The transfer of company shares in Lesotho is not only a matter of compliance with the Companies Act and Articles of Incorporation. Where either the transferor or transferee is a non-resident of Lesotho, the Exchange Control Regulations of 1989 introduce additional requirements that both companies and shareholders must observe.
Shares as “Controlled Securities”
Under Lesotho’s Exchange Control framework, shares are classified as “securities.” Regulation 15 of the Exchange Control Regulations makes it clear that any acquisition or disposal of shares that involve non-residents requires prior approval from the Minister of Finance, whose powers are exercised through the Central Bank of Lesotho. Specifically, approval is required to:
- Acquire or dispose of controlled securities; and
- Record in a securities register any transfer of shares into or out of the name of a non-resident.
Further, Regulation 5(2) obliges any person who becomes the holder of such shares to submit the share certificate to an authorised dealer within 30 days of acquisition or custody.
Who Qualifies as a “Non-Resident”?
The Regulations define controlled securities to include shares registered in the name of, or owned by, a non-resident, or in which a non-resident has an interest. A “non-resident” is broadly defined as a person residing outside the Common Monetary Area (CMA).
Transfers Within the Common Monetary Area
Where both the transferor and transferee reside within the CMA, no Central Bank approval is required. These transactions are treated as ordinary share transfers and do not fall within the scope of controlled securities.
Transfers Between CMA Residents and Non-Residents
Where a resident of the CMA seeks to transfer shares to a non-resident, Central Bank approval is mandatory. This is because the transaction involves the acquisition of a controlled security by a non-resident, triggering the endorsement requirements.
The same principle applies in reverse. If a non-resident of the CMA transfers or disposes of shares to a resident, the transaction still requires Central Bank approval. In this scenario, however, the approval may not take the form of endorsement but would still require a formal permission process.
Practical Implications
For companies and shareholders, the key takeaway is that any transfer of shares involving non-residents of Lesotho is subject to Exchange Control oversight. Failure to obtain the necessary approval or to comply with the endorsement and submission requirements may render the transfer invalid and expose the parties to regulatory sanction.
Businesses should therefore factor in the timelines for obtaining Central Bank approval when structuring transactions involving cross-border shareholding.