Page 1 of 57 LAO PEOPLE's DEMOCRATIC REPUBLIC Peace
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Page 1 of 57 LAO PEOPLE’S DEMOCRATIC REPUBLIC Peace Independence Democracy Unity Prosperity Prime Minister’s Office No. 301/PM Vientiane Capital, dated 12/10/2005 Decree of the Prime Minister Regarding the Implementation of The Law on Promotion of Foreign Investment - - Pursuant to the Law on the Government of the Lao PDR No. 02/NA, dated 6 May 2003; - Pursuant to the Law on Foreign Investment Promotion No. 1 1/NA, dated 22 October 2004; - Referencing the proposal of the Chairman of the Committee for Planning and Investment. Section I General Provisions Article 1. Objective This Decree is stipulated to implement the Law on Promotion of Foreign Investment in conformity with the purposes of the law in a uniform manner throughout the country on the principles, methods and measures regarding the promotion, protection, inspection, resolution of disputes, application of award policies toward good performers and imposition of measures against violators. Article 2. Legal Guarantees The State provides legal guarantees to foreign investors who are established under the Law on Promotion of Foreign Investment as follows: 2.1 administer law and regulations on the basis of equality and mutual interests; 2.2 undertake all of the State’s obligations under the laws, the international treaties in which the State is a party, agreements regarding the promotion and protection of foreign investment and the agreements that the government has signed with foreign investors; 2.3 do not interfere with the legal business operations of foreign investors. Page 2 of 57 Article 3. Capital Contribution That Is Intellectual Property The State recognizes enterprise capital contribution in the form of intellectual property. The intellectual property’s value assessment shall be stipulated in a resolution of the shareholders’ meeting and the joint venture agreement of the enterprise regarding the scope of rights, obligations and benefits. Article 4. Types of Activities That are Related to Concession Rights from the Government Businesses (projects) that are related to concession rights from the government mean activities that are related to use of natural resources and the concession rights from the government that require an agreement with the government according to the types mentioned below: 4.1 general concession activities; 4.2 mineral resources concession activities; 4.3 energy resources concession activities. The detail is contained in Article 25 of this Decree. Article 5. Business by Contract Management A foreign individual or legal entity that conducts business in the form of business by contract shall bring the signed contract to be registered at the notary office. Subsequently, the parties shall submit [it] to the CPMI at the place where the domestic legal entity is licensed in order to issue a certificate of acknowledgement according to the law. Article 6. Management of Assets of Enterprises in Conducting Business A foreign investor shall maintain his/her enterprise’s assets to be not less than registered capital during the period of its business operation. A foreign investor shall make an asset balance sheet for the accounting year in order to send [it] to the agency for the financial sector for inspection and certification before 31st March of each year then submit it to the CPMI for the CPMI’s information. In case an enterprise does not maintain its assets equal to registered capital, the CPMI will issue a warning letter in order to let such enterprise resolve the issue within 20 official working days. If such enterprise does not act accordingly, it will be subject to the measures provided for in the Law on Promotion of Foreign Investment. Article 7. Determination of the Term of an Investment License Page 3 of 57 There are two types of term of investment licenses: 7.1 if the activities are related to a concession right, the term of the investment license depends on negotiations and agreement in a contract; 7.2.1 if the activities are the 1st and 2nd type of investment activities as provided for in Article 23 and Article 24 of this Decree, the term of the investment license depends on the characteristic of each activity according to the proposal of the investor and the CPMI’s approval. Article 8. Representative Administration A representative that engages in activities as the representative of an individual or legal entity that has invested in the Lao PDR shall properly register as a legal entity according to the laws of Lao PDR. Such representative shall submit the power of attorney to inform the relevant organization. Such power of attorney shall prescribe in detail the scope of rights and obligations of the representative from the assignor. Article 9. Administration of Consultancy Enterprises That Provide Services on Investment Documents 9.1 Consultancy enterprises that are involved in providing services regarding investment documentation shall inform the CPMI, and provide a description of the following: - - list of investment documentation services; - fees for the company’s investment services; - power of attorney for the investment documentation services from the investor that shall prescribe in detail the scope of rights and obligations of the enterprise that receives the assignment of the right in giving documentation services; - power of attorney for the monitoring and coordination of investment documentation services of the enterprise by the investor. 9.2 All consultancy enterprises that wish to invest in activities involving documentation services for an investment shall be authorized by the CPMI. 9.3 Individuals who are not authorized to be a consultancy enterprise pursuant to law cannot be involved in providing documentation services regarding investment. Section II Establishment of Representative Offices and Branches Article 10. Representative Offices Page 4 of 57 10.1 Types of representative offices There are 3 types of representative offices. 1. The representative office that is an agent that represents its parent company abroad and has the duty to collect information and study whether it is feasible for its parent company to invest. 2. The representative office that is an agent for its parent company that has a memorandum of understanding with the government to sign any project concession agreement that such representative office coordinates between its parent company and the government. 3. The representative office of a limited public company that is registered with an international stock exchange. 10.2 A representative office has the following rights and duties: - - collect data and study the feasibility of investment; - liaise internally and internationally to facilitate the parent company’s activities; - enter into an investment agreement, or formulate any other document for construction activities by the assignment of the parent company; - sign other legal documents on behalf of the parent company by having a power of attorney in writing from the parent company; - monitor the implementation of investment agreements, construction projects or services provided by the parent company. 10.3 Consideration to authorize the establishment of a representative office shall be by the one stop service as provided for in Article 39 of this Decree. The consideration and approval shall be by the CPMI at the central level. 10.4 The term of a representative office Each category of representative office as prescribed in Clause 10.1 of this Article may conduct their activities according for the term authorized as follows: - 1st category has a term of 1 year which can be renewed, but not to exceed 2 times; - 2nd category has a term of 1 year which can be renewed in accordance with the memorandum of understanding between the parent company and the government of the Lao PDR; rd - 3 category has a term according to the decision of the CPMI. Page 5 of 57 A representative office of the 1st category that has received permission to extend its own license more than 2 times before this decree is effective is entitled to extend it again once. 10.5 Termination of a representative office - A representative office shall be terminated when there is an approval from the parent company or the parent company abroad is dissolved or bankrupt. - A representative office shall be dissolved according to the decision of the CPMI in case such representative office does not adhere to the laws and regulations of the Lao PDR. - The parent company has signed a concession agreement with the government. - A representative office does not request to extend its term continuously every year. - The representative office does not timely make its tax registration. - In case a representative office does not act in compliance with its rights and duties as provided for in clause 10.2 of this Decree, the CPMI will issue a warning letter in order to notify the representative office to improve and modify [its actions] within 20 official working days. From the date that the representative office receives the warning letter, the representative office shall act according to such warning then inform the CPMI. In case that a representative office fails to act in compliance with such warning letter, the CPMI will issue a notification to close such representative office within 7 official working days after the expiration date of 20 official working days as mentioned above. 10.6 A representative office is prohibited from the following activity: - having its own separate independent Articles of Association from the parent company; - carrying out any business or commercial activity, other than the activities that are permitted under Article 10.2 of this Decree; - making revenue; - issuing receipts or invoices for other income and revenue; - declaring itself in a debt insolvency situation or bankrupt; - importing and using equipment that directly serves production, except office supplies, but customs duty and tax shall be paid according to the relevant laws. Article 11. Establishment of a Branch 11.1 A foreign investor that is a bank or a financial institution, an insurance company, an international consulting company or a foreign airline company may establish [itself] as a new legal entity or a branch in the Lao PDR.