legal entity, either domestic or foreign, that is established and is operating a
business in the Lao PDR.

The procedure for enterprise regi stration is separately regulated.

An enterprise is registered once thro ughout the period of operation of such
enterprise.

Article 13. Filing of Notification for Enterprise Registration

Any person intending to conduct business in the Lao PDR shall file a
notification for enterprise registration with the concerned State agencies as
specified under this law.

16 The term “notification for enterprise regist ration” (rather than “application for enterprise
registration”) is used in the Lao text and has the connot ation that enterprise registration should generally be
a matter of notifying the relevant authorities of, rather than seeking permission for, the establishment of a
business unit.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 14. Procedures and Timeframe for Consideration of Enterprise
Registration

Upon receipt of a notification for ente rprise registration, the commercial
sector17 shall examine whether the type of business to be registered falls in the list
of controlled or non-controlled businesses. If the proposed business is not in the
controlled list, the enterprise registration authority of the commercial sector shall
consider
18 issuing a certificate of enterprise re gistration no later than ten official
working days from the date of receipt of the notice.

In the event that the type of business submitted for registration falls within
the list of controlled businesses, the co mmercial sector shall immediately forward
the application to the concerned authority
19. Such authority shall consider and
respond no later than ten wo rking days, except in the case of certain businesses
that require a longer technical review process. Thereafter, the commercial
authority shall consider issuing an enterprise registration certificate no later than
three working days.

In the event that the enterprise regi stration certificate is not issued, a
written response with reasons shall be given to the applicant for enterprise
registration.

The list of controlled businesses and the timeframe for the technical
review process as stipulated in paragra ph two of this article shall be approved by
the government only.

Article 15. Invalid Regist ration of Enterprises

An invalid registration of an enterprise [refers to] the registration of an
enterprise where part or the whole conten t of [such] registration does not conform
to the form, category [or] 20 reality, and that needs to be corrected. Such correction
may be made by amendment.

In the event that the correction cannot be made, the enterprise shall be
dissolved in accordance with the pro cedures set forth in this law.
17 The term “sector” is used in many Lao laws to refer to the cluster of government ministries or
agencies engaged in a particular activity.
18 This term has the connotation of having the power to approve.
19 This is a reference to the author ity regulating the controlled industry.
20 The Lao word “and” is sometimes used in a disjunctive sense, often when the authors wish to
emphasize the importance f all items in the disjunctive list. Here the literal translation is “and”, but it is
clear that the disjunctive “or” meaning is intended.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The registration of an enterprise [granted] to a person restricted by la
w or
the registration of an enterprise in contra vention of any law or regulation shall be
invalid.

The invalidity of any enterprise re gistration or the dissolution of the
enterprise shall not terminate the liabilities of the enterprise.

Article 16. Effects of Enterprise Registration

The registration of an enterpri se has the following effects:

1. Creates a legal entity of a partnershi p enterprise or a company that is
separate from its shareholde rs, having rights, duties and
responsibilities with in the scope of its purposes and bylaws
21;
2. Enables the enterprise to carry out business activities within the
business sectors indicated in its en terprise license without requiring
further approval or review from th e relevant authorities, except for
certain types of businesses specified in the list of controlled
businesses, as provided in Article 14 of this law;
3. The contents 22 that were filed with the notification for enterprise
registration shall be disclosed, and any interested person may see such
application as described in paragr aph one, Article 19 of this law;
4. The enterprise’s name and ta x registration are registered.

Article 17. Effects of Failure to Conduct Business Operations

An enterprise shall commence its busi ness operations within ninety days
from the date of the enterprise registration. In the event that an enterprise fails to
operate within that period or suspends its operation and fails to perform its fiscal
obligations over twelve months conti nuously without reasons, the relevant
enterprise registration officers shall no tify such enterprise to clarify the
reasons[.] 23 If such enterprise fails to meet the registration officers within ten
working days from the date the notice is received or at the meeting no sufficient
reason is given, such enterprise shall be considered suspended and [shall be] dissolved in accordance with the pro cedures set forth in this law.

21 This is a reference to the internal regulations of the company.
22 This is a literal translation. The intention is to refer to “those matters that must be included”. See
Article 11 of the Contract Law for a similar use of “contents”.
23 For readability, the punctuation of this sentence has been modified.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 18. Modification of Contents in Enterprise Registration

Any modification of the contents in the enterprise registration after
registration, such as the purpose or the re gistered capital, shall be notified to the
relevant enterprise registration officers within one month after the decision on
such modifications has been made, except for the modification of contents in the
enterprise registration relati ng to the types of business falling within the list of
controlled businesses, which shall comply with paragraph two of Article 14 of
this law.

Any enterprise that provides invalid c ontents in its enterprise registration
or gives notice of a modification later th an the period specified in paragraph one
of this article, whether intentionally or not, shall not be entitled to assert [such
deficiencies] as an argument for the release from liability for its acts against third
parties acting in good faith.

Article 19. Public Disclosure of Contents of Enterprise Registration

Individuals and legal entities may access or request a copy of filed
registration documents from the enterprise registration officers . Such registration
documents refer to documents filed by the en terprise for enterprise registration as
required under this law. A person requesti ng a copy of such documents shall pay
fees as stipulated.

Other than the documents described in paragraph one of this article,
disclosure shall be permitted only with the prior consent of the concerned
enterprise, unless otherwise provided by the laws.

Article 20. Registered Capital of Enterprises

The registered capital of a sole-trader enterprise is the capital declared by
the owner to the enterprise registration officer in its enterprise registration.

The registered capital of a partnershi p or company is the value of all
shares as defined in item 4 of Article 33 and item 4 of Article 81 of this law. Such
registered capital is also referred to as the “stated capital” of the partnership or the
company.

For certain types of busin esses, as necessary, the relevant sector has the
authority to set the minimum required regist ered capital for enterprise registration,
provided that approval from the government has been obtained.

The declared registered capital must truly exist in the Lao PDR, as
prescribed by the laws. In the event of a breach, the breaching party shall be
responsible under the laws for the offence of making false statements to a
government authority.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Chapter 3
Name of Enterprise

Article 21. Selection of Name of Enterprise

An enterprise may select the name or surname of one or several persons or
may use other names as agreed. Any enterprise first subscribing for a name shall
have priority over other enterprises. The na me of an enterprise shall at all times
indicate the form or cate gory of such enterprise.
A subscribed name shall terminate if the subscribing enterprise is not
accepted for enterprise registration.

Upon the registration of an enterprise , the business operator shall display a
sign with its name.

Article 22. Forbidden Names

Forbidden names are:

1. Names causing confusion, [names that are] similar or identical to the
names of other enterprise s within the same province, [or] city[,] or
names of other enterprises that are widely known;
2. Names that conflict with the fine national culture and traditions or
with social order;
3. Names that contain the name of any country, [or] international
organisation, or the name of any symbol of cultural identity or
national sacred site;
4. Names that are identical or similar to a form or category of enterprise.

Article 23. Allowing other Persons to Use Name or License of Enterprise

Any authorisation to another person to use the name or enterprise license
for business activities shall be made in writing and in accordance with the
Contract Law of the Lao PDR.

In the event that there is no written au thorisation for the use of a name or
enterprise license but there is sufficient evidence indicating that the owner of the
name or enterprise license knew but did no t complain or object or supported such
use, it shall be deemed as due authorisation.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 24. Liability for Allowing other Persons to use Name or License of Enterprise

Any person who authorises others to use its name or enterprise license
shall be responsible to third parties in accordance with the agreed contract 24 or as
provided by the laws.

Any person who authorises a person having no capacity 25 to use its name
or enterprise license shall be liable for the act of such persons.

Any person who authorises an individual or legal entity that is subject to
legal restrictions to use its name or enterp rise license shall be jointly liable for the
acts of that individual or legal entity. Any business operations carried out by the
authorised persons shall be deemed to be business operations [conducted] without
an enterprise registration.

A State company may not authorise any individual or legal entity to use its
name or enterprise license. In the event of any violation, it shall be personally
liable to the third party.

Article 25. Transfer and Restrictions on Transfer of Name

A name may be transferred only when:

1. It is transferred together with th e transfer of the whole enterprise,
including its right s and obligations;
2. It is the name of an enterprise th at has been entirely and lawfully
dissolved.

Upon the proper transfer of a name in accordance with item 1 above, the
transferee shall notify the debtors and creditors of the enterprise within sixty days
and notify the relevant enterprise regist ration officers within five working days
from the date of the transfer.

Any improper transfer of a name in any form, including monopolizing the
market through the transfer of any name, is forbidden. In the event of any
violation, the transferor and transferee shall be liable for their acts in accordance
with the relevant laws and regulations of the Lao PDR.

A State company is not permitted to transfer its name to any other type of
enterprise.

24 This appears to be a reference to the contract between the owner of the name or license and the
permitted user of the name or license, as referred to in Article 23.
25 This term refers to lega l capacity and mental capacity.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 26. Cancellation of Name

A name shall be cancelled together with the dissolution of the enterprise.
Upon termination of a name, the owner of the name shall remove the sign of its
name within seven days from the date of the notice of termination.

Any individual or legal entity still using a cancelled name or enterprise
license shall be deemed to be conduc ting business without a proper enterprise
registration.

Part III
Sole-Trader Enterprises

Article 27. Filing of Notification for Enterprise Registration

Any person intending to register a so le-trader enterprise shall submit an
application with the following details:

1. The name and kind of business;
2. The name, address and nationality of the enterprise owner and
manager;
3. The location of the enterprise;
4. The registered capital.

Article 28. Rights and Duties of Owner

The owner of a sole-trader enterprise has the following rights and duties:

1. To administer and manage the enterprise himself 26 or to employ other
persons to administer an d manage the enterprise;
2. To decide by himself the use of profits or other matters relating to the
enterprise;
3. To keep accounts as provided by the Law on Enterprise Accounting;
4. To perform obligations towards the State;
5. To perform other rights and du ties as provided by the laws.

26 Readers should note that the Lao language does not distinguish between genders in pronouns. In
this translation, a reference to a gender is a referen ce to all genders, unless the context requires otherwise
(as is the case in some Articles). The translators’ decision to use the male gender pronoun as the default
translation was made in the interests of simplicity and consistency.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 29. Manager

The manager of a sole-trader enterprise may be the owner himself or one
or several third parties 27 employed as managers. An external employed manager
is remunerated as agreed with the owner of the sole-trader enterprise.

A sole-trader enterprise with several managers may appoint one manager
as the overall supervisor who shall solely have authority to enter into contracts on
behalf of the sole-trader enterprise with third parties. Such manager is called the
“general manager”. This provision is also applicable to managers of partnership
enterprises and one-person limited companies.

A manager performs all his tasks on the basis of the rights and duties
described in the contract and under the supervision of the enterprise owner.

A manager may assign certain of his tasks to other assistants.

Article 30. Manager’s Employment Contract

A manager’s employment contract shall be made in writing as provided by
the Contract Law. The contents of the employment contract shall describe the
rights, duties, remuneration and responsibil ities of the contracting parties and how
the contract may be terminated.

Relations between the enterprise owne r, manager(s), and third parties are
governed by the relevant laws.

Article 31. Dissolution and Liquidation

A sole-trader enterprise is dissolved in the following cases:

1. The sole-trader enterprise owner d ecides to dissolve the enterprise;
2. Dissolution by court order;
3. Bankruptcy 28;
4. Death or lack of capacity 29 of an enterprise owner who has no heir.

In the event that the sole-trader ente rprise is dissolved, its owner shall
have the obligation to liquidate the ente rprise by himself or to appoint third
parties as liquidators, except when the di ssolution is ordered by the court or the
sole-trader enterprise is in bankruptcy, in which case only the court shall appoint
the liquidator.
27 The literal translation of this term is “persons outside of the company”.
28 This is a reference to final declaration of bankruptcy by the court.
29 This term has the connotation of mental capacity.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Part IV
Partnership Enterprises

Chapter 1
General Principles Relating to Partnership Enterprises

Article 32. Partners of Partnership Enterprise

Investors in a partnership enterprise are called “partners”.

Partners in a partnership enterprise may be individuals or legal entities.

Article 33. Partnership Contract

A partnership contract shall be made in writing and shall be consistent
with the Contract Law of the Lao PDR.

A partnership contract shall descri be the following primary contents:
1. The name of the enterprise;
2. The business purpose;
3. The names [and] locations of the headquarters and all branches, if
any;
4. The stated capital or value of sh ares of the partnership enterprise
divided into cash, kind or labour;
5. The names, addresses and nation alities of the partners of the
partnership;
6. The names and signatures of all partners of the partnership.

The stated capital described in item 4 of this article is the registered capital
of the partnership enterprise.

Article 34. The Status of Partners hip Enterprise as Legal Entity

The indices of the status of a partnership enterprise as a legal entity
comprise:

1. The name of the partnership;
2. The names [and] locations of its hea dquarters and all branches, if any;
3. The assets and capital;
4. The bylaws of the part nership enterprise;
5. Liability for debts according to the form of partnership enterprise;
6. The legal capacity to exercise ri ghts and obligations, and to be a
plaintiff or defendant [in legal pr oceedings] in the same manner as
natural persons.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 35. Branches of Partnership Enterprises

A partnership enterprise registered in the Lao PDR is not required to
further register its branches and such branches shall not have the status of a
separate legal entity from the partnership enterprise.

Each branch office shall notify the en terprise registration officers at that
location.

A branch of a foreign partnership ente rprise operating in the Lao PDR is
required to register the enterprise in accordance with this law.

The establishment of a bran ch of a Lao partnership enterprise in a foreign
country shall be governed by the laws of that country.

In the event that the branch of a domest ic or foreign legal entity is sued in
the Lao PDR, such suit shall be deemed to be against that legal entity. This
provision covers foreign legal entities that have branches in the Lao PDR.

Article 36. Bylaws of Partnership Enterprises

The bylaws of a partners hip enterprise shall contain the following main
items:

1. The matters specified in item 1 to item 5 of Article 33 of this law;
2. The names, addresses and nationa lities of the managers of the
partnership enterprise. In the even t that other partners are not co-
managers, restrictions on the use of power of the managers may be
defined;
3. The method for the distribution of profits and responsibility for the
partnership’s losses;
4. The method and schedule of payment for shares;
5. Administration and management;
6. Meetings and rules for the adoption of resolutions;
7. Resolution of disputes;
8. Dissolution and liquidation.

The contents of item 1 of this article must be included in the notification
of enterprise registration, but 30 the partnership enterprise may [decide to] include
additional contents.

The bylaws of a partnership enterprise must be signed by its manager.
30 The literal translation of this phrase is “except that the partnership enterprise shall decide to
include additional contents”. The idea here is that only item 1 is mandatory and must be included in the
application; items 2 to 8 are optional.

15

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 37. Modification of Establishment Contract 31 or Bylaws

Any modification to the contents of the establishment contract or bylaws
of a partnership enterprise shall be made by unanimous consent of all partners,
except as otherwise agreed.

Resolutions on the amendment or m odification of such establishment
contract or bylaws shall be notified to th e relevant enterprise registration officers
within ten working days from the date of the partners’ meeting adopting such
resolution on modification.

Chapter 2
General Partnership Enterprises

A. Enterprise Registration and Intern al Relations of General Partnership
Enterprises

Article 38. Filing of Notification for Registration of General Partnership Enterprises

The following documents are required for the filing of a notification for
the registration of a genera l partnership enterprise:

1. The application form for notifica tion of enterprise registration;
2. The general partnership contract containing the names and signatures
of all partners;
3. The name, address and nationality of the manager when the partners
decide not to act as co-managers;
4. The bylaws of the general partnership enterprise.

The application 32 for notification of enterprise registration shall be signed
by the manager.

Article 39. Capital Contributions

The capital of a general partnership enterprise is contributed by the
partners. Such capital contribution may be provided in cash, in kind or in labour.

31 This contract appears to be the same as a partnership contract.
32 The translators are aware that there are slightly different references in this Article, namely, to the
previously mentioned process of “notification for registration” (see also footnote 16), to an application
form, and to an application for giving notification of registration. It would appear that this article aims to
spell out in greater detail the process commonly referre d to generally as “notification for registration”.
16

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Capital contributed in kind or in labour shall be appraised in monetary
terms. Capital provided in labour shall not be recorded in the balance sheet of the
general partnership enterprise.

The methods and schedule of payment for shares specified in paragraph
one of this article shall be agreed among the partners. Prior to the registration of
the enterprise, the partners shall contri bute their shares in full as agreed.

In addition to the capital described in paragraph one of this article,
partners in a general part nership enterprise may finance any transaction carried
out by the general partnership en terprise with their own funds.

The use of funds described in paragraph four of this article, including
liabilities and the distribution of dividends, shall be agreed among the partners.

Article 40. Shares

Each share in a general partnership enterprise need not be of equal value.

Upon payment for their shares by partne rs as provided in paragraph three
of Article 39 of this law, the general partnership enterprise shall issue share
certificates to the partners based on the paid proportion of shares.

Share certificates of a general partne rship enterprise are not negotiable.

Article 41. Manager

All partners in a general partnership enterprise may act as co-managers or
appoint one or more partners to be managers.

The manager is the representative of the general partnership and of the
other partners. The manager shall not receive a salary or bonuses for th
e
performance of his duties, unless otherwise agreed.

The manager of a general partnership enterprise may be a third party. A
third party appointed as manager shall be remunerated with a salary or bonuses as
agreed by the partners.

Article 42. Appointment or Removal of Manager

The appointment or removal of the manager requires the unanimous vote
of all partners, unless otherwise ag reed. Each partner has one vote.

The partner to be appointed or removed as manager is not entitled to cast a
vote.

17

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 43. Rights and Duties of Manager

The manager has the following rights and duties:

1. To fully and faithfully perform his duties 33 for the best interests of the
general partnership enterprise;
2. To exercise the rights and perform the duties described in the bylaws
of the general partnership enterprise;
3. To recruit third parties to assist in any transaction of the general
partnership enterprise for which he has responsibility.

In the event that several partners are joint co-managers, the administration
and management of the general partnership enterprise shall be based on a majority
vote or as it may otherwise be agreed as described in the bylaws. Each person
shall have one vote.

In the event that there is a single manager, such manager shall have the
sole authority to administer and manage the general partnership enterprise, unless
restrictions are otherwise provided.

The restrictions referred to in paragraph three of this article shall have no
effect upon third parties if su ch restrictions are not stipulated in the enterprise
registration filing.

Article 44. Rights and Duties of Partners

Partners have the following rights and duties:

1. To inquire on the overall status of the general partnership enterprise at
all times;
2. To examine or make copies of accounting records and other
documents of the general partnership enterprise;
3. To receive dividends and be liable for losses as agreed;
4. To have unlimited liability for the general partnership’s total debts;
5. To have the right to veto, oppose or complain if these [rights] have
been agreed upon, but there shall be detailed provisions in the bylaws
on the subject matter and applicable procedures for the use of such
rights;
6. To receive a portion of contributed capital and profits as agreed when
the general partnership en terprise is dissolved.

Article 45. Acceptance of New Partners and Transfer of Shares

A general partnership enterprise may not accept new partners and each
partner may not transfer shares among themselves, unless otherwise agreed.
33 The literal translation of this term is “to fully perform his duties and with loyalty”.
18

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

In the event that the partners agree to accept a new partner or to allow the
transfer of shares, unanimous consent is required from all partners.

The acceptance of new partners may be carried out by transferring shares
to third parties or by allowing a third party to acquire a portion of newly issued
shares.

Upon a decision to accept a new partner or to transfer shares to another
[partner], [the partnership enterprise ] shall notify the relevant enterprise
registration officers within five working days from th e date of the decision on
such acceptance or transfer.

In the event that only one partner remains in the general partnership
enterprise as a result of the transfer of shares or for any other reason, the general
partnership enterprise shall be dissolved.

In the event that the name of the ge neral partnership enterprise includes
the names of partners, when one partne r withdraws, the general partnership
enterprise is entitled to delete such partner’s name from its name.

Article 46. Prohibited Acts and Bu siness Transactions of Partners

Partners are prohibited from carrying out any acts or business transactions
that compete with their own ge neral partnership enterprise.
An act or transaction which is consid ered as competing with the general
partnership enterprise is:

1. [When a partner engages] on his own behalf in a business transaction
that is similar to the purpose of the general partnership enterprise;
2. [When a partner engages] on behalf of another person, such as being a
manager or director of another en terprise, in a business transaction
that is similar to the purpose of the general partnership enterprise;
3. Being a partner in another general partnership enterprise or being a
general partner 34 in a limited partnership enterprise.

[In the event of] any breach of the restri ctions in this article, the general
partnership enterprise has the right to cl aim the entire profits obtained from such
acts or business transactions or to file a petition for dissolution of the general
partnership enterprise.

Article 47. Exemptions from Restrictions

[A partner] may be exempted from the restrictions described in Article 46
of this law when:
34 The literal translation of this term is “having unlimited liability”.
19

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

1. [He has] obtained the unanimous consent of all other partners;
2. Such act or business transaction by the partner was carried out prior
to [his] joining the partnership and the other partners did not object.

B. Relationship between General Part nership Enterprises and Third Parties

Article 48. Liability for Debts

Each partner shall have unlimited liability for the debts of the general
partnership enterprise. A creditor may claim for payment of debt from each
partner but only after it has made a cl aim against the general partnership
enterprise which remains unsettled.

All partners may agree on the proportion of each partner’s liability for the
debts or losses of the general partners hip enterprise, but such agreement shall
have no effect on third parties.

Partners are liable for the debts of the partnership only when:

1. Such debts arise from the performa nce of duties of the manager or
other partners in accordance with bylaws of the general partnership
enterprise;
2. Such debts arise from the perfor mance of any duty to achieve the
purpose of the general partnership enterprise and such acts were
approved by all partners.

Article 49. Rights to Benefits

All partners are entitled to receive the benefits obtained by the general
partnership enterprise from transactions with third parties on behalf of the
enterprise, whether or not su ch benefits are obtained in the name of the general
partnership enterprise.

Article 50. Liability of Withdraw ing Partners and New Partners

A partner withdrawing from a general part nership enterprise shall be liable
for the debts of the general partnership ar ising prior to his withdrawal from the
general partnership enterprise.

Such liability shall terminate within one year from the date of approval of
such withdrawal, except when a longer period of liability has been agreed.

A new partner is liable for the en tire debt of a general partnership
enterprise, unless otherwise agreed, but such agreement shall have no effect on
third parties.
20

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

C. Merger of General Partnership Enterprises

Article 51. Merger of General Partnership Enterprises

A general partnership enterprise may merge with one or several other
general partnership enterprises into either the original partnership enterprise or
into a new general partnership enterprise.

General partnership enterprises may merge only when the following
conditions are met:

1. Unanimous consent was obtained in a meeting of all partners of the
general partnership enterprises to be merged, unless otherwise agreed.
The resolutions adopted by such mee ting shall be registered with the
enterprise registration officers within ten working days from the date
of the resolution to merge;
2. The merger has been published through appropriate mass media at
least once within ten working days from the date the resolution to
merge is adopted to inform and allow creditors to oppose the merger
within sixty days from the date the creditors receive the notification,
and creditors fail to oppose or respo nd within the stipulated period of
time;
3. The enterprise has been registered again.

Article 52. Objection to Merger and Effects of Merger

In the event that a creditor objects to the merger of a general partnership
enterprise, [the general partnership enterp rise] cannot merge, unless all debts have
been paid to that creditor only.

A merger of general partnership en terprises does not result in the
dissolution of the enterprises [or] 35 the lapse of previous ri ghts or responsibilities.

D. Dissolution of Genera l Partnership Enterprises

Article 53. Grounds for Dissolution

A general partnership enterprise may be dissolved on three grounds:
dissolution by agreement between the part ners, dissolution by court order and
dissolution by operation of law
36.

35 See footnote 20.
36 The literal translation of this term is “dissolution by legal effect”.

21

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The enterprise registration officers shall be temporarily notified 37 of the
dissolution of a general part nership enterprise on any grounds within ten working
days from the date the grounds for dissolution occurred.

Article 54. Dissolution by Agreement between Partners

A general partnership enterprise may be dissolved by unanimous
agreement of the partners.

Article 55. Dissolution by Court Order

Any partner of a general partnership enterprise may request the court to
consider the dissolution of the general part nership enterprise when he finds that:

1. The general partnership enterpri se has suffered losses and cannot
solve [the problem];
2. An event of force majeure occurs making it impossible to continue
the business of the genera l partnership enterprise;
3. Such partner has been misled or forced to become a partner;
4. A partner has committed an act or is acting with the intention to
breach the partnership contract or the bylaws or is acting in gross
negligence and causing severe dama ge to the general partnership
enterprise.

The partner requesting the court to consider the dissolution shall not be the
partner causing the aforementioned events.

Other partners may request the court to order the partner at fault to pay
compensation or to withdraw from the pa rtnership enterprise instead of ordering
dissolution. In such event, the general pa rtnership enterprise shall distribute the
assets of the enterprise to such partner at the current value of such assets after
deducting the damage caused by such pa rtner, unless otherwise agreed by the
partners.

Article 56. Dissolution by Operation of Law

A general partnership enterprise may be dissolved on any of the following
legal grounds:

1. Dissolution in accordance with the contract or bylaws of the general
partnership enterprise;
2. Only one partner remains in the general partnership enterprise;
3. A partner dies, becomes bankrupt or has no legal capacity, except as
otherwise agreed;
37 This is a literal translation. It appears to be a reference to temporary dissolution upon the
occurrence of the events set out in Article 53 as opposed to permanent dissolution under Article 67.
22

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

4. Dissolution stipulated in Chapter 2 and Chapter 3 of Part II of this
law.

In the event that a partner dies but th e general partnership enterprise is not
dissolved, the heir of the deceased part ner is entitled to receive the full
distribution of dividends or asse ts of the deceased partner.

Article 57. Effects of Temporary Dissolution

The temporary dissolution of a general partnership ente rprise has the
following effects:

1. The temporary suspension of a partne r’s right to claim benefits from
the general partnership enterprise;
2. The liability of partners for pa yment of unpaid shares is not
terminated;
3. The temporary suspension of paymen ts, [but] receivables owed to the
enterprise shall be paid;
4. The general partnership enterprise sh all have no right to engage in
business activities, but shall continue to exist as a legal entity for a
period of time until its dissolution is registered and the enterprise
registration license is permanently cancelled in order to complete
pending matters and proceed with liquidation.

E. Liquidation of General Partnership Enterprises

Article 58. Methods for Liquidation

Partners may agree on the method for di stribution of assets or liquidation
as provided in the bylaws of the general partnership enterprise or as agreed
between partners, except for a dissolu tion caused by bankruptcy, by court order,
or when only one partner remains in the partnership.

Article 59. Appointment or Removal of Liquidator

Liquidation of a general pa rtnership enterprise may be carried out by the
manager or all partners as joint liquidators or by appoi nting a partner or a third
party to act as the liquidator. Such a ppointment shall require unanimous approval
from all partners.

In the event that the votes cast by partners for the selection of the
liquidator are not sufficient as required in paragraph one of this article, the
partners of the general part nership enterprise may request the court to appoint the
liquidator.

23

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The liquidator specified under this article and Article 60 of this law shall
be removed in the same way he 38 was appointed.

Article 60. Appointment of Liquidator by Court

In the case of the dissolution of a ge neral partnership enterprise caused by
bankruptcy or by court order or when only a single partner remains in the
partnership, only the court shall appoint the liquidator.

In the event that a genera l partnership enterprise is dissolved because of
the death of a partner, the deceased partner’s heir is entitled to act or participate as
liquidator.

Where there are several heirs, one pe rson shall be appointed as their
representative.

Article 61. Appointment of Replacemen t for Liquidator who is Unable to
Perform

In the event that, for any reason, a liquidator is unable to perform his
duties following his appointment, such as d eath or lack of capacity, all partners
shall act as joint liquidators until a new liquidator is appointed as a replacement.

The general partnership enterprise shall give public notice of the
appointment, removal or termination of the liquidator’s duties within ten working
days from such appointment, removal or termination as provided in this article,
Article 59 and Article 60 of this law.

Article 62. Rights and Duties of Liquidators

In the case of the liquidation of a general partnership enterprise, the
liquidator has the following rights and duties:

1. To give written notice of the dissolution to creditors of the general
partnership enterprise and announce through suitable mass media
within ten working days from the date of the occurrence causing the
dissolution
39 in order to inform the public and allow creditors to
present documents relating to the debts of the general partnership
enterprise;
2. To collect all assets, and to create a balance sheet;
38 For readability, these provisions have been translated as if the liquidator is a natural person;
however, in practice, liquidators can be legal entities or natural persons.
39 The time limit qualifies both the written notice and the announcement.

24

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

3. To continue to complete pending bu siness of the general partnership
enterprise;
4. To receive remuneration for the performance of his duties from the
general partnership en terprise as agreed;
5. To apply necessary measures to pr eserve assets, to claim for full
repayment of debts, [and] to sell or transfer the assets of the general
partnership enterprise;
6. To submit a report on th e balance sheet to auditors to certify its
accuracy;
7. To report on the collection of asse ts and various activities to the
relevant creditors, partners or to the court if the liquidator is
appointed by the court;
8. To call the meeting of creditors and partners to adopt or decide on
such issues as necessary and to cal l a meeting at least once every six
months;
9. To perform the tasks a ssigned by the meeting of the partners and
creditors;
10. To present quarterly reports on the balance sheet to the enterprise
registration officers;
11. To repay debts to creditors and distribute remaining assets to the
partners;
12. To mediate issues or file claims in court in legal proceedings in the
name of the general pa rtnership enterprise;
13. To report to the pa rtners or to the court, if the court has appointed the
liquidator, if he finds that the assets of the general partnership
enterprise, including those of its pa rtners, are insufficient to pay the
debts. In the event that the general partnership enterprise is unable to
pay its excessive debts, the liquidator may file with the court for
bankruptcy.

Upon the declaration of bankruptcy by the court following the process
defined in the Law on the Bankruptcy of Enterprises, the rights and duties of the
liquidator shall be terminated and his ta sks shall be transferred to the asset
supervision committee
40.

Article 63. Performance of Duties by Several Liquidators

The joint performance of duties by several liquidators shall be based on a
majority vote where each person has one vote, except if a specific task is assigned
to a different person, but such assignmen t shall be notified to the enterprise
registration officers within ten working days from the date of appointment.

Restrictions on the use of power by th e liquidators have no effect on third
parties.
40 Readers may wish to refer to Article 15 of the Law on Bankruptcy of Enterprises for more
information on this committee.
25

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 64. Priority in Payment of Debts and Distribution of Assets

The payment of debts and the distributi on of assets shall be made in the
following [order of] priority:

1. Salaries of the employees;
2. Debts owed to the State that do not arise from contracts between [the
enterprise and] the State or persons described in Article 4 of the Law
on Secured Transactions;
3. Secured debts;
4. Unsecured debts;
5. Debts of the general partnership ente rprise owed to the partners as
described in paragraphs four and fi ve of Article 39 of this law;
6. Distribution of profits or losses among the partners;
7. Return of capital contributed by th e partners. In this case, capital
contributed in labour may not be re imbursed, unless the partners have
agreed on the reimbursement at the time of capital contribution.

Article 65. Duties of Liquidators after Liquidation

Upon the completion of liquidation, the liquidator shall:

1. Immediately prepare a statement a nd report on the distribution of
assets and repayment of debts for adoption by the meeting of creditors
and partners;
2. Inform the public of the report on the distribution of assets and
repayment of debts within ten working days from the date of
completion of the distribution of assets and repayment of debts;
3. Hand over all documents relating to the liquidation of the concerned
general partnership enterprise and register the completion of
liquidation with the enterp rise registration officer.

Article 66. Liability of Liquidators

Liquidators are liable for their following acts:

1. Intentional acts that cause dama ge to the general partnership
enterprise or [damage caused] by severe gross negligence in the
performance of their duties. Severe gross negligence [refers to] the
failure to perform their tasks or performing [their tasks] in a wrongful
manner which they know or ought to know would cause damage;
2. Acts against the assignors 41 and third parties as stipulated in relevant
laws.

41 This is a reference to pe rsons appointing the liquidator.
26

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 67. Notification of Dissolution and Cancellation of Enterprise License

Upon public notice of the distribution of assets and repayment of debts as
described in item 2, Article 65 of this law, the liquidator shall register the
permanent dissolution of the general part nership enterprise within ten working
days with the relevant ente rprise registration officer.

The relevant enterprise registration officer shall cancel the enterprise’s
name from the enterprise registry in accordance with paragraph one above and
issue a public notice on such cancellation within ten working days from the date
the name is cancelled.

A general partnership enterprise shall ha ve no status as a legal entity from
the date the court orders the permanent di ssolution of the partnership enterprise.

The dissolution of a general partnership enterprise due to bankruptcy or
merger of the partnership does not require notice of dissolution.

Article 68. Liability of Partners of General Partnership Enterprises

All partners shall be jointly liable for the debts of the general partnership
enterprise remaining unpaid for a period of three years from the date the court
ordered permanent dissolution.

In the case described in paragraph one above, the court shall appoint a
liquidator to carry out liquidation procedures until the debts have been repaid in
full.

Chapter 3
Limited Partnership Enterprises

A. General Principles and Enterprise Registration

Article 69. Liability of Partners

General partners in a limited partnership enterprise shall have unlimited
liability for the debts of the limited partnership enterprise.

Partners with limited liability in a limited partnership enterprise shall be
liable for the debts of the limited partne rship enterprise up to an amount not
exceeding the unpaid portion of their subscribed shares.

All partners of a limited partnership enterprise that has not completed
registration shall have unlimited liability fo r the debts of the partnership occurring
during the period of establishment.
27

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 70. Filing of Notification for Enterprise Registration

The filing of a notification for the registration of a limited partnership
enterprise shall be subject to Article 38 of this law.

B. Relationship between Limited Partners and Limited Partnership and [with] Third Parties

Article 71. Capital Contribution

Limited partners may contribute capital in cash or in kind, but shall not
contribute in labour. Each share of a limited partnership enterprise not need be of
equal value.

The methods and schedule for capital contributions shall be agreed among
all partners in the limite d partnership enterprise.

Article 72. Transfer of Shares

Limited partners may transfer their shares without requiring approval from
the other partners. Such transfer of shares is effective against third parties only
after prior notice [has been given] and an amendment to the enterprise registration
has been made.

In the event that a limited partner faces any issue, the following solutions
shall apply:

1. If a partner dies, his heirs may replace him as partner, unless
otherwise agreed;
2. If a partner becomes bankrupt, only th e share of the bankrupt partner
shall be sold and given to the a sset supervision committee for further
proceedings in accordance with the Law on the Bankruptcy of
Enterprises. The disposal of the share of the bankrupt partner
terminates his status as a partner in the limited partnership enterprise,
but the limited partnership enterprise may continue business
activities;
3. If a partner lacks legal capacity, th e guardian of that partner shall be
assigned to oversee and administer his interests, except when the
partner has otherwise agreed in advance.

Article 73. Liability of Limited Partners in Management of Limited Partnership
Enterprises

Limited partners are not entitled to act as managers like the general
partners, except if they are appointed by all the general partners.
28

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

In the event that a limited partner acts as manager without a proper
appointment, it shall have the following effects:

1. [Such limited partner] shall have unlimited liability for the damage
caused to the enterprise and to third parties;
2. In the event that the partners of the limited partnership enterprise
supported, endorsed, assigned or knew of such acts but did not object,
the limited partnership enterprise shall be jointly liable for any
damage to third parties.

In the event that a limited partner is involved in a limited partnership
enterprise in any way mentioned in the paragraph above, that partner shall have
unlimited liability for debts to third parties only, but his limited liability towards
the limited partnership enterprise remains unchanged.

Article 74. Effects of Authorising Others to Use Enterprise Name

The name of a limited partnership enterp rise is obtained from the names or
surnames of the general partners.

Any limited partner who authorises th e limited partnership enterprise to
use his name, whether directly or indirectly, shall be liable for the debts of the
limited partnership enterprise to third parties in a manner similar to the general
partners, but his limited liability towards the limited partnership enterprise
remains unchanged.

Article 75. Distribution of Dividends or Interest

Limited partners are entitled to rece ive dividends or interest from the
limited partnership’s business activities that generate profit in the agreed
proportion or amount, except when the limite d partnership enterprise sustains
losses or its capital is diminished becau se of the prior accumulation of losses.

The payment of dividends or interest shall take place at the end of each
fiscal year in accordance with the Law on Enterprise Accounting of the Lao PDR.

Dividends or interest legitimately distributed by the limited partnership
enterprise may not be reclaimed.

29

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 76. Rights and Duties of Limited Partners

Limited partners have the following rights and duties:

1. To give opinions [and] recommendations to[,] and to make inquiries
regarding the business operations of the limited partnership enterprise
of[,] the manager;
2. To be liquidators of the limited partnership enterprise, if they are
appointed;
3. To elect or remove the manager, unless otherwise agreed;
4. To vote on amendments to the byl aws and on the dissolution of the
limited partnership enterprise. Th e methods of voting shall be
described in detail in the bylaws of the limited partnership enterprise;
5. To conduct other lawful business ac tivities, regardless of whether
such business activities are similar or identical to the activities of the
limited partnership enterprise in which they are partners.

The exercise of the rights and the performance of the duties of limited
partners described in items 1 to 5 of th is article shall not be deemed to be
involvement in the management of limited partnership enterprise as mentioned in
Article 73 of this law.

Article 77. Application of Provisions relat ing to General Partnership Enterprises

In addition to the provisions contained in Chapter 3, Part IV, the
provisions of Chapter 2, Part IV of this law shall apply with respect to enterprise
registration, the internal and external relationships of the enterprise, mergers,
dissolution and the liquida tion of the enterprise.

Part V
Companies

Chapter 1
General Principles Relating to Companies

Article 78. Shareholders of Companies

Persons who contribute capital to a company are called “shareholders”.

Shareholders are only liable for the company’s debts up to an amount not
exceeding the unpaid portion of [their] shares.

A company may have one or more shareholders.

30

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Shareholders or promoters of a company may be natural persons or legal
entities.

Article 79. Status [of a Company] as Le gal Entity and [Status of] Branches of
Company

A company is a legal entity and its bran ches have the identical legal status
as branches of partnership enterprises as stipulated in Article 34 and Article 35 of
this law.

Article 80. Group Company

Any company acquiring a su fficient number of shares in another company
in order to gain control over such comp any’s administration is called a “group
company”.

A company controlled by another comp any as described in paragraph one
above is referred to as a “subsidiary”.

Restrictions on the scope of management control shall be in compliance
with the relevant laws and regulations.

Article 81. Contract of Incorporation

A contract of incorporation shall be made in writing in accordance with
the Contract Law of the Lao PDR.

A contract of incorporation shall contain the following items:

1. The name of the enterprise;
2. The business purpose;
3. The name [and] location of the headqu arters and all branches, if any;
4. The stated capital broken down into the value and number of shares,
the proportion contributed in kind, th e proportion contributed in cash,
and [the number of] common shares and preferred shares;
5. The names, addresses and nationa lities of the promoters of the
company, and the number of shares subscribed by each promoter;
6. Provisions referring to th e directors’ unlimited liability for the debts
of the company. 42 The provisions on unlimited liability of the director
in this paragraph shall terminate one year after the date [such] director
is removed from the company;
7. The names and signatures of th e promoters of the company.

42 This has the connotation that the extent of the director’s liability, if any, must be stipulated in the
contract of incorporation.

31

Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The stated capital mentioned in item 4 of this article is the registered
capital of the company.

A company with a single shareholder is not required to have a contract of
incorporation.

Article 82. Bylaws of Companies

The bylaws of a company shall contain the following items:

1. The matters described in item 1 to item 6 of Article 81 of this law;
2. The method for the distribution of the company’s profits or dividends;
3. The method and schedule of payment for shares;
4. Administration and management;
5. Meetings and methods for voting;
6. Methods for dispute resolution;
7. Dissolution and liquidation.

The contents of item 1 of this article must be included in the notification
for enterprise registration, but the comp any may include additional information.

The bylaws of a company must be signed by the director 43.

Article 83. Modifications of Contra ct of Incorporation or Bylaws

Any amendment or modification to th e contents of the contract of
incorporation or the bylaws of a company shall be made by special resolution of
the shareholders’ meeting as described in Article 144 of this law.

Any resolution of the shareholders’ meeting on the amendment or
modification of the contract of incorporat ion or the bylaws of a company shall be
notified to the relevant enterprise regi stration officers within ten working days
from the date the shareholders’ mee ting adopts the resolution on modification.

Chapter 2
Limited Companies

A. General Principles and Incorporation

Article 84. Shareholding of Limited Companies

A limited company may hold shares of other companies or may be a
partner in other partnership enterprises but shall not be a shareholder in its own
limited company.
43 In the original Lao text, it is unclear whether this term should be singular or plural. The translators
have therefore simply used the singular form here.
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Article 85. More or Fewer Shareholders than Number Stipulated

A limited company with more than thirty shareholders may continue to
maintain its status as a limited company provided that a special resolution is
required as specified in Article 144 of this law.

In the event that the limited company doe s not wish to maintain its status
as a limited company or does not receive su fficient votes as specified in paragraph
one of this article, the company shall am end the enterprise registration license in
accordance with the procedures and prin ciples governing the establishment of
public companies or dissolve the company.

In the event that only a single shareh older remains in the limited company,
the limited company shall change its na me to “one-person limited company” and
shall comply with the provisions under s ub-section J, Chapter 2, Part V of this
law, or dissolve the limited company.

Article 86. Incorporation of Limited Companies

A limited company shall be incorporated in accordance with following
procedures and conditions:

1. At least two promoters submit the contract of incorporation as a
notification to the enterprise registration officers where the
company’s headquarters are located;
2. Upon notification of the contract of incorporation of a limited
company required under item 1 of this article, the company must find
persons to subscribe for all the shares of the company. The share
subscription shall not be carried out through a public offering.
Persons subscribing for shares are referred to “share subscribers”;
3. The meeting of incorporation is convened;
4. The promoters of the limited compa ny assign all tasks to the director
elected by the incorporation meeting;
5. The director calls for payment in full of shares from the promoters
and subscribers of the limited company as defined in paragraph one of
Article 96 of this law;
6. Upon full payment of shares as provided in item 5 of this article, the
director shall register the enterprise within thirty days from the date of
full payment of shares.

Article 87. Promoters of Limited Companies

The promoters of a limited company are persons who initiate the
establishment of the limited company, but are not representatives of the limited
company and are required to hold at least one share.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The main duties of the promoters of a limited company are to undertake
all activities relating to the establishmen t of the limited company until the meeting
of incorporation is convened.

Article 88. Liability of Prom oters towards Share Subscribers

The promoters of a limited company shall be liable to share subscribers for
the following acts:

1. Acting in [their own] personal interests;
2. Concealing revenues or expenses in curred in association with the
establishment of the limited company;
3. Incurring expenses or making contracts outside the objective of
establishing the limited company;
4. Evaluating their assets in ex cess of [their] actual value;
5. Other liabilities as provided in this law.

The promoters shall resolve [such ac ts] and compensate for any damages
arising from such acts in accordan ce with the laws and regulations.

Article 89. Liability of Promoters towards Third Parties

The promoters of a limited company shal l have joint unlimited liability for
contracts signed with third parties relating to the establishment of a limited
company or
44 for unapproved expenses for the establishment of a limited
company or for expenses that have been approved but where the company does
not get registered.

Article 90. Rights and Duties of Incorporation Meeting of Limited Companies

The incorporation meeting of a limited company has the following rights
and duties:

1. To adopt the bylaws of the limited company;
2. To approve the contract of incor poration and other contracts relating
to the establishment of the limited company entered into by promoters
with third parties, including the expenses incurred by the promoters
relating to the establishment of the limited company;
3. To decide on the common and preferred shares, if any;
4. To elect the initial board of the limited company.

44 See footnote 20.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

At least ten working days before the date the incorporation meeting is
convened, the promoters shall send a report on the in corporation to the share
subscribers together with the list of sh are subscribers, their addresses and the
number of shares subscribed by each person.

Article 91. Resolutions of Incorpor ation Meeting of Limited Companies

Resolutions of the incorporation meeting shall be effective only when
adopted by more than half of the promoters and share subscribers attending the
meeting and by share subscribers representi ng more than half of the total shares
subscribed. One share shall be equal to one vote.

The promoters or share subscribers sh all not have the right to vote on
matters in which they have any involvement that could benefit them 45, except for
votes to elect the directors of the limited company.

The incorporation meeting of a limited company shall determine whether a
promoter or share subscriber has an involve ment that could benefit him or a direct
benefit.

Article 92. Filing of Notification for Enterprise Registration

The following documents are required for the filing of a notification for
enterprise registration of a limited company:

1. The application form for the notificat ion of enterprise registration and
the contract of incorpora tion of the limited company;
2. The minutes of the incorporation meeting of the limited company;
3. The bylaws of the limited company.

The notification for enterprise regist ration shall be signed by the director.

Article 93. Liability of Directors for Default in Enterprise Registration

The registration officers shall reject the registration of a limited enterprise
if the time set forth in item 6 of Article 86 of this law has expired, except [when] the delay in registration arises by reason of necessity that is not the fault of the
directors or the shareholders adopt a resolution to continue the enterprise
registration by a vote of more than f our-fifths of the fully paid shares.

In the event that the limited company is not registered, the directors shall
return the total value of shares in full to the shareholders within three months
from the date the enterprise registration officers reject the registration of the
enterprise.
45 In the original Lao text, there is one word for the whole idea of “involvement that could benefit
them”.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

In the event that the three months is exceeded and the directors involved
do not return the total value of the shares in full to the subscribers, such directors
shall be liable for the remain ing amount together with inte rest at the bank rate for
loans, except that a director may prove th at he was not at fault in delaying the
enterprise registration and is unable to return such shares in full.

B. Shares and Share Certificates of Limited Companies

Article 94. Shares

Each share of a limited company shall not be issued [with a face value of] less than two thousand Kip.

A share of a limited company may be held by one or several shareholders,
and one person shall be assigned to have rights as a shareholder in the limited
company, provided that these shareholde rs shall be jointly responsible for
payment of unpaid shares to the limited company.

Shares of a limited company may be c ontributed in cash or in kind. The
contribution in kind shall be appraised in monetary terms [which appraisal shall
be] approved by at least two-thirds of the promoters and share subscribers
attending the incorporation meeting, except as otherwise agreed. Shares
contributed in other forms than in kind and in cash shall be determined in detail at
the incorporation meeting.

There are two types of shares of a limited company: common shares and
preferred shares.

Article 95. Value of Shares and Issuance of Shares below Par Value

The value of a share of a limited company shall be determined in the
contract of incorporation. Such value of a share is referred as its “par value”.

A limited company shall not issue shares below par value as described in
paragraph one above, except when the lim ited company reduces its capital as
stipulated in Article 112 of this law. The restrictions under this paragraph shall
not apply to price setting by the shareholders for the sale or purchase of shares.

A limited company may only increase the value of its shares by complying
with Article 110 of this law.

Article 96. Payment of Shares before Enterprise Registration

Payment of shares before enterprise registration is the payment of shares
following the incorporation mee ting stipulated in item 5 of Article 86 of this law.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

In such case of payment of shares, the subscribers shall pay in full if it is in kind
and at least seventy percent of the value of subscribed shares if it is in cash.

The directors of the limited comp any may call for payment of the
remaining amount at any time after regi stration of the enterprise, unless the
company’s bylaws stipulate otherwise.

Article 97. Payment of Shares after Enterprise Registration

In calling for the payment of shares as described in paragraph two, Article
96 of this law, the direct ors of a limited company sha ll call upon each shareholder
to pay for shares in proportion to his shareholding by giving thirty days prior
written notice to each shareholder indicat ing the date and amount of payment.

Payment of shares as mentioned above or payment of shares in other
cases, such as an increase of capital under Article 110 of this law, shall be made
in cash and it is prohibited to set off debts with the limited company, unless a
special resolution of the shar eholders’ meeting is passed.

Article 98. Effects of Failure to Pay for Shares

Shareholders who fail to pay for shares at the first call by the directors of a
limited company shall pay interest at the bank rate for loans on the portion
remaining unpaid commencing from the date they receive notice, and are entitled
to vote in the shareholders’ meeting with only their fully paid shares.

In the event that a shareholder fails to pay both shares and interest at the
second call, the directors are entitled to sell these shares by giving p
riority as
specified in items 1 to 4 of Article 111 of this law to recover payment for the
shares and interest for the limited company. Any remaining amount shall be
returned to the concerned shareholder.

In the event that the amount from th e sale of shares under paragraph two
of this article is not sufficient, the directors have the right to claim for full
payment; otherwise, the directors may refuse to register the transfer of shares or
suspend the right to vote of the con cerned shareholder at the shareholders’
meeting.

Article 99. Rights and Duties of Common Shareholders

Owners of common shares are referre d to as “common shareholders”.
Common shareholders have th e following rights and duties:

1. To present opinions on the limited company’s activities;
2. To participate in the limited company’s activities;
3. To pay for shares on the due date;
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

4. To fully protect their interests;
5. To receive information and examine the records of the limited
company as provided in the limited company’s bylaws;
6. To file complaints against directors, officers or employees of the
limited company causing prejudice to their interests;
7. To be liable for the unpaid portion of their shares;
8. To have pre-emptive rights with resp ect to the transfer or sale of
shares by shareholders of the limited company to third parties;
9. To elect or remove director s of the limited company;
10. To receive part of the assets remaining from liquidation in event of
dissolution;
11. To receive dividends in propor tion to their shareholdings;
12. To exercise such other rights an d perform such other duties as
specified under laws and regulations.

The distribution of dividends and asse ts described in items 10 and 11 of
this article may be carried out only after the distributi on to the limited company’s
preferred shareholders and creditors.

Article 100. Rights and Duties of Preferred Shareholders

Owners of preferred shares are referre d to as “preferred shareholders”.
Preferred shareholders have the following rights and duties:

1. The rights and duties as described in items one to six of Article 99 of
this law;
2. To be entitled to the distribution of assets and dividends before the
common shareholders. Dividends may be received at a fixed amount
or as a percentage of shares as agreed by the shareholders;
3. To receive other special rights. A ny modification or revision of these
special rights shall be determined in the limited company’s bylaws;
4. To redeem their shares when the li mited company is profitable or to
seek to sell their shares to new shareholders after the limited company
has refused to buy such shares, except as otherwise agreed.

In the event that the limited company agrees to purchase the shares
mentioned in item 1 46 of this article, the purchase price shall be at the set price or
agreed price.

Preferred shareholders are not entitled to elect the directors of the limited
company.

46 In the original Lao text, the reference to “”item 1” may be an erroneous reference which should
have been made to item 4.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 101. Issuance of Share Certificates of Limited Companies

Within thirty days from the date of registration of a limited company, the
directors shall issue share certificates to the shareholders. Each share certificate
shall bear the signatu re of the director with the stamp of the limited company.

Each share certificate shall have a va lue of at least one share or more.

There are two types of share certificat es of limited companies: registered
share certificates and be arer share certificates. 47

Article 102 Registered Share Certificates

Registered share certificates sha ll contain the following main items:

1. The serial number of the share certificate;
2. The name of the limited company;
3. The name of the shareholder;
4. The number of shares held by the shareholder;
5. The value of each share;
6. The value of the unpaid portion and sc hedule of payment, if specified;
7. The signature of the director a nd stamp [of the limited company].

A registered share certificate may be for shares that have not been paid.
Such registered share certificate may be converted into a bearer share certificate
when the shareholder has paid for the shar es in full and registered to cancel the
previous [certificate].

In the event that the bylaws of the limited company require that the
directors hold shares of the limited company, the directors shall only hold
registered share certificates.

Article 103. Bearer Share Certificates

A bearer share certificate is a negotiable instrument and may only be
issued if the following conditions are met:

1. The shares have been fully paid;
2. The right of the company to issue bearer share certificates shall be
specified in the bylaws of the company.

A bearer share certificate has similar contents to a registered share
certificate, except for the contents relati ng to the name of shareholders and the
value of the unpaid shares.
47 The literal translations of these terms are “name certificates” and “no-name certificates”,
respectively.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

A bearer share certificate may be converted into a registered share
certificate by cancelling such share certif icate and issuing a registered share
certificate in its place.

Article 104. Transfer of Shares

A bearer share certificate of a lim ited company may be transferred by
handing over the share certificate to another.

Bearer shares may only be transferred when:

1. [The transfer] is consistent with the restrictions on share transfer
provided in the bylaws of the limited company;
2. [The transfer] does not contravene any legal restrictions on share
transfers;
3. They are acquired [pursuant to] a transfer of shares by operation of
law;
4. [The transfer] is made in wr iting by indicating the names and
signatures of the transferor and transferee, as well as the names and
signatures of at least one witness for the transferor and one for the
transferee, and the serial number of the transferred share certificate;
5. The transfer is registere d. In the event of a transfer to a third party, a
prior offering shall be made to the other shareholders of the company,
and the transfer shall be registered with the name and address of the
transferee in the share register.

The directors of a limited company may refuse to register a transfer of
registered share certifi cates if the shares have not been fully paid.

In the event that a limited company has registered the transfer of shares as
mentioned in paragraph three above, the transferor shall remain liable to creditors
for his unpaid portion of the transferred shares.

Article 105 Share Transfer by Operation of Law

A share transfer by operation of law [refers to] the transfer of shares
pursuant to the grounds set out in paragra ph two of Article 98 and paragraph three
of Article 108 of this law, or by the death, bankruptcy or other circumstances of
the shareholder.

A person who receives shares transfe rred by operation of law shall present
full and proper evidence on the acquisition of such transferred shares, including
share certificates, to the relevant limited company in order to be issued a share
certificate and to be registered as a new shareholder of the limited company.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 106. Restrictions on Share Transfers by Operation of Law

Restrictions on share transfers by operation of law include:

1. The restrictions described in paragraph three, Article 98 of this law;
2. Restrictions on share transfers under other laws, such as restrictions,
if any, against shareholding by forei gn persons, foreign residents or
apatrids in any type of business;
3. The transfer of shares during the supervision of assets 48;
4. The transfer of shares when the shareholder regi ster book is closed, if
agreed or specified in the bylaws of the limited company.

Article 107. Shareholder Register Book

The shareholder register book shall contain the following main items:

1. The names, addresses and nationa lities of the shareholders;
2. The number of shares, value of shares, and serial numbers of share
certificates divided according to their types as registered share
certificates and bearer share certificates;
3. The unpaid portion of shares in the case of registered share
certificates;
4. The date of registration as shar eholder of the limited company;
5. The date of deletion from the shar eholder list of the limited company.

The shareholder register book shall be kept at the office of the limited
company and made available for inspec tion by shareholders at agreed times.

The directors of the limited company sh all send copies of the shareholder
register book each time any changes are made or at least once a year if there is no
change[,] to the relevant enterprise registration officers not later than 25
December of each year.

Article 108. Invalid Transfer of Registered Share Certificates

A transfer of registered share certifi cates shall be invalid if there is any
breach of the requirements set forth in paragraph two, Article 104 of this law.

An invalid transfer of such shares results in the transferee not becoming a
shareholder of the limited company until a proper solution is found. In such case,
the transferor shall remain the owner of the transferred shares.

48 This is a reference to supervision under Article 16 of the Law on the Bankruptcy of Enterprises.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

A transferee who has possessed shares in good faith for more than two
years, without any claim or protest, is en titled to be the lawful owner of such
shares.

Article 109. Liability of Share Transferor and Transferee

The transferor is liable to creditors for the unpaid portion of the shares
transferred, in the case: 49

1. As provided in paragraph four , Article 104 of this law;
2. Payment is called on transferred shares;
3. The transferee is unable to pay the outstanding portion of the unpaid
shares.

The transferor’s liabilities are liabili ties towards creditors[,] and they shall
be terminated within one year from the da te of registration of the share transfer.
The limited company may not file a claim
50 against the transferor.

The transferee acquires all rights, dutie s and obligations attaching to the
transferred shares.

C. Increase or Reduction of Capital of Limited Companies

Article 110. Increase of Capital

A limited company may increase its re gistered capital by increasing the
number of shares or increasing the value of each share.

Increasing the registered capital sha ll be approved by [the adoption of] a
special resolution of the shareholders’ meeti ng as stipulated in Article 144 of this
law.

49 The translators left this term as is because it is unclear whether the term refers to cumulative
events or a single triggering event.
50 In Laos, there are several means by which citizens with grievances are able to seek redress either
administratively or through the legal process. The re ader may wish to refer to Article 2 of the Law on
Handling Petitions for more information on these means. Th e word translated as a “claim” in this Enterprise
Law corresponds to the second category of petitions referred to in Article 2 of the Law on Handling
Petitions.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 111. Offering of Additional Shares

Additional shares shall be offered in the following order of priority:

1. [Shares are] offered to the limited company’s shareholders in
proportion to their shareholding by sending a written notice to each
shareholder indicating the timeframe for response. Any failure to
respond or delay in responding shall be considered as a forfeiture of
[that shareholde r’s] rights;
2. The shares which were not acquired after the specified timeframe had
expired or in respect of which th e shareholders refused to acquire
these shares in proportion to their shareholding are then offered to the
other shareholders of the limited co mpany who have an interest in
acquiring them;
3. The directors have the right to pu rchase shares remaining after the
offering under item 2 of this article;
4. [Any remaining shares] shall be offered to third parties. The methods
and procedures for the transfer of shares shall comply with the bylaws
of the limited company.

The measures defined in Article 98 of this law shall apply to subscribers
who fail to pay for the additional shares when [payment is] due.

Article 112. Reduction of Capital

A limited company may reduce its regist ered capital by reducing the value
of each share or reducing the number of the company’s shares. The reduction of
registered capital shall comply with the following requirements:

1. The value of shares remaining af ter the reduction shall not be less
than two thousand Kip;
2. The capital remaining after the reduction shall not be less than one
half of the registered capital and shall not be less than the capital set
by the relevant authorities as described in paragraph three, Article 20
of this law;
3. The reduction of registered capita l may be executed only when a
special resolution is passed as pr ovided in Article 144 of this law;
4. The creditors of the limited company have not opposed the reduction
of such capital.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Article 113. Notice to Creditors

Notice shall be given to creditors of the limited company to allow them to
oppose the reduction, as follows:

1. Written notice shall be sent to all the creditors of the limited company
indicating the reasons for the capital reduction, [and] the value or
number of shares to be reduced. The time period for objecting shall
not be less than two months from the date such notice is received.
Creditors who fail to respond within such timeframe shall be deemed
not to object;
2. Public notice shall be given at least ten times by indicating the
timeframe for response and other detail s as described in item 1 of this
article.

Article 114. Objections and Responsibility 51 for Notice

An objection by a creditor prevents th e limited company from reducing its
capital, unless the debt due to that creditor has been fully repaid.

In the event that any creditor has not received such notice on the reduction
of capital due to the fault of the lim ited company, the limited company shall pay
the debt owed to such creditor not later than one year from the date of the
shareholders’ meeting adopting the resolu tion for the reduction of the capital of
the limited company.

In the event that the credito r is at fault, such creditor shall be considered as
having not objected.

Article 115 Registration of Capital Increase or Reduction

A limited company that has increased or reduced its capital, as provided in
this sub-section C, shall register that cha nge in capital with the relevant enterprise
registration officers as follows:

1. The registration of a capital incr ease shall be made within ten
working days from the date specified for the payment of subscribed
shares;
2. The registration of a capital reduc tion shall be made within ten
working days from the date of no objection or from the date debts are
paid to the opposing creditors.

51 This articles does not appear to address responsibilities or liabilities; however, the word
“’responsibility” is used in the original Lao text.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Upon registering the capital increase or reduction, the limited company
shall give public notice at least once with in ten working days from the date the
change in capital is registered.

The documents submitted [to regist er] the changed new [amount of
registered] capital shall include the list of shareholders whose shares in the limited
company have been increased or reduced, their nationalities and addresses, the
serial number of share certificates and the number of shares held.

D. Directors and Board of Directors of Limited Companies

Article 116. Directors

A director is the representative of a limited company. The relationships
among directors, the limited company and third parties shall be based on the
relevant laws and regulations.

A director of a limited company receives no salary but receives an annual
honorarium and remuneration for each meeting at the rate or in the amount
determined by the shareholders’ meeting, except for third party directors or as
otherwise agreed.

Directors may or may not be shareholders, except as otherwise agreed.

All acts of directors must be with in the scope of power and duties
determined in the bylaws of the company and shall be under the supervision of the
shareholders’ meeting.

A limited company may have several directors depending on the needs of
the limited company.

In the event that a limited company ha s several directors, one of whom is
authorised to enter into contracts with third parties on behalf of the limited
company, such director shall be called the “general director”.

In the event that the chairman of the board of directors is elected as the
general director, he shall be referred to as the “president of the board”.

Article 117. Qualifications of Directors

A director of a limited company shal l have the following qualifications:

1. Shall not be a legal entity;
2. Shall have legal capacity;
3. Shall not be a bankrupt person, who is still under the restricted period
for conducting business;
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

4. Shall never have been convicted of embezzlement or
misappropriation of assets.

Article 118. Appointment or Removal of Directors

Directors are appointed in the following manner:

1. The initial board of di rectors is appointed by the incorporation
meeting of the limited company;
2. Subsequent boards of directors ar e appointed by the shareholders’
meeting;
3. Any vacancy in between two ordinary shareholders’ meetings shall be
filled by an appointment made by a meeting of the board of
directors.
52 In the event that the limited company does not have a
board of directors, the bylaws shal l provide for the appointment of
such director.

A director of a limited company is removed by the shareholders’ meeting,
notwithstanding the manner in whic h such director was appointed.

The removal of a director may take place at any time when there are
sufficient reasons to justify [such remova l] or there is no confidence in such
director.

The shareholders or the board of dir ectors of a limited company shall not
be entitled to request the court to appoint or remove directors, except when the
appointment procedures stipulated in th is law or in the bylaws of the limited
company have been violated.

Article 119. Voting Procedures for A ppointment or Removal of Directors

Voting for the appointment or removal of directors shall be carried out in
two ways: by cumulative voting and by ordinary voting.

Cumulative voting is when each shareholder multiples his shares by the
number of directors to be elected and votes for one or several candidates he
chooses. In counting the votes , one share shall be equal to one vote. The candidate
receiving the most votes is elected as a director.

52 The term “meeting of the board of directors” is used interchangeably in two senses. First, to refer
to the meetings held by the directors. Second, to refe r the “body of directors” attending such meetings. The
second meaning is intended here and in similar provisions dealing with shareholders’ meetings.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The removal of directors elected by cumulative voting may only take
place if the votes for his removal 53 are at least equal to the number of votes that
elected that director.

Ordinary voting is the vote to elect one director where one share is equal
to one vote.

The elected candidate under paragraph f our of this article is the person
who receives over half of the votes of sh areholders and their proxies attending the
meeting. The removal of such director sha ll be carried out in the same manner as
his election.

Article 120. Number and Term of Office of Directors

A limited company may have one or se veral directors, provided that the
number of directors is specified in the bylaws of the company or agreed by the
shareholders’ meeting.

Directors of a limited company have a term of office of two years and may
be re-elected for another term.

The term of office of a new director appointed to replace [another director] as described in item 3 of Article 118 of th is law is equal to the remaining term of
the replaced director.

Article 121. Liability of Directors

A director shall be liable for the following acts:

1. Acting outside the scope of the limited company’s business purpose
specified in its bylaws or in th e contract of incorporation;
2. Breaching the bylaws of the limited company;
3. Exercising rights and performing dut ies beyond the assigned scope of
power;
4. Failing to exercise assigned righ ts or perform assigned duties.

A director may be released from liability only if such director is able to
prove that his acts were not involved with the breach or that he opposed such acts
which shall [be] reflected in the minutes of the meeting
54.

A shareholder shall reimburse the limited company for any payment to
him made by a director in breach of the bylaws of the company.
53 The literal translation of this term is “votes opposing him as director”.
54 It is not clear from the original Lao text which meeting is meant here.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

The civil liability of a director towards third parties shall apply in
accordance with the laws.

Article 122. Liability for Breaches of Directors

A limited company shall be liable for any breach committed by its
directors towards third parties when the shareholders’ meeting issues a resolution
to adopt any act described in items 1 to 4 of Article 121 of this law.

In the event that [a director] violates the scope of the rights and duti
es
assigned to directors, officers or employ ees of the company without contravening
the purpose of the limited company, the limited company shall be liable towards
third parties. The internal liabilities of the limited company and its directors,
officers or employees in such case shall be dealt with according to the relevant
laws and regulations.

Article 123. Measures Against Directors

A limited company shall apply measures against directors in breach as
described in Article 121 of this law. The measures against the directors shall be
determined in the bylaws of the limited company.

In the event that the limited company fails to apply the measures
mentioned in paragraph one of this articl e, one or more shareholders representing
at least four percent of th e paid shares of the limite d company may file a notice
requesting the company to fine the director or to terminate the act.

In the event that the limited company fails to act or takes improper action
against the director in breach, such shareholders 55 may file a claim requesting the
court to fine such director or to terminat e such act of the director, in the place of
the company.

Article 124. Performance of Duties by Di rectors on behalf of Limited Companies

Directors perform two types of duties: acting as the agent of the limited
company and performing specific duties.

The performance of duties as an agent of a limited company [refers to] the
performance [of duties] in accord ance with the relevant laws. 56 This provision
shall also apply to officers or employees of a limited company.

The specific duties of directors include:
55 This is a reference to the percentage in the previous paragraph.
56 Initially this law included Agency Law. This is a reference is to the intended Agency Law and to
provisions in the Contract Law.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

1. Administering the business of the limited company in compliance
with the contract of incorporati on, the bylaws of the limited company
and the resolutions of the shareholders’ meeting;
2. Calling and collecting payments for shares at the determined amount
and at the defined time;
3. Managing and using the capital of the limited company in accordance
with the defined purpose and goal;
4. Establishing the accounting system, maintaining and filing all
documents of the limited company;
5. Cooperating with the auditors by providing clarifications on the
source and accuracy of numbers a nd information appearing in the
balance sheets before submitting them to the shareholders’ meeting
for adoption;
6. Sending copies of the balance sheet to the shareholders and keeping
copies for review by holders of bearer shares when required;
7. Properly distributing the profits;
8. Administering and depl oying officers or employees of the limited
company;
9. Informing the company of their dire ct or indirect involvement in
transactions of the limited company th at could benefit them or of any
increase or reduction of their shar eholding in the limited company or
in the company’s subsidiaries within the accounting year.

Article 125. Restrictions on Directors

Directors are prohibited from engagi ng in the following business activities
in competition with the limited company:

1. To conduct identical or similar bu siness activities to the limited
company, whether such conduct is fo r their own personal interest or
for another person’s interest, excep t as approved by the shareholders’
meeting;
2. To be a partner in a general partners hip enterprise or a general partner
in a limited partnership enterprise that conducts the same or similar
business activities as the limited company, except as approved by the
shareholders’ meeting;
3. To undertake any transactions with their own limited company,
whether for their own personal in terest or for another person’s
interests, except as otherwise agreed;
4. Directors, including members of their families or close relatives, shall
not borrow money from their limited company, except as permitted
by the bylaws of the limited company. These restrictions also apply to
the officers and employees of the limited company.

In the event of any breach of the restri ctions mentioned in this article, the
measures stipulated in Article 123 of this law shall be applied.
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Article 126. Liability towards Third Parties in Appointment of Directors

In the event that directors are appoint ed in contravention of the bylaws of
the limited company or lack qualificati ons [or] for other reasons, the limited
company may not assert [such deficienci es] as arguments to escape liability
towards third parties.

Article 127. Termination of Directors

The position of directors of a limited company may terminate for any of
the following reasons:

1. The term of office expires;
2. The shareholders’ meeting passes a resolution for the removal of the
director;
3. The court orders his removal as provided in paragraph four, Article
118 of this law;
4. The director dies, becomes bankrupt, resigns, lacks legal capacity,
[or] lacks qualifications as stipulated in Article 117 of this law.

After such termination and the appointme nt of a new director, the relevant
registration officers shall be notified with in ten working days from the date of
such appointment in order to register the changes.

Any change shall be effective toward s third parties only when it has been
registered as stipulated in paragraph two of this article.

The resignation of a director shall be effective from the date the limited
company receives the resignati on letter of the director.

Where the board of directors completes its term, the existing board shall
continue to perform necessary tasks until the new board is elected, except as
otherwise decided by the court as provided in item three of this article.

Article 128. Register Book of Directors

The register book of directors sh all contain the following details:

1. The names, nationalities, dates of birth and addresses of directors;
2. The types of shares, value [of shares], [and] the serial number of
shares and number of shares held by each director;
3. The date of election as director;
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4. The register book of directors an d the minutes of shareholders’
meetings shall be kept at the limited company’s headquarters and
made available to the sharehol ders for review or inspection.
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Article 129. Board of Directors

A limited company with two [or] 58 more directors may establish a “board
of directors” unless otherwise agreed. A limited company with more than fifty
billion Kip in assets shall have a boa rd of directors and [shall] appoint
auditor(s)
59.

The board of directors performs it s tasks based on the principles and
procedures set forth in th e bylaws of the limited company. In the event that the
bylaws of the company do not specify the pr inciples and procedures, the board of
directors of the limited company shall ope rate in accordance with articles 131 to
134 of this law.

The board of directors operates by dividing the responsibilities among the
directors.

The board of directors shall have a pr esident and may choose to have or
not to have a vice president.

Article 130. Rights and Duties of Board of Directors

The board of directors has th e following rights and duties:

1. To act as the central coordinating body and to ov ersee the tasks of the
directors;
2. To appoint a director to fill a vacancy between two ordinary
shareholders’ meetings;
3. To determine the plan for the administration and management of the limited company for adoption by the shareholders’ meeting;
4. To exercise such other rights and perform such other duties as
determined in the bylaws of the limited company.

Article 131. Quorum for Meetin gs of Board of Directors

The quorum for meetings of the board of directors is subject to the
decision of the board of dire ctors itself[,] provided that [the quorum] shall not be
57 The translators are aware that th is item 4 is incongruous in this list; however, this is how the item
appears in the original Lao text.
58 See footnote 20.
59 In the original Lao text, it is unclear whether this term is singular or plural.
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less than half the total number of directors. In the event that there are only two
directors, the quorum shall be two persons.

In the event that the position of a dir ector is vacant but there is a sufficient
number of directors to have a quorum, th e board of directors is still able to
conduct its activities until a new direct or is appointed as a replacement.

In the event that the position of a director is vacant and the number of
directors is less than that required for a quorum as stipulated in paragraph one of
this article, the board of directors ca nnot conduct its activities unless the full
number of directors required is filled.

Article 132. President and Vice Pres idents of Board of Directors

The president and vice presidents of the board of directors are elected
from among the directors.

The president of the board of directors chairs 60 the board meetings [and] the shareholders’ meetings[,] and performs other activities within the scope of
rights and duties specified in the bylaws of the limited company.

The vice presidents of the board of di rectors assist and perform the tasks
assigned by the president.

In the event that the president is unabl e to attend a meeting of the board of
directors or a shareholders’ meeting, one of the vice presidents shall be assigned
to chair the meeting. In the event that there is no vice president or the vice
president is unable to attend the meeting, a director shall be selected as the chair
of [such] specific meeting.

For the shareholders’ meeting of a limited company that has no board of
directors, a director shal l be selected to chair [such] specific meeting.

Article 133. Calling Meetings of Board of Directors

Each director may call a meeting of the board of directors.

Directors shall attend the meetings in person. It is prohibited to assign
other persons to attend the meeting of the board of directors, unless the other
directors give unanimous consent. The proxy or representative attending the
meeting of the board of direct ors has the right to give opinions but not the right to
vote.

60 The literal translation of this term is “leads”.

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When necessary, the board of directors may hold a meeting referred to as
an “informal meeting” through any means of communication.

Article 134. Resolutions and Minutes of Meetings of Board of Directors

The resolutions of the meeting of the board of directors shall be effective
only when adopted by a majority vote of the directors attending the meeting. One
director shall have one vote.

As a director, the president of the m eeting of the board of directors shall
cast his vote like other directors. However, in the event of a tie, the president shall
have one more deciding vote.

A director who has any involvement th at could benefit him or any direct
benefit relating to the re solution shall not vote.

The adoption of resolutions in informal meetings shall be determined in
the bylaws of the limited company by descri bing in detail the voting procedures
when using any specific means of communication.
61

Minutes shall be taken or a report sh all be made of each meeting of the
board of directors. The minutes of meetings of the board of directors shall be kept
at the company’s headquarters and shar eholders shall have access to them for
inspection, except for documents or info rmation containing trade secrets or
relating to the strategic competitiveness of the limited company.

Article 135. Officers and Employees of Limited Companies

The officers of a limited company include managers, secretaries,
accountants and other general officers.

The officers of a limited company are appointed or removed by the board
of directors or by the director if the limited company has no board of directors.
The employees of a limited company are recruited or dismissed by the manager.

The officers of a limited company rece ive salaries. The employees of a
limited company are paid wages 62. The salaries of officers and the wages of
employees of a limited company are a pproved by the shareholders’ meeting.

61 This appears to be a reference to being able to pass resolutions by teleconference or other means
of communication.
62 The Lao language has two terms “salary” and “wag es”. They connote that remuneration is paid on
slightly different bases, e.g., in one case remuneration may be paid on a daily basis while in the other case
remuneration is paid on the basis of a period longer than a day.

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The officers and employees of a limited company shall exercise their
rights and perform their du ties as assigned to them.

The relationship among the directors, officers and employees of a limited
company are subject to the relevant laws.

Hiring or assigning tasks sh all be made in writing, describing in detail the
rights and duties assigned by the assigning person.

In the event that a limited company doe s not have a manager, the directors
shall exercise the rights and perf orm the duties of the manager.

E. Shareholders’ Meeting of Limited Companies

Article 136. Shareholders’ Meetings

A shareholders’ meeting of a limited company is the supreme body of the
limited company. There are two types of shareholders’ meetings of a limited
company: ordinary meetings and extraordinary meetings.

An ordinary meeting shall be held at least once a year. The time for
convening 63 the meeting shall be stipulated in the bylaws of the limited company.

An extraordinary meeting may be held whenever necessary, such as when
the position of an auditor is vacant.

An extraordinary meeting may be held in the following cases:

1. When more than half of the direct ors agree to hold the shareholders’
meeting;
2. When shareholders file complaints and the court orders the meeting to
be convened;
3. When shareholders representing at least twenty percent of the total
paid shares make a request.

When calling a meeting as prescribed in item 3 of this article, the
shareholders shall jointly present a request in writing to the board of directors or
the director[,] by indicating the purpose of the request for convening the meeting.
After receiving the request, the board of directors or the director shall convene the
extraordinary meeting within thirty days from the date the request was received.

63 Here, the literal translation of the term is actually “starting”, not calling, a meeting.

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Article 137. Advance Notice of Meeting to Shareholders

Five working days before conveni ng the ordinary or extraordinary
meeting, the board of directors or director shall notify all shareholders of the date,
the place and the time for the convening and closing of the meeting, and shall
send necessary documents to the shareholders.

In the event that the meeting is pos tponed, the board of directors or the
director shall repeat the same procedures mentioned in paragraph one of this
article.

Notice to shareholders may be delivered directly 64 or through an
appropriate communication system.

Article 138. Quorum

A limited company shall stipulate in detail the quorum for meetings and
the procedures for meetings in the bylaws of the limited company. In the event
that they are not specifie d in the bylaws of the lim ited company, the quorum of
the shareholders’ meeting shall be at l east two shareholders representing more
than half of the total paid shares.

The bylaws of the limited company may stipulate a different 65 quorum,
provided that the numbers shall not be less than the numbers described in
paragraph one of this article.

Shares invalidly transferred shall not be counted in the meeting regardless
of whether the holder of such shares attends the meeting.

Article 139. Agenda of Meetings

The chairman of the meeting shall set and keep to the order of the agenda,
as agreed. Any change to the order of the agenda may be made only when
approved by more than half of the numb er of the shareholders attending the
meeting.

A shareholders’ meeting may add to the meeting’s agenda provided that
shareholders representing more than one-third of the total paid shares make the
proposal.

In the event that any matter requires extensive time for consideration, the
meeting may decide to postpone the consid eration of such matter to a later date
64 This term has the connotation of actual de livery by hand with receipt acknowledged.
65 The literal translation of this term is “stipulate a quorum otherwise”.

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and it is not necessary to follow the procedures for calling meetings set forth in
Article 137 of this law.

Article 140. Venue for and Rules of Meetings

A shareholders’ meeting shall be convened at the limited company’s
headquarters, except in the event of necessity or as otherwise agreed.

In the event that a quorum has not b een achieved after two hours from the
time set for the commencement of the meeting, the chairman has the right to
suspend the meeting.

The next meeting shall be held within fifteen working days from the date
[the meeting] was suspended and shall proceed with [or] without a quorum.

Article 141. Restrictions on Right to Vote

A shareholder may be restricted from voting in the following
circumstances:

1. As stipulated in the bylaws of the limited company;
2. The shareholder has not paid a portion of [his] shares, unless
otherwise agreed;
3. The shareholder is a bearer share holder, except when such share
certificates are presented to the chairman of meeting or the director
prior to convening the meeting;
4. Such shareholder has any involveme nt that could benefit him or a
direct benefit in connection w ith the matter to be voted on.

The shareholders’ meeting shall determine whether the shareholder falls
within item 4 of this article.

Article 142. Assigning Proxies to Shareholders’ Meetings

A shareholder may assign a proxy to attend a meeting, but the assignment
shall be made in writing and presented to the board of directors or the director
before the meeting is convened a nd shall include the following items:

1. The names of the proxy and of the assigning shareholder;
2. The number of shares held by the assigning shareholder;
3. The name, time and venue of the meeting and the scope of the
assignment. In the event that the shareholder authorises the proxy to
vote, this shall also be indicated.

The proxy has an equal number of vot es as the assigning [shareholder],
except as otherwise provided in the letter of assignment.
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Article 143. Resolutions of Shareholders’ Meetings

There are two types of resolutions of shareholders’ meeting: ordinary
resolutions and special resolutions.

An ordinary resolution is effective only when it is passed by a simple
majority vote of the numbe r of shares represented 66 at the meeting where one
share equals one vote.

Article 144. Special Resolution s of Shareholders’ Meetings

Shareholders shall be notified when a m eeting is [called] to adopt a special
resolution, [including] the matters to be cons idered at the meeting, as stipulated in
Article 137 of this law.

A shareholders’ meeting convened to adopt a special resolution may be
held on one or several occasions. The speci al resolution is effective only when it
is passed by a vote of at least two-thir ds of the shareholders or their proxies
attending the meeting representing at le ast eighty percent of the paid shares.

Matters requiring special resolutions include:

1. Voting on matters defined by this law;
2. Amending the bylaws or the contract of incorporation of the limited
company;
3. Increasing or reducing the capital;
4. The merger or dissolution of the limited company;
5. The sale or transfer of all or a s ubstantial part of the business of the
limited company to another person;
6. The purchase or acceptance of a tran sfer of the business of another
enterprise;
7. Maintaining the status as a limited company when there are more than
thirty shareholders.

Within ten working days from the date of adoption, such resolution shall
be registered with the rele vant registration officers.

Article 145. Methods for Adopting Resolutions

Ordinary or special resolutions of the shareholders’ meeting may be
adopted by secret or open ballo t as agreed at each meeting.

66 The literal translation of this term is “participating”.

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Article 146. Protection of Rights and Interests of Minority Shareholders

Resolutions of the shareholders’ meetings are effective when they are
adopted in accordance with Article 143 a nd Article 144 of this law; however, if
the resolutions cause substantive dama ge to the limited company, the limited
company shall compensate the shareholders opposing these resolutions as agreed.

Article 147. Nullification of Resolutions of Shareholders’ Meetings

Resolutions of shareholders’ meetings may be nullified by court order
only. The court may decide to nullify the resolutions of shareholders’ meetings
when:

1. The bylaws or the contract of in corporation of the limited company
are breached;
2. The procedures for the adoption of resolutions are breached;
3. The rules on providing notice of meetings specified in Article 137 of
this law are breached.

Article 148. Persons Entitled to Re quest Nullification of Resolutions

The persons entitled to request the court to nullify the resolutions of
shareholders’ meetings are the shareholders and directors.

In the event that a shareholder dies or has no legal capacity, his legitimate
heirs or guardians have a similar right to request the court to nullify the
resolutions of shareholders’ meetings.

Any request for nullification of a re solution of a shareholders’ meeting
must be made within sixty days from the date the meeting passed the resolution.

Article 149. Rights and Duties of Ordinary Meetings

The ordinary meeting of shareholde rs has the following main rights and
duties:

1. To adopt the bylaws of the limite d company and the contract of
incorporation;
2. To elect the director or the board of directors;
3. To elect the auditors;
4. To determine annual honorariums, meeting allowances or salaries of
directors;
5. To determine salaries of officers, f ees of auditors and wages of other
employees of the company; fees fo r auditors appointed by the court
under paragraph three, Article 155 of this law shall be set by the
court;
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6. To adopt the business report, the accounts receivable, expenses and
business plan of the limited company;
7. To adopt the method for the distribution of dividends;
8. To exercise such other rights and pe rform such other duties as may be
deemed necessary.

The extraordinary meeting exercises rights and performs duties in the
event of necessity arising be tween two ordinary meetings.

F. Finances of Limited Companies

Article 150. Distribution of Dividends

Dividends are distributed equally on a pro rata basis to every paid share,
except as otherwise agreed. The distribu tion of dividends requires prior approval
of the shareholders’ meeting.

A limited company shall not distri bute dividends when the company
sustains accumulated losses from previous years.

In the event that there is a breach of paragraph two of this article resulting
in detriment to the company’s creditors, the creditors may make a claim 67 against
the shareholders to return the distributed dividends provided that such claim is
made within one year from the date of the distribution of such dividends.

Article 151. Reserve Funds

There are two types of reserve funds: the statutory 68 reserve fund and
other reserve funds.

The statutory reserve fund is a fund to secure against risks, whereby the
limited company shall annually convert ten percent of its net profit into the
reserve fund, after deducti ng its accumulated losses. When the reserve fund
reaches half of the registered cap ital, the limited company may suspend
converting [profit] to such fund, except as otherwise provided by the bylaws of
the company.

The other reserve funds may be created as agreed by the shareholders’
meeting.

67 See footnote 50.
68 The literal translation of this term is “what the law says”.
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Article 152. Use of Reserve Funds

The limited company’s statutory reserve fund shall only be utilized
specifically to recover the losses of the limited company, except as otherwise
stipulated by the laws. The other rese rve funds of the limited company may be
utilized to recover losses subject onl y to the approval of the shareholders’
meeting.

G. Audit of Limited Companies

Article 153. Audit

An audit is a verification of the accuracy of the information and the
accounting records as stipulated by the Law on Enterprise Accounting.

The shareholders’ audit is carried out through the auditor they selected at
the shareholders’ meeting.

A limited company may employ an auditor from the date of its
incorporation, or may employ an auditor on a permanent basis, or [may employ an
auditor] for periodic aud iting as decided by the share holders’ meeting except in
the event that the limited company possesses assets in excess of fifty billion Kip.

Article 154. Qualifications of Auditors

Auditors shall have the following qualifications:

1. Not be a director, officer or employee of the limited company;
2. Not have any involvement that could benefit him or direct interest in
the limited company. A shareholder is not deemed to be such a
person.

An auditor may be a shareholder or a third party.

Article 155. Election or Removal of Auditors

Auditors are elected or remove d by the shareholders’ meeting.

In the event that the position of an auditor becomes vacant for any reason,
the board of directors or the director sha ll call an extraordinary meeting to elect a
replacement auditor to fill the original number of auditors.

In the event that the provisions of paragraph two of this article are
breached, three or more shareholders have the right to jointly request the court to
appoint the replacement auditor.

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Article 156. Rights and Duties of Auditors

Auditors have the following rights and duties:

1. To receive their fees;
2. To audit the accounts of the limited company at any time as deemed
necessary;
3. To make inquiries on any matter relating to their audit to the
directors, officers or employ ees of the limited company;
4. To prepare a report on the limited company’s income, expenses and
the balance sheets of the limited company to present at the
shareholders’ meeting, including reporting and certifying the
appropriateness or inaccuracy of the limited company’s accounting
system and accounting records
69.

Article 157. Annual Business Report

The annual business report of a limited company shall include the
following main items:

1. The total capital, the registered capital and the [number of] issued
shares remaining unpaid;
2. The types and number of shares issued and paid;
3. The name, place and type of bus iness of other companies or
subsidiaries in which the limited company holds shares, [and] the
types and number of shares;
4. The information described in item 9, Article 124 of this law;
5. The amount and value of remuneration paid to each director by the
limited company;
6. Other matters set forth in the bylaws of the limited company.

Article 158. Shareholders’ Right to Inspect Copies of Documents

Shareholders are entitled to inspect or make copies of documents on 70 the
enterprise license of the limited company at any time during office hours, except
for documents pertaining to trade secrets and strategic competitiveness.

Copying fees shall be collect ed on a cost basis only.

Shareholders may request directors of the limited company to certify the
accuracy of the copies made by the limited company.

69 The literal translation of this term is “numbers in the accounting”.
70 This term is used in the sense of “’relating to” or “about”.
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H. Merger and Dissolution of Limited Companies

Article 159. Merger of Limited Companies

A limited company may merge with another company to become either
the original company or a new company.

A limited company may merge only when:

1. A special resolution is passed as stipulated in Article 144 of this law;
2. The merger is published at least three times through appropriate mass
media within ten working days from the date the resolution was
adopted and creditors are notified to allow [them] to oppose [the
merger] within sixty days from the date the creditors receive the
notice. Failure of the creditors to respond within such period of time
shall be deemed as no objection;
3. The enterprise has been registered again.

Article 52 of this law shall apply sim ilarly to opposition to the merger and
the effects of the merger of a limited company.

Article 160. Grounds for Dissolution

A limited company may be dissolv ed on two grounds: dissolution by
operation of law and diss olution by court order.

A limited company intending to dissolve shall register a temporary
dissolution as stipulated in paragr aph two, Article 53 of this law.

Article 161. Dissolution by Operation of Law

A limited company may be dissolved on any of the following legal
grounds:

1. Dissolution in accordance with the bylaws of the company;
2. The shareholders’ meeting of the limited company passes a resolution
for dissolution as provided in Article 144 of this law;
3. The limited company is bankrupt;
4. Dissolution in cases described in Chapte rs 2 and 3, Part II of this law.

Article 162. Dissolution by Court Order

Any director or shareholder may file a claim to the court to consider the
dissolution of a limited company for any of the following reasons:

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1. A breach of any provisions or of the procedures for incorporation set
forth in this law;
2. A breach of the contract of incorporation of the limited company or of
the bylaws of the limited company;
3. The limited company continuously ope rates with losses and is not
able to resolve the matter;
4. The company is unable to continue its business operations due to
events of force majeure;
5. Only one shareholder remains or the limited company has more than
thirty shareholders, except in the case provided in Article 85 of this
law.

Upon receiving the claim, the court ma y consider ordering dissolution or
may order the concerned company to solve the problem if it is a minor problem or
can be solved.

Article 163. Effects of Temporary Dissolution

The temporary dissolution of a limite d company has the same effects as
the dissolution of a partners hip enterprise described in Article 57 of this law.

H. Liquidation of Limited Companies

Article 164. Methods for Liquidation

The shareholders may agree to select methods for the distribution of assets
or liquidation as specified in the bylaws of the limited company or as agreed by
the shareholders’ meeting, except where di ssolution is the result of bankruptcy,
[or] court order, [or] the limited compa ny having only one shareholder or having
more than thirty shareholders.

Article 165. Appointment or Removal of Liquidators

The procedures for the appointment or removal of liquidators of a limited
company shall be described in detail in its bylaws. In the event that the bylaws of
the limited company do not provide for the appointment or removal of liquidators,
the shareholders’ meeting shall choose
71 the liquidators by a vote of at least two-
thirds of the shareholders or proxies pr esent at the meeting. The liquidators shall
be natural persons, who may be internal persons or third parties.

Where the shareholders’ votes are not sufficient to choose the liquidators
as required under paragraph one of this ar ticle, any person having an involvement
in the limited company that could benef it him may request the court to appoint
liquidators.
71 The term translated as “choose” is a different word from “select’’ or “elect” and is broader in
scope.
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The liquidators specified in this article and in Article 166 of this law
shall
be removed in the same manner as they were appointed.

Article 166. Appointment of Liquidators by Court

In the case of dissolution of a li mited company caused by bankruptcy or
court order or when only a single share holder remains or when there are more
than thirty shareholders in the limite d company, only the court shall appoint the
liquidator.

Article 167. Appointment of Replacemen t for Liquidator Who is Unable to
Perform his Duties

In the event that, for any reason, a liquidator is unable to perform his
duties following his appointment, such as death or lack of legal capacity, [such
liquidator] shall be replaced by a new liquidator applying the same process [as
that] applied to appoint the former liquidator.

The limited company shall give public notice of the appointment, removal
or termination of the liquidator’s duties wi thin ten working days from the date of
such appointment, removal or termination of appointment as provided in this
Article 165 and Article 166 of this law.

Article 168. Priority in Liquidation [and] 72 Distribution of Debts

The liquidation [and] distribution of debts 73 shall comply with the order of
priority described in items 1 to 4 of Article 64 of this law.

After distribution to the creditors in full as required in paragraph one of
this article, any remaining balance sha ll be distributed among the shareholders.

Article 169. Application of Provisions on Liquidation of General Partnership
Enterprises

In addition to the provisions contained in this sub-section H, Chapter 2,
Part V of this law, the liquidation of a limited company shall comply with Article
62 of this law in relation to the rights and duties of the liquidators, Article 63 on
the performance of duties by multiple liquidators, Article 65 on the duties of
liquidators after liquidation, Article 66 on the responsibilities of liquidators and
Article 67 on the notice of dissolution and registration of cancellation of the
enterprise license.

72 Here, the literal translation is “or”, but it is clear from the context that the term “and” is intended.
73 The term “distribution of debts” has meaning of “making distributions to pay debts”.
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J. One-Person Limited Companies

Article 170. Establishment of One-Person Limited Companies

A one-person limited company shall be established according to the
following procedures:

1. Full payment of shares under the name of the one-person limited
company as provided in paragraph one, Article 172 of this law;
2. Drafting of the bylaws of th e one-person limited company;
3. Registration of the enterprise.

Article 171. Filing of Notification for Enterprise Registration

The following documents are require d for filing a notification for
enterprise registration of a one-person limited company:

1. The application form and power-of-attorney in the event that a
separate manager is appointed;
2. The bylaws of the one-person limited company.

All of the documents mentioned above shall have the signature of the
shareholder and manager, if a ma nager is separately appointed.

Article 172. Payment and Transfer of Sha res of One-Person Limited Company

The shareholder of a one-person limited company shall pay for his shares
in full both in cash and in kind prior to the registration of the enterprise.

Upon registration of the enterprise, shares of a one-person limited
company shall not be withdrawn but may be transferred and inherited.

A one-person limited company shall present its share certificates to the
enterprise registration officers for endorsement within thirty days from the date of
the registration of the enterprise.

Share certificates of a one-pers on limited company are non-negotiable.

Article 173. More than One Shareholder in Company

A one-person limited company having more than one shareholder shall
change its name to “limited company” and comply with the provisions of sub-
section A to sub-section J of Chapter 2, Pa rt V of this law or shall be dissolved.

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Article 174. Rights and Duties of Shareholder

The one-person limited company shareholder has following main rights
and duties:

1. To adopt the bylaws of the one-person limited company;
2. To employ a manager;
3. To appoint an auditor when necessary;
4. To determine the salary of the manager, the fees of the auditor and
other employees;
5. To adopt the business report, ac counts receivable, expenses and
business plan of the one-person limited company;
6. To utilize dividends;
7. To exercise such other rights an d perform such other duties as
provided in the bylaws of th e one-person limited company.

Article 175. Manager

The manager of a one-person limited company may be the shareholder
himself or an employed third party. A thir d party employed as a manager receives
remuneration as agreed with the sharehol der. The shareholder may employ one or
several managers.

All activities performed by the manager shall be within the scope of the
bylaws of the one-person limited company and [shall be conducted] under the
shareholder’s supervision.

The manager may delegate part of his tasks to other persons.

Article 176. Employment Contract of Manager

The employment contract of the mana ger of a one-person limited company
shall be made in writing in accordance w ith the Contract Law. Such contract shall
describe in detail the rights, duties, remuneration, responsibilities of the parties
and how the contract may be terminated.
74

The relationship between the manage r, the one-person limited company
and third parties shall be based on the relevant laws and regulations.

Article 177. Restrictions on Employed Manager

An employed manager of a one-person limited company shall not conduct
business activities in competition with the one-person limited company such as:
74 The literal translation of this term is “the termination of the contract”.
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1. Conducting business activities that are the same type or similar to the
one-person limited company, whether doing so for himself or for the
benefit of other person s, except if authorised by the shareholder;
2. Being a general partner in a part nership enterprise which conducts
business that is the same or a similar business to the one-person
limited company, except if authorised by the shareholder.

Article 178. Application of Provisions on Limited Companies

In addition to the provisions set forth in sub-section J, Chapter 2 of this
Part, an increase or reduction of capit al, financial matters, audit, merger,
dissolution and liquidation shall be conducted in compliance with the provisions
on limited companies.
Chapter 3
Public Companies

A. General Principles and Incorporation

Article 179. Principles relating to Numb er of Shareholders in Public Companies

A public company shall have at least nine promoters a nd shall employ the
auditors from the date of registration of the enterprise.

A public company that has fewer than nine shareholders shall proceed
with dissolution and liquidation in accordance with sub-section J, Chapter 2, Part
V of this law.

Article 180. Promoters of Public Companies

Promoters of a public company are natu ral persons or legal entities that:

1. Have legal capacity;
2. Are not bankrupt persons who are still under the restricted period for
conducting business;
3. Have not been convicted of em bezzlement or misappropriation of
assets;
4. Jointly hold shares representing at least ten percent of the registered
capital.

Lao citizens, foreign residents, ap atrids residing in the Lao PDR or
foreigners are entitled to be promoter s with one hundred percent shareholding of
the public company, except in cases of n ecessity[,] when at least half of the
promoters shall be Lao citizens, which the government shall determine case by
case.

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Article 181. Convening the Incorporation Meeting of Public Companies

The incorporation meeting of a public company shall be convened within
ninety days after the contract of inco rporation of the public company has been
notified to the enterprise registration officers and the shares of the public
company have been fully subscribed.

In the event that the incorporation meeting of the public company cannot
be convened within the time stipulated in paragraph one of this article, the
promoters shall notify the re levant enterprise registration officers within ten
working days from the date of th e decision to postpone the meeting.

The next meeting shall be held within thirty days from the date of the
notice given to the registration officers. In the event that the subsequent
incorporation meeting cannot be convened, the contract of incorporation shall be
terminated and the public company’s promoters shall return all money paid for the
shares to the subscribers.

The incorporation meeting of a public co mpany shall be held in the district
or province where the compa ny’s headquarters will be located, with at least two-
thirds of the promoters and subscribers re presenting two-thirds of the total shares
attending the meeting.

Article 182. Contract of Incorporation of Public Companies

The contract of incorporation shall be consistent with the provisions
defined in Article 81 of this law, and shall also include wording indica
ting the
intention to offer shares to the public.

The public offering of shares may take place only when the public
company is registered and has duly co mplied with the laws and regulations
governing the purchase a nd sale of shares.

Regulations on the transaction of shares 75 will be determined separately.

B. Shares and Debentures of Public Companies

Article 183. Shares and Payment of Shares

A share of a public company shall not exceed one hundred thousand
Kip. 76

75 This is a reference to a public offering of shares.
76 Although it is not specified in the original Lao te xt, this appears to be a reference to par value.
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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

Shareholders of a public company are required to pay for shares in full at
the date of its incorporation, whet her payment is in kind or in cash.
Shareholders may not request the court to order redemption of their shares
once the public company has comp leted enterprise registration.

Article 184. Share Certificates

A share certificate of a public compa ny shall contain the following items:

1. The serial number of the share certificate;
2. The name and reference number of th e enterprise registration license
of the public company;
3. The name and nationality of shareholders;
4. The number of shares held by each shareholder;
5. The value of each share;
6. The date of issuance of the share certificate;
7. The names and signatures of authoris ed directors and the stamp of the
public company.

Share certificates of a public company are negotiable.

Article 185. Transfer of Shares

Shares of a public company may be tran sferred to internal persons or third
parties. The share transfer shall be completed when the transferor has endorsed
the share certificate by indicat ing the name of the transferee and it is signed by
both parties, and the transfer or hands over the share certificate to the transferee.

The transfer of shares is effective towards:

1. The public company when it receives a request to register the transfer;
2. Third parties when the transfer is registered by the public company.

In the event that, after receiving the request, the public company
determines that the transfer was carried out in due course, the public company
shall register the transfer of shares within five working days from the date of
receipt of such request.

In the event of an improper transfer of shares, the public company shall
notify the applicant to solve [the matter] within five working days from the date
of receiving the request.

The methods and timeframe for replacem ent of new share certificates shall
be stipulated in the byla ws of the public company.

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Promoters of a public company shall not transfer shares as provided in
item 4, Article 180 of this law within a pe riod of two years from the date of the
enterprise registration of the public company.
Article 186. Debentures

A public company may raise funds by issuing debentures to the public.
The issuance and offering of debentures shall be conducted in accordance with the
procedures and rules of the laws and re gulations relating to the transaction of
shares.

A public company may raise funds by i ssuing and offering debentures to
the public only pursuant to a special resoluti on as stipulated in Article 144 of this
law.

C. Merger of Public Companies

Article 187. Merger of Public Companies

A public company may merge with anot her company to become either the
original public company or a new company.

In addition to the provisions in this sub-section C, a merger of public
companies shall be conducted in accordan ce with the procedures set forth in
Article 159 of this law.

Article 188. Opposition to Merger by the Shareholders

In the event that shareholders of a public company oppose the merger, the
public company shall purchase the shares held by the opposing shareholders at the
prices appearing at that time on the stock exchange or securities exchange
77.

In the event that there is no refe rence price on the stock exchange or
securities exchange, the price to be a pplied shall be assessed by independent
appraisers appointed by a special resolution of the shareholders’ meeting.

Following the appraisal of the share pr ice mentioned in paragraph two of
this article, if the opposing shareholders re fuse to sell their shares, the relevant
public company may carry out the merger regardless of whether the shareholders
opposing the merger agree to the estimated prices or not[,] and such shareholders
shall become de facto shareholders of the merged company.

Article 189. Timeframe for Merger and Regist ration of Merged Public Companies

77 The literal translation of this term is stock market or security market.

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A merger of public companies shall be completed within one hundred and
fifty days from the date all the companies to be merged pass resolutions on the
merger[,] and the enterprise registration shall be completed within ten working
days from the date of completion of the merger.
Article 190. Application of Provisions on Limited Companies

In addition to the provisions contained in Chapter 3, Part V of this law, the
provisions on filing th e notification for enterprise registration, the liability of
promoters, the increase or reduction of capital, the directors and the board of
directors, shareholders’ meetings, finance, audit and liquidation of public
companies shall comply with the provis ions pertaining to limited companies.

Part VI
State-Owned Companies

Chapter 1
General Principles and Formation 78 of State-Owned Companies

Article 191. General Principles Relating to State-Owned Companies

A State-owned company is initially formed with one hundred percent
capital contribution by the State and, upon its registrati on, [the State] may sell
part of its shares to other shareholders as authorised by the government up to a
maximum amount of less than fift y percent of its total shares.
79

Shareholders are liable for the de bts up to an amount not exceeding the
unpaid portion of their shares.

A State-owned company may hold shar es in other companies or be a
partner in other partnership enterprises.

The State may hold shares in other co mpanies or be a partner in other
partnership enterprises, but shall not be a general partner in a partnership
enterprise.

Where a State-owned company or the State acquires less than one hundred
percent of shares in othe r types of enterprises, [this] does not cause those
enterprises to become State enterprises
80.
78 In the Lao language, the same word is used for incorporation, establishment and formation. Earlier
in this law, the term “incorporation” was used specifically for companies. Here, because the process of
establishment of State-owned companies is different, the word “formation” is used. However, readers
should bear in mind that both English word s are translations of the same Lao word.
79 In practice, this means up to 49% of shares can be sold to other shareholders.
80 The translators are aware that this appears am biguous in situations in which the State has a
majority interest; however, it might be a reference to Article 9 regarding the type of enterprise.
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Article 192. Contract of Formation of State-Owned Companies

A State-owned company is formed on the basis of a contract between the
financial sector 81 and the relevant sectors, except for a State-owned company of
the financial sector.

The contents of the contract of form ation of a State-owned company shall
comply with the provisions set forth in Article 81 of this law.

Article 193. Procedures Relating to Formation

A State-owned company shall be formed in accordance with the following
procedures:

1. The relevant sector coordinates with the financial sector to determine
and agree on the objectives for form ation, the type of business and the
total capital by dividing the capital into shares of equal value and by
determining the proportion of shares that is permitted to be
transferred after its registration according to paragraph one, Article
191 of this law;
2. Presenting the application for the fo rmation of the company together
with an economic-technical feasibil ity study to the Prime Minister in
the case of a State-owne d company at the central level, [or] to the
provincial or city mayor, in the cas e of a State-owned company at the
provincial level;
3. Upon receiving approval from the Prime Minister, or from the
provincial governor or city mayor , the relevant sector and the
financial sector shall select person s to be appointed as directors;
4. Convening the formation meeting of the State-owned company which
is attended by the proxies of the rele vant sectors, the financial sector
and all the appointed directors to d eclare the formal formation of the
State-owned company and to assign all tasks to the directors to
continue operations;
5. Convening an initial meeting of the board of directors, if any;
6. The directors shall register the enterprise within thirty days from the
date of full payment of shares in accordance with Article 199 of this
law.

Article 194. Duties of Formation Meeting of State-Owned Companies

81 See footnote 17. In this Chapter, “sector” is used in its governmental sense.
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The formation meeting of the State-owned company has following main
duties:

1. To adopt the bylaws of the State-owned company;
2. To declare the formal formation of the State-owned company;
3. To announce the names of the initial appointed members of the board
of directors;
4. To announce the auditors and de termine their remuneration;
5. To formally assign tasks to the dire ctor or the board of directors.

The formation meeting of a State-ow ned company is chaired by the proxy
of the relevant sector or the financial sector.

Article 195. Bylaws of State-Owned Companies

The bylaws of a State-owned compa ny shall contain the requirements
specified in Article 82 of this law, and in addi tion, the following items shall be
included:

1. Provisions regarding the [State-o wned company’s] rights and
[regarding] the proportion of shares to be transferred upon registration
of the enterprise;
2. The distribution of dividends to other shareholders, if any;
3. The policies or measures 82 of the State regarding the profits or losses
of business operations.

The bylaws of a State-owned company shall be signed by the Minister of
Finance, in the case of a State-owned co mpany at the central level, or by the
provincial governor or city mayor in the case of a State-owned company at the
provincial level.

Any modification to the bylaws of a St ate-owned company shall be carried
out only when it is approved by 83 the votes as stipulated in Article 210 of this law.

Article 196. Initial Board Meeting

The initial meeting of the board of directors shall be held within ten
working days from the closing date of the formation meeting of the State-owned
company.
82 The term “policies” is often used as an indirect way of referring to “incentives” or “privileges” and
the term “measures” is often used as an indirect way of referring to “sanctions”. Here, these two words are
used to refer to the entitlement of persons running State-owned companies to receive incentives or be
subject to sanctions for good or bad performance, as the case may be.
83 The literal translation of this term is “has obtained”.

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The first board meeting shall have the following duties:

1. To elect the president. If necessary, the vice presidents of the board of
directors may be elected;
2. To assign tasks to each director.

A resolution of the initial board meet ing shall be effective only when it is
adopted by more half of the total number of directors.

Article 197. Filing of Notification for Enterprise Registration

The following documents are required for the filing of a notification for
enterprise registration of a State-owned company:

1. The application form for notification of enterprise registration signed
by the director 84 and accompanied by the economic-technical
feasibility study;
2. The notice or decision on the formation of the State-owned company
from the Prime Minister, in the case of a State-owned company at the
central level, or from the provinc ial governor or city mayor in the
case of a State-owned company at the provincial level;
3. The minutes of the formation mee ting of the State-owned company
signed by the chairman of the meeting;
4. The bylaws of the State-owned comp any signed by the Minister of
Finance, in the case of a State-owned company at the central level, or
by the provincial governor or city ma yor, in the case of a State-owned
company at the provincial level.

A transfer of shares of a State-owne d company, as stipulated in paragraph
one, Article 191 of this law, may be executed only when the company is
registered and in compliance with th e laws and regulations governing the
transaction of shares.

Chapter 2
Shares and Debentures of State-Owned Companies

Article 198. Shares

Shares of a State-owned company ar e obtained from dividing the capital
into portions of equal value of shares. Each share of a State-owned company shall
not exceed one hundred thousand Kip.

84 In the original Lao text, it is unclear whether this term is singular or plural.

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The shares of a State-owned company may be contributed in cash or in
kind. Contributions in kind shall be appr aised in monetary terms by a special
committee.

Article 199. Payment of Shares

Shares of a State-owned company to be paid in cash or in kind shall be
paid in full no later than five working days prior to the date of the formation of
the State-owned company by transferring the ownership
85 to the relevant State-
owned company, except in the event that th e financial sector and relevant sector
have agreed otherwise, and this matter
86 shall be described in the bylaws of the
State-owned company.

Article 200. Share Certificates

A share certificate of a State-owned company shall have the following
contents:

1. The serial number of the share certificate;
2. The name and reference number of th e enterprise registration license
of the State-owned company;
3. The names of the shareholding sectors;
4. The number of shares;
5. The value of each share;
6. The date of issuance of the share certificate;
7. The name and signature of the director and the stamp of the State-
owned company.

Share certificates of a State-owne d company are negotiable up to the
portion of shares stipulated in para graph one, Article 191 of this law.

Within thirty days from the date of registration of the State-owned
company, the directors shall issue share cert ificates to the relevant sector and the
financial sector to keep as evidence [of ownership].

The share certificates issued to other shareholders shall have contents in
accordance with the types of shares held by each shareholder as stipulated under
Article 184 of this law. Other shareholders [refers to] the shareholders that are not
shareholders representing the State.

A share certificate shall have a valu e equal to at least one share.
85 Although it is not specified in the original Lao text, this is a reference to the ownership of the
contributions made in cash and in kind.
86 Although it is not specified in the original Lao text , this is a reference to the transfer of ownership.
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Article 201. Transfer of Shares

Shares that are permitted by the government to be transferred to other
shareholders may be tran sferred without further approval from the government.

Any transfer of shares in excess of the portion stipulated in paragraph one,
Article 191 of this law, is invalid. Any person making such transfer shall be
responsible for the breach as provided by the laws.

Article 202. Debentures 87

A State-owned company may raise funds by issuing and offering
debentures to the public. [Such] debentur es may be issued and offered only when:

1. [Such issuance and offering] ar e authorised by the government;
2. [Such issuance and offering] duly co mply with the procedures and
regulations stipulated in the relevant laws relating to the transaction
of shares.

Chapter 3
Directors and Board of Directors of State-Owned Companies

Article 203. Directors

A director of a State-ow ned company may be a civil servant or a third
party, except as otherwise determined for certain State-owned companies.

A director of a State-owned company is the representative of the State-
owned company to efficiently administer and manage assets contributed by the
government to the business activities [of the company], as well as the
representative of the State-owned company in its business transactions with third
parties.

A director of a State-owned company is paid a basic salary equal to the
basic salary of a civil servant, and r eceives an additional salary or bonus as
provided in item 1, Article 215 of this law. This provision also applies to the
officers of State-owned companies.

Article 204. Qualifications of Directors

87 The Lao term for “debenture” encompasses both debentures and bonds, both short-term unsecured
obligations as well as longer-term obligations.

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Translation Endorsed by the Law Committee of the National Assembly of the Lao PDR

In addition to the requirements set forth in Article 117 of this law, a
director of a State-owned company shall meet the following additional
requirements:

1. Have no record of acts of corruption or self-dealing 88;
2. Be a person with high responsibilit y in the performance of duties;
3. Have no involvement that could benefit himself or direct benefit in
the business transactions of th e State-owned company, whether
personally or through hi s spouse and children;
4. Must have declared his assets prior to accepting the position of
director;
5. Possess skills, competence and experience in business management
and administration.

Article 205. Appointment and Removal of Directors

Directors are appointed in the following two ways:

1. The initial board of directors is ap pointed by the Minister of Finance
in the case of a State-owned compa ny at the central level, or by the
provincial governor or city mayor in the case of a State-owned
company at the provincial level, based on the consent of the relevant
sector;
2. The subsequent boards of director s, including [any] vacancy of a
director’s position in between two ordinary shareholders’ meetings,
are appointed by the Minister of Fi nance in the case of a State-owned
company at the central level, or by the provincial governor or city
mayor in the case of a State-owned company at the provincial level,
based on a resolution of the shareholders’ meeting.

The directors appointed in either of the two ways described above shall be
removed by the Minister of Finance in th e case of a State-owned company at the
central level, or by the provi ncial governor or city mayor in the case of a State-
owned company at the provincial level, on the basis of a resolution of the
shareholders’ meeting.

Article 206. Termination of Position of Directors

The position of a director of a Stat e-owned company may be terminated
for any of the following reasons:

1. As provided in items 1 to 4 of Article 127 of this law;
2. The Minister of Finance, in the cas e of a State-owned company at the
central level, or the provincial gover nor or city mayor, in the case of a
88 The literal translation of this term is “self-undertaking opportunities”.
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State-owned company at the provincial level, issues a decision on his
removal.

A resignation by a director shall be e ffective only when it is adopted by
the Minister of Finance at the central leve l, or by the provincial governor or city
mayor at the provincial level and shall be notified to the relevant enterprise
registration officers.

Article 207. Board of Directors

A State-owned company with more than three directors shall form a board
of directors. In the case of necessity, a State-owned company with two directors
may also form a board of directors.

The rights and duties of the board of directors of a State-owned company
shall be in accordance with Article 130 of this law.

Chapter 4
Shareholders’ Meeting of State-Owned Companies

Article 208. Proxy Shareholders of the State

Shareholders of a State-owned compa ny are the proxies of the relevant
sector and of the financial sector, unle ss otherwise determined by the government.

All the sectors described in the foregoing paragraph shall have at least two
proxy shareholders appointed by the Minister of Finance in the case of the central
level, or by the provincial governor or city mayor in the case of the provincial
level, based on the proposal of the relevant sector. In the event of a change of the
shareholders, replacements shall be made w ithin thirty days from the date of such
changes.

The aforementioned proxies exercise the rights and perform the duties of
State shareholders in eac h State-owned company.

The proxy shareholders of the State r eceive no salaries or remuneration,
but receive an annual bonus and allowan ces for each meeting in accordance with
the relevant regulations.

Article 209. Quorum and Rule s for Shareholders’ Meetings

A shareholders’ meeting of a State- owned company shall be attended by
all appointed proxy shareholders of the State or their proxies.

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The proxy shareholders of the State who are unable to attend the meeting
in person shall send their pr oxies to the shareholders’ meeting, who shall present
their letters of assignment to the chairman of the meeting.

In the event that the proxy shareholders of the State are absent at three
shareholders’ meetings without sufficient reasons, the chairman of the meeting
shall notify the Minister of Finance or the provincial governor [or] city mayor for
consideration.

In the event that the State-owned company sells its shares in accordance
with paragraph one, Article 191 of this law, the quorum of the shareholders’
meeting shall, in addition to the requirements mentioned above, require the
presence of shareholders [other than th e proxy shareholders of the State] holding
at least eighty percent of the total number of shares of [non-State] 89 shareholders.

Article 210. Resolutions of Shareholders’ Meetings

There are two categories of resolu tions of shareholders’ meetings:

1. In the case of a State-owned company in which the State is the sole
shareholder, the resolution of th e shareholders’ meeting shall be
effective only when adopted by more than half of the proxy
shareholders of the State, except as provided in the bylaws of the
State-owned company. In counting votes, one person shall have one
vote;
2. In the event that a State-owned company has sold its shares in
accordance with paragraph one of Article 191 of this law, the
resolutions of the shareholders’ meeting shall be effective only when
they are adopted by more than half of the total number of shares. In
counting votes, one share shall have one vote. After having agreed by
a vote as stipulated in item 1 of th is article, the proxy shareholders of
the State shall assign one of them to cast the votes on their behalf.

The shareholders’ meeting of a State-owned company may consider and
adopt any resolutions on all matters relating to the State-owned company’s
business, except for matters stipulat ed in Article 211 of this law.

Article 211. Matters Requiring Approval

A State-owned company at the central level shall obtain approval from the
government, and a State-owned company at the provincial level shall obtain
approval from the provincial governor or city mayor for an increase or reduction
of capital, a dissolution, a merger among State-owned companies, or a merger of a
State-owned company with other types of enterprises to become a State-owned
89 The literal translation of this term is “those”, wh ich is a reference to the “shareholders other than
the proxy shareholders of the State”.
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company, and [for] purchasing or accepting the transfer of business from other
types of enterprises to the State-owned company.

Matters requiring government approval include:

1. The sale of shares as provided in paragraph 1, Article 191 of this law;
2. The sale or transfer of the busin ess of the State-owned company to
another type of enterprise;
3. A merger between a State-owned company with other types of
enterprises to become anot her type of enterprise.

When the government, or the provin cial governor or city mayor, has
authorised any action as de scribed in this article, it shall provide detailed
directives on the implementation.

Article 212. Rights and Duties of Other Shareholders

Other shareholders have the following rights and duties:

1. To participate, present their opinio ns and vote at the shareholders’
meeting;
2. To examine and make copies of re gistered documents of the State-
owned company or other information in accordance with regulations;
3. To receive dividends in the manner prescribed in the bylaws of the
State-owned company;
4. To file claims in court when their interests are breached.

Chapter 5
Finance and Liabilities of State-Owned Companies

Article 213. Distribution of Dividends

Dividends of a State-owned company sh all be distributed in proportion to
the shareholding. The remaining balance from the distribution of dividends to
other shareholders shall become State pr operty and shall be remitted to the State
budget, as regulated.

A State-owned company shall not distribute dividends when it has
sustained accumulated losses from previous years.

Article 214. Reserve Funds

There are two types of reserve funds: the statutory reserve fund and other
reserve funds.

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The statutory reserve fund is a fund to secure against risks, whereby the
State-owned company shall annually convert ten percent of its net profit into the
reserve fund, after deducti ng its accumulated losses. When the reserve fund
reaches half of the registered capital, the State-owned company may suspend
converting to such fund, except as otherwise provided by the bylaws of t
he State-
owned company.

Other reserve funds may be create d as decided by the shareholders’
meeting. A State-owned company shall not create its own social welfare fund but
shall apply the regulations on the governmental social welfare fund.

The use of a State-owned company’s reserve funds shall comply with
Article 152 of this law.

Article 215. Liabilities

The government treats State-owned co mpanies on a case-by-case basis as
follows:

1. In the event that the State-owned company operates at a profit, the
State may grant monetary rewards of not more than ten percent of the
State-owned company’s net profit fo r increasing salaries or bonuses
as appropriate on an annual basis;
90
2. In the event that the State-owned company operates its business at a
loss caused by external factors that are uncontrollable or difficult to
control, the State may apply approp riate policies to share the burden
of the State-owned company and to allow its business to continue;
3. In the event that losses are sustaine d because of the lack of capability
of management in the State-owned company, the directors shall be
liable for not more than ten percent of the total losses. The directors
shall be removed when the State-owned company sustains losses for
two consecutive years;
4. In the event that the losses are suffered because of the fault of the
directors, officers or employees of the State-owned company, the
State may cause such persons to be personally liable for such losses
and may bring a claim in court against them in accordance with the
laws.

Details of the policies awarded and the liabilities in case of losses shall be
specified in separate regulations.

Chapter 6
Audit and Ad Hoc Inspection of State-Owned Companies

90 The translators are aware that the heading does not necessarily correspond to this item and item 2
of this article.
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Article 216. Audit

A State-owned company shall have auditor(s) from the date of its
enterprise registration. In the case of a small scale State-owned company which is
unable to employ a permanent auditor, an auditor shall be recruited to audit and
verify its accounting records prior to the submission of its balance sheet and
annual report to the shareholders ’ meeting at least once a year.

The State-owned company shall stri ctly comply with the auditing
principles stipulated in sub-section G, Chapter 2, Part V of this law.

Article 217. Ad Hoc Inspections

Ad hoc inspections of State-owned co mpanies may be carried out with the
approval of the Minister of Finance in th e case of a State-owned enterprise at the
central level, or of the pr ovincial governor and city ma yor in the case of a State-
owned company at the provincial level, [or] based on a resolution of the
shareholders’ meeting or at the request of the relevant sector. The provisions of
Article 210 of this law shall apply to th e resolution of the shareholders’ meeting.

Upon receiving such resolution or request , the Minister of Finance, in the
case of the central level, or the provincial governor or city mayor, in the case of
the provincial level, shall appoint insp ectors or an inspection committee within
thirty days to inspect the concerned State-owned company.

Article 218. Rights and Duties of Inspectors

Inspectors have the following rights and duties:

1. To request the State-owned company to supply documents for
inspection;
2. To question the directors, officer s or employees of the concerned
State-owned company;
3. To present an inspection report to the shareholders requesting such
inspection, and to the Minister of Finance, provincial governor or city
mayor.

Article 219. Cost of Ad Hoc Inspections

The State-owned company shall be respons ible for the costs incurred in an
inspection if the inspection reveals that the company is at fault. The internal
liabilities of relevant persons to the St ate-owned company shall be in accordance
with laws and regulations.

Where the results of the inspection do not prove the facts alleged, the State
shall bear the cost for the inspection.
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Chapter 7
Privatisation, Merger, Dissolution and Liquidation of State-Owned Companies

Article 220. Conversion to Other Type of Enterprise 91

In the event that there is an intention or a necessity, a State-owned
company may be converted into other types of enterprises as stipulated in items 2
and 3 of Article 211 of this law.

The merger or transfer of shares referre d to in paragraph one of this article
causes the name of the State-owned compa ny to become another name as agreed
with the other
92 shareholders[,] and the State becomes a shareholder in the new
company, except when the State transfers all of its shares.

A State-owned company that converts to another type of enterprise shall
incorporate, register and operate the en terprise on the basis of the principles
governing that type of enterprise.

As the holder of the State’s shares, th e financial sector shall comply with
the rules governing that form of company. An y sale or transfer of the shares held
by the State shall receive prior approval from the government.

The financial sector shall exercise the rights, perform the duties and
protect the interests or ownership of the State as a shareholder in other types of
enterprises.

Article 221. Merger of State-Owned Companies

The following procedures shall appl y to the merger of State-owned
companies:

1. A merger among State-owned companies or a merger of a State-
owned company with other types of enterprises to form a State-owned
company as provided in paragraph one , Article 211 of this law, shall
comply with the rules governing the merger of limited companies and
the rules on the formation of State companies;
2. A merger of a State-owned company w ith other types of enterprises to
form another type of enterprise as provided in item 3, paragraph two
of Article 211 of this law, shall comply with the rules governing the
merger and establishment of that type of enterprise.

91 The translators are aware that this article heading refers to “conversion” rather than to
“privatisation” (which is the word used in the chapter heading).
92 This is a reference to shareholders other than State proxies.
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Article 222. Dissolution and Liquidation

A State-owned company may be dissolved in the following cases:

1. The government orders the dissolution of the State-owned company at
the central level, or the provincial governor or city mayor orders the
[dissolution of the] State-owned company at the provincial level;
2. Bankruptcy;
3. The State-owned company continuous ly operates at a loss and is
unable to recover.

The State-owned company shall stri ctly comply with the rules of
liquidation as provided in sub-section I of Chapter 2, Part V of this law.

Article 223. Application of Provisions on Companies

In addition to the provisions containe d in Part VI of this law, the
provisions pertaining to limited companies or public companies shall be applied
[to a State-owned company] if the form of limited company or public company is
used.

Part VII
Joint Companies

Article 224. Joint Companies

A joint company is a company jointly established between the State and
other [non-State investors] 93, whether domestic or fore ign, where each party holds
fifty percent of the shares.

Incorporation of a join t company and its management shall be governed
by the form of the company 94, as prescribed in this law.

Article 225. Shareholders’ meeting

The resolutions of the shareholders’ meeting shall be effective only when
passed by unanimous vote, except as otherw ise determined in the bylaws of the
joint company.

In casting votes, one share shall have one vote.
93 The literal translation of this term is simply “oth ers”, but, it has the connotation of “other than the
State”.
94 The translators are aware that there are not many choices in this context. This appears to be a
reference to a limited company.

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Part VIII
Administration and Inspection of Enterprises

Article 226. Administrative Authority

The government centrally administers the establishment and operation of
enterprises by assigning the commercial sector to be the focal point in
coordination with concerned sectors, except for enterprise registration and
administration of activities defined in the laws on the promotion of domestic and
foreign investments
95.

The commercial sector comprises:

1. The Ministry of Commerce;
2. The trade divisions 96 at the provincial and capital city 97 level;
3. The trade offices at the district and municipal level.

Article 227. Rights and Duties of Ministry of Commerce

The Ministry of Commerce has th e following rights and duties:

1. To develop directives, [and] pol icies to develop and promote
enterprises;
2. To research [and] study legal acts 98 for the implementation of policies
to develop and promote enterprise;
3. To disseminate, direct, encourage and monitor the nationwide
implementation of policies to de velop and promote enterprises;
4. To administer and provide services for enterprise registration in
compliance with the laws and regulations;
5. To train and to build the techni cal capacity of officials in the
commercial sector;
6. To coordinate with the relevant se ctors and local administrations to
systematically inspect and monito r nationwide the compliance with
laws and regulations by business units;
7. To record 99, amend or cancel names of ente rprises from the enterprise
registration lists as prescrib ed by laws and regulations;
95 This is a generic reference to laws pertaining to promoting domestic and foreign investment.
96 This term could also be translated as “commercial division”.
97 The terms “city” and “capital city” are often used interchangeably to refer to Vientiane because, as
of 2005, Vientiane is the only city in terms of local administration. Readers may wish to refer to the Law
on Local Administration for more information.
98 This is a generic reference to legislation, edicts and the like.
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8. To maintain foreign trade relations and to seek markets;
9. To exercise such other rights an d perform such other duties as
prescribed by laws and regulations.

Article 228. Rights and Duties of Trade Divisions at Provincial and City Level

The trade divisions at the provincial and city level have the following
rights and duties:

1. To disseminate, direct, encourage and monitor the implementation of
policies to develop and promote ente rprises within their [respective] provinces or cities;
2. To coordinate with relevant sectors and others 100 to systematically
inspect and monitor the implementation of the laws and regulations
relating to enterprises by business units within their [respective] local
areas, and to report [on such impl ementation] to higher authorities;
101
3. To record, amend or cancel enterprise names from the enterprise
registry lists in accordance with the laws and regulations;
4. To maintain foreign trade relations , especially with the countries
sharing borders with their [respec tive] provinces, as approved by the
Ministry of Commerce;
5. To exercise such other rights an d perform such other duties as
provided by the laws and regulations.

Article 229 Rights and Duties of Trade Offices at District or Municipal Level

District or municipal trade offices have the following rights and duties:

1. To implement the policies, laws and regulations relating to enterprises
within the scope of th eir responsibilities;
2. To record, amend and cancel the names of enterprises from the
enterprise registration lists in accordance with the laws and
regulations;
3. To coordinate with the relevant sectors to systematically control,
monitor, collect [information] and report to higher authorities on the
compliance by business units within their [respective] districts or
municipalities with the laws and re gulations relating to enterprises;
4. To exercise such other rights an d perform such other duties as
provided by the laws and regulations.

99 The literal translation of this term is “put”.
100 The term “and others” is a literal translation and is not subject to further specificity.
101 For readability, the structure of this sentence has been modified.
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Article 230. Rights and Duties of Other Concerned Sectors

Other sectors relating to enterprises 102 shall have duties to coordinate with
the commercial sector in accordance with their roles, rights and duties.

Upon registration of an enterprise, th e concerned sectors shall take the
lead in administering the operations of enterprises within the scope of their rights
and duties.

Article 231. Chamber of Commerce and Industry

The Chamber of Commerce and Industr y is a social organisation of
business people acting as a bridge betw een government agencies and business
units, as representatives of the employe rs, business associations and different
types of enterprises established and operating in the Lao PDR.

The Chamber of Commerce and Industry plays a role in giving opinions to
the government on matters pertaining to business, in mobilizing 103 , in educating
and leading, in organising, [and] in bri nging business people together, in order to
promote the economy, trade, industry, finance and services, including the
protection of legitimate rights and inte rests of enterprises, and making [them] operate in accordance with the laws and regulations.

Part IX
Policies and Sanctions

Article 232. Policies

Persons or organisations with outstanding performance in the
implementation of this law will be praised, congratulated or shall receive
appropriate policies.

Article 233. Sanctions

Persons or organisations that breach th is law shall be subject to different
sanctions in accordance with the nature of the breach.

Article 234. Hindering En terprise Registration

Any enterprise registration officer or concerned person who has hindered
the registration of enterprises in any manner, such as by demanding that the
102 This is a reference to the following paragrap h in which responsibilities are delegated to other
sectors to administer each enterprise in acco rdance with their mandated rights and duties.
103 This is a reference to encouraging people to participate.

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applicant provide additional documentation without proper reasons, losing the
documents or delaying the regi stration process[,] shall be subject to disciplinary
sanctions, such as: re-education
104 , removal from his position, demotion, or
dismissal from the civil service.

The provisions contained in paragraph one shall apply to the examination
and review of the types of businesses falling within the list of controlled
businesses by the officers of the concerned sectors.

Article 235. Order to Renew Enterprise License

Any person ordering the renewal of an enterprise license will be subject to
disciplinary sanctions such as removal from his position, demotion, or dismissal
from the civil service.

The provisions of paragraph one sha ll apply to ordering the renewal of
documents or licenses relating to the types of businesses falling within the list of
controlled businesses by officers of the con cerned sectors, except as authorised by
the government.

Article 236. Conducting Business wi thout Enterprise Registration

Any person conducting any business activity without an enterprise
registration shall be fined from 1,000,000 Kip to 10,000,000 Kip each time.

The legitimate interests of a cred itor of a person conducting business
activities without an enterpri se registration shall be protected if it enters into the
business transaction with such person in good faith.

Article 237. Conducting Business Operations Not Consistent with Purpose

Any individual or legal entity conducting business inconsistent with its
enterprise purpose shall be re-educated or fined from 1,000,000 Kip to 5,000,000
Kip each time.

Article 238. Improper Registration

Any enterprise license that is improperly registered as described in Article
15 of this law shall be cancelled.

Any enterprise registration officer who has improperly registered an
enterprise for persons or organisations as specified in paragraph one above, shall
104 Here, the term “re-educate” does not mean the same as “re-education without deprivation of
liberty referred to in the Penal Law.

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be subject to disciplinary sanctions, such as removal from his position, demotion,
or dismissal from the civil service.

Article 239. Disclosing and Refu sing to Disclose Information

Any enterprise registration officer or concerned person who has disclosed
information indicated in paragraph two, Artic le 19 of this law, without the consent
of the relevant enterprise , shall be deemed to be in breach of official
confidentiality and shall be punished in accordance with the Penal Law and
dismissed from the civil service.

Any enterprise registration officer who refuses the public access to or
copies of documents or refuses to disclo se the information described in paragraph
one, Article 19 of this law, shall be subj ect to disciplinary sanctions, such as
removal from his position, demotion, or dismissal from the civil service.

Article 240. Failure to Display Si gn or Improper Use of Name

An enterprise that, seven days after receiving notice, fails to display its
enterprise sign or uses an enterprise name inconsistent with the form or type of
enterprise shall be sanctioned with re -educational measures or fined 200,000 Kip
each time.

Article 241. Use of Forbidden Name

A person who uses a name forbidden unde r Article 22 of this law will be
sanctioned with re-educational measures or fined 300,000 Kip and be ordered to
cease the use of such enterprise name.

Article 242. Failure to Remove Sign of Enterprise Name after Dissolution

An enterprise that fails to remove the sign of enterprise name after the
enterprise is dissolved as provided in pa ragraph one, Article 26 of this law will be
sanctioned with re-educational measur es or fined 500,000 Kip and ordered to
remove the sign.

Article 243. Other Breaches

Any person or organisation breachi ng this law and thereby causing
damage to other persons shall be liable to compensate for the damage it has
caused.

In the event that such breach constitutes a criminal offence, the breaching
person shall be punished in acco rdance with the Penal Law.
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Part X
Final Provisions

Article 244. Implementation

The government of the Lao PDR shall implement this law.

Article 245. Effective Date

This law shall take effect one hundred and twenty days after the date of
the promulgating decree issued by the President of the Lao People’s Democratic
Republic.

This Law on Enterprises repeals th e Business Law No. 005/SPA, dated 18
July 1994.

Any regulations or provisions that c ontradict this law shall be null and
void.

Vientiane, 9 November 2005
President of the National Assembly

[Seal and Signature]

Samane VIGNAKET
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