Background

A foreign individual (“Investor”) is interested in operating a bar in Vientiane, Lao PDR.

Questions from the Investor

1. What type of entity should the Investor register?
2. Is an investment licence required for the proposed activity?
3. Is an operating license required for the proposed activity? If so, which government authority is responsible for issuing it?
4. Are there any foreign shareholding restrictions? In other words, is a joint venture with a Lao national required?
5. What is the minimum registered capital requirement to operate a bar?

Suitable Entity

There are several types of business entities available under Lao law, including the following:

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A sole limited company was deemed the most suitable option for the Investor, given that he was the sole investor, the requirements to obtain an operating licence for running a bar, and the benefits of limited liability.

Investment Licence

Certain business activities classified as “controlled businesses” (such as plantation agriculture, specific manufacturing sectors, transportation, leasing, insurance, legal and accountancy services, education, and casinos) require an investment licence issued by the Ministry of Planning and Investment (MPI), which acts as the registration authority for such sectors.

However, in the case of operating a bar, an investment licence is not required. Instead, the company incorporation application was submitted to the Ministry of Industry and Commerce (MOIC), which is responsible for the registration of companies engaged in general business activities.

Operating Licence

In Laos, depending on the nature of the business activity, an investor may be required to obtain an industry-specific operating licence from the relevant ministry. In this case, the Investor was required to apply for an operating licence for the operation of a bar, which is issued by the Ministry of Information, Culture and Tourism (MICT).

Foreign Shareholding

Lao PDR law does not prohibit 100% foreign ownership of a company operating a bar. Accordingly, the Investor was able to register a sole limited company, i.e. a limited company with the Investor as the sole shareholder.

Minimum Registered Capital

Previously, companies with one or more foreign shareholders were required to have a minimum registered capital of LAK 1 billion (approximately USD 100,000 at the time). In line with this requirement, the Investor registered this amount at the time of company incorporation.

However, it is understood that this requirement was abolished in 2019, and there is currently no minimum registered capital requirement for a foreign-owned company operating a bar. In practice, though, foreign-owned companies are generally expected to have a minimum registered capital of at least LAK 500 million (approximately USD 23,000).

That said, it is strongly recommended to verify the current practice regarding minimum capital and any other applicable requirements with the relevant authorities, prior to proceeding with the company incorporation process in Laos.