Table of Contents
- Introduction: Why Lesotho’s Business Law Landscape Is Changing in 2025
- Key Legal Frameworks Governing Business in Lesotho
- Recent and Upcoming Legislative Reforms (2025–2030)
- Business Registration, Licensing, and Corporate Structures
- Taxation, Incentives, and Financial Compliance
- Employment Law and Labor Regulations
- Foreign Investment Rules and Restrictions
- Dispute Resolution, Courts, and Arbitration Procedures
- Compliance Challenges and Enforcement Trends
- Future Outlook: Opportunities, Risks, and Strategic Recommendations
- Sources & References
Introduction: Why Lesotho's Business Law Landscape Is Changing in 2025
Lesotho’s business law environment is undergoing significant transformation in 2025, reflecting both domestic reforms and regional shifts. The government has intensified efforts to modernize commercial regulations, aiming to enhance competitiveness, attract foreign investment, and align with international best practices. These initiatives are driven in part by Lesotho’s commitments under the Southern African Development Community (SADC) protocols and its obligations as a member of the African Continental Free Trade Area (AfCFTA), which demand harmonized and transparent business regulations.
Recent legislative amendments have targeted corporate governance, insolvency, and company registration procedures. The Companies Act 2011 remains the primary framework for corporate entities, but new amendments in 2023 and 2024 streamlined business registration and reporting requirements, reducing the average time to register a company from over 60 days to under 30 days, according to the Lesotho Companies Registry. Additionally, the introduction of the Licensing and Business Registration Bill, expected to pass in 2025, aims to further simplify market entry, particularly for small and medium-sized enterprises (SMEs).
Compliance pressures are also rising, especially regarding anti-money laundering (AML) and anti-corruption standards. The Lesotho Financial Intelligence Unit has enhanced monitoring and reporting requirements for businesses, in line with recommendations from the Financial Action Task Force (FATF). In 2024, over 500 businesses were subject to compliance audits, a figure projected to rise by 20% in the coming year.
Judicial reforms are improving the enforcement of commercial contracts. The Judiciary of Lesotho has introduced specialized commercial courts and digital case management systems, expected to reduce average case resolution times by up to 40% by 2026. These steps are designed to address longstanding concerns by investors about delays and unpredictability in dispute resolution.
Looking ahead, Lesotho’s business law landscape is expected to become more investor-friendly and efficient. With a growing emphasis on digitalization, transparency, and compliance, businesses operating in Lesotho in 2025 and beyond face both new opportunities and heightened regulatory expectations. This evolving legal environment is poised to support economic diversification and sustainable growth, provided reforms continue to be effectively implemented and enforced.
Key Legal Frameworks Governing Business in Lesotho
Lesotho’s business law landscape is principally shaped by a combination of statutory instruments, common law principles, and regulatory frameworks designed to foster a stable environment for commercial activity. The primary legislation governing company formation, operation, and dissolution remains the Companies Act 2011, administered by the Lesotho Companies Registry. This Act stipulates requirements for incorporation, directorship, shareholder rights, financial reporting, and corporate governance, aligning Lesotho’s corporate environment with international best practices. The Business Licensing and Registration Act 2019 further streamlines business entry by consolidating permits and licenses under the oversight of the Ministry of Trade and Industry, resulting in a reduced average time for business registration, now typically under five days.
Lesotho’s commercial law is also influenced by regional obligations, notably through its membership in the Southern African Development Community (SADC), which encourages harmonization of trade and investment rules. The country’s contract law and dispute resolution frameworks are principally based on English common law, with the Commercial Court—a division of the High Court—serving as the main forum for business disputes (Judiciary of Lesotho). The Insolvency Proclamation 1957 remains the principal legislation on bankruptcy, though legal reforms to modernize insolvency processes are under consideration as of 2025.
Regulatory compliance is an increasingly prominent focus. The Financial Services Regulatory Authority (FSRA) enforces prudential standards within the financial sector, while the Lesotho Revenue Authority governs tax registration, VAT, and corporate income tax compliance. According to official data, over 6,800 companies are currently registered, with corporate tax contributing approximately 15% of total tax revenue in recent fiscal years.
Lesotho is also taking steps to strengthen anti-money laundering and anti-corruption measures. The Money Laundering and Proceeds of Crime Act 2008 is enforced by the Directorate on Corruption and Economic Offences (DCEO), reflecting ongoing alignment with international standards recommended by the Financial Action Task Force (FATF). Businesses must comply with enhanced due diligence and reporting obligations.
Looking ahead, anticipated reforms—such as the review of company and insolvency laws—aim to further streamline business processes, enhance investor protections, and fortify regulatory transparency. These efforts are expected to improve Lesotho’s ranking in cross-border business indices and foster a more competitive, resilient business environment in the coming years.
Recent and Upcoming Legislative Reforms (2025–2030)
Lesotho has undertaken significant legislative reforms in business law over the past few years, with a pronounced focus on improving its legal infrastructure to attract investment and foster economic growth. The government’s reform agenda, articulated in its Vision 2020 and National Strategic Development Plan II, continues to prioritize the modernization of commercial legislation and regulatory processes through 2025 and beyond.
A major milestone was the enactment of the Companies Act, 2011 (as amended), which streamlined company registration and governance requirements. In 2023, amendments introduced provisions for electronic filing and clarified directors’ duties, aligning Lesotho’s corporate governance standards more closely with international norms. The Companies (Electronic Filing) Regulations, 2023 further enabled digital registration and compliance, reducing average company registration times from several weeks to a matter of days, according to the Office of the Registrar of Companies.
In late 2024, Lesotho’s Parliament passed the Business Licensing and Registration Bill, designed to consolidate and simplify the licensing regime across sectors. This Bill, effective in 2025, is expected to cut compliance costs and reduce regulatory overlap, a longstanding concern for local and foreign investors. Implementation is overseen by the Ministry of Trade, Industry, Business Development and Tourism, which has also committed to digitizing licensing processes by 2026.
Reforms to insolvency law are underway, with the Insolvency Bill, 2024 anticipated to come into force by mid-2025. The new framework modernizes creditor rights, introduces business rescue procedures, and aims to improve Lesotho’s ranking in resolving insolvency in the World Bank’s Doing Business indicators. The High Court of Lesotho (Commercial Division) has been preparing for these changes by training judges and court staff on the new processes to ensure swift and transparent insolvency proceedings.
Looking ahead to 2030, Lesotho is expected to review its Investment Promotion Act and Competition Act to align with regional standards, particularly those of the Southern African Development Community (SADC). The Lesotho Competition Commission and the Lesotho National Development Agency are actively involved in stakeholder consultations and drafting amendments aimed at enhancing investor protection and market fairness.
Taken together, these legislative reforms signal a robust commitment to modernizing Lesotho’s business law framework. By 2030, the country aims to provide a more predictable, efficient, and transparent legal environment conducive to sustainable private sector development.
Business Registration, Licensing, and Corporate Structures
Business law in Lesotho has seen significant modernization in recent years, particularly in the areas of business registration, licensing, and corporate structures. The government, through the Lesotho Revenue Authority and the Office of the Registrar of Companies, has streamlined the processes for company formation and compliance, aiming to improve the ease of doing business and attract domestic and foreign investment.
Business registration is governed primarily by the Companies Act 2011, which outlines the incorporation, management, and dissolution of companies in Lesotho. In 2023-2024, the Office of the Registrar of Companies implemented an online business registration system, reducing the time required for company incorporation to as little as five working days. The system is accessible through the Lesotho e-Registry Portal, enabling electronic submission of documents and payments, and is expected to further enhance efficiency in 2025 and beyond (Office of the Registrar of Companies).
All companies are required to register with the Lesotho Revenue Authority for tax purposes, and with the National Provident Fund for employee social security contributions. For sector-specific activities, businesses may also need licenses from regulatory agencies such as the Central Bank of Lesotho for financial services or the Lesotho Communications Authority for telecommunications.
The most common corporate structures in Lesotho are private companies limited by shares, public companies, and non-profit companies. As of 2024, over 17,000 companies and 8,000 business names were registered, with small and medium-sized enterprises (SMEs) forming the bulk of new registrations (Office of the Registrar of Companies). The government continues to encourage formalization of informal businesses through outreach and incentives.
- Compliance requirements include annual returns, tax filings, and the maintenance of statutory records. Failure to comply can result in penalties or deregistration.
- Recent reforms have focused on anti-money laundering (AML) and beneficial ownership disclosure, with new regulations introduced in line with recommendations from the Financial Action Task Force (FATF).
- Ongoing digitalization is expected to further reduce administrative burdens and increase transparency, with additional updates to the Companies Act and related regulations anticipated by 2026.
The outlook for business law in Lesotho is positive, with continued emphasis on regulatory clarity, simplification of procedures, and alignment with international best practices to support economic growth and investment.
Taxation, Incentives, and Financial Compliance
Lesotho’s business law landscape in 2025 continues to evolve, particularly in the areas of taxation, investment incentives, and financial compliance. The country operates under the Income Tax Act 1993 (as amended), with oversight and administration by the Lesotho Revenue Authority (LRA). For companies, the standard corporate income tax rate is 25%, while manufacturing firms benefit from a preferential rate of 10% to encourage industrial growth. The Value Added Tax (VAT) rate is maintained at 15%, with certain exemptions applicable to essential goods and services.
Lesotho has implemented several tax incentives to attract both domestic and foreign investment. The Lesotho National Investment Promotion agency highlights incentives such as tax holidays, accelerated depreciation, and duty-free import of capital equipment for qualifying sectors, especially in manufacturing and export-oriented enterprises. Additionally, the government continues to leverage its membership in the Southern African Customs Union (SACU) to facilitate preferential market access for exporters.
Compliance and enforcement remain central to the LRA’s agenda for 2025. The Authority has intensified digitalization efforts, including the expansion of e-filing and electronic payment systems, aiming to improve efficiency and reduce compliance costs for taxpayers. These initiatives are part of a broader modernization strategy outlined in the LRA’s 2023–2028 Strategic Plan, which emphasizes risk-based audits, taxpayer education, and robust anti-avoidance measures. According to recent data from the LRA, tax revenue collection has shown a steady increase, with 2023/24 figures reaching over M8 billion, reflecting improved compliance and economic recovery post-pandemic.
Financial compliance is further supported by alignment with international standards. Lesotho continues to update its anti-money laundering (AML) and combating the financing of terrorism (CFT) frameworks, in accordance with the recommendations of the Central Bank of Lesotho. The Financial Institutions (Amendment) Act 2019, enforced by the Central Bank, mandates stringent reporting, due diligence, and risk management for all regulated entities.
Looking forward, key priorities for Lesotho’s business law regime include strengthening digital tax administration, enhancing transparency, and ensuring harmonization with regional and global compliance norms. Ongoing reforms are expected to further streamline procedures, bolster investor confidence, and sustain fiscal stability, positioning Lesotho as a competitive investment destination in Southern Africa.
Employment Law and Labor Regulations
Lesotho’s employment law and labor regulations are governed primarily by the Labour Code Order 1992 (as amended), which outlines minimum employment standards, workers’ rights, and employer obligations. In 2025, Lesotho continues to align its employment framework with international labor standards, reflecting commitments as a member of the International Labour Organization (International Labour Organization). The Labor Code covers contract formation, working hours, minimum wage, occupational health and safety, anti-discrimination, and dispute resolution.
- Minimum Wage and Conditions: As of 2025, minimum wages are reviewed annually by the Wages Advisory Board under the Ministry of Labour and Employment. In 2024, minimum monthly wages ranged from LSL 2,360 to LSL 2,533, depending on sector, with expected incremental increases based on cost-of-living adjustments (Ministry of Labour and Employment). Employers are required to provide written contracts for employment exceeding six months.
- Working Hours and Leave: Standard working hours are capped at 45 hours per week, with overtime regulated and paid at premium rates. Statutory leave entitlements include annual, sick, and maternity leave, consistent with the Labour Code Order and its amendments.
- Compliance and Enforcement: Inspection and enforcement are handled by the Department of Labour Inspection, which conducts regular audits of workplaces to ensure compliance with safety, wage, and employment standards. Non-compliance can result in fines, mandatory remedial actions, or prosecution (Ministry of Labour and Employment).
- Industrial Relations and Dispute Resolution: The Directorate of Dispute Prevention and Resolution (DDPR) offers mediation, arbitration, and adjudication services for labor disputes. The DDPR handled over 6,000 cases in 2023, with the majority relating to unfair dismissals and wage claims, a trend expected to persist as employment levels slowly recover post-pandemic (Directorate of Dispute Prevention and Resolution).
Looking ahead, Lesotho is expected to continue strengthening labor protections, particularly in the textile and manufacturing sectors, which are major employers. Legislative amendments under consideration include enhanced anti-harassment provisions and expanded social security coverage. Businesses must remain vigilant in monitoring legal updates, as non-compliance carries reputational and financial risks. Overall, Lesotho’s employment law environment remains dynamic, with gradual reforms aimed at improving worker welfare and supporting sustainable business growth.
Foreign Investment Rules and Restrictions
Lesotho’s legal framework for foreign investment is designed to balance the country’s economic development objectives with the protection of domestic interests. The principal legislation regulating foreign investment is the Lesotho Investment Promotion Act, 2016, administered by the Lesotho National Development Corporation (LNDC). This Act outlines the rights, incentives, and obligations for foreign investors, as well as the sectors in which foreign participation is either restricted or subject to specific conditions.
As of 2025, Lesotho maintains a generally open investment regime. Foreign investors may hold 100% ownership in most sectors. However, certain business activities are reserved for Basotho nationals, as specified in the Reserved Activities List published by the Ministry of Trade, Industry, Business Development and Tourism. These reserved sectors typically include small-scale retail, road transport (less than 25 seats), barber shops, hairdressing, and other micro-enterprises. For activities outside this list, foreign investors are permitted to establish wholly-owned subsidiaries or joint ventures, subject to standard registration and licensing requirements.
Foreign investors are required to register their businesses with the Companies Registry (Lesotho) and obtain an Investment Certificate from the LNDC. To promote compliance and transparency, Lesotho has streamlined business registration processes through the One Stop Business Facilitation Centre (OBFC), reducing the average time to register a business to under seven days as of 2024, according to the LNDC.
Incentives for foreign investors include tax holidays, duty-free import of capital goods, and access to industrial sites, particularly in priority sectors such as manufacturing, agriculture, and renewable energy. Notably, Lesotho’s membership in the Southern African Customs Union (SACU) and the African Continental Free Trade Area (AfCFTA) provides foreign investors with preferential access to regional markets, further enhancing the country’s appeal.
Despite these advantages, compliance with local laws remains critical. Foreign investors must adhere to environmental regulations, labor laws, and sectoral licensing requirements. The government has increased scrutiny on anti-money laundering and beneficial ownership disclosure, in line with commitments to the Financial Action Task Force (FATF). As of 2025, amendments to the Companies Act and Anti-Money Laundering laws are under consideration to enhance transparency and close regulatory gaps.
The outlook for foreign investment in Lesotho is cautiously optimistic. Government priorities for the next few years include further liberalization of investment rules, digitalization of compliance processes, and targeted incentives for high-value sectors. However, investors should monitor evolving regulations, particularly in relation to ownership restrictions and due diligence requirements.
Dispute Resolution, Courts, and Arbitration Procedures
Lesotho’s dispute resolution framework for business-related matters continues to evolve, reflecting efforts to align with international standards and improve the efficiency of its legal system. The country’s court structure comprises the Magistrates’ Courts, High Court, and the apex Court of Appeal, all of which have jurisdiction over commercial disputes. The Judiciary of Lesotho serves as the principal body for the administration of justice, with rules and procedures stipulated under the Laws of Lesotho and various procedural rules.
The High Court holds unlimited jurisdiction in civil and commercial matters, while Magistrates’ Courts handle less complex business disputes, depending on the monetary value in question. There is also a Commercial Division within the High Court, aiming to expedite commercial cases and foster a business-friendly environment. Notably, the current government has highlighted judicial reform and case management improvements as priorities for 2025 and beyond, focusing on reducing the backlog of cases and improving the speed of dispute resolution (Government of Lesotho).
Arbitration remains a viable alternative to litigation in Lesotho, particularly for cross-border and complex commercial disputes. Lesotho is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which facilitates the enforcement of international arbitration awards within its jurisdiction (United Nations). Domestically, the Arbitration Act 1980 governs arbitration proceedings, allowing parties greater autonomy and confidentiality in resolving disputes. However, as of 2025, the business community and legal professionals continue to advocate for modernizing the arbitration framework to harmonize with global best practices.
Key compliance considerations for businesses include the requirement to adhere to contractual dispute resolution clauses and to engage in good faith negotiations prior to litigation or arbitration, as encouraged by the courts. The introduction of digital case management tools and ongoing judicial training programs is expected to further streamline dispute resolution procedures in the coming years (Judiciary of Lesotho).
- According to the Judiciary of Lesotho, commercial cases constitute a significant portion of the civil docket, with ongoing efforts to ensure resolution times align with regional standards.
- Arbitral awards, both domestic and international, are generally recognized and enforced by the High Court, provided statutory requirements are met.
Looking forward, the government’s commitment to judicial efficiency and harmonization with international dispute resolution norms bodes well for businesses operating in Lesotho. The anticipated reforms and increased adoption of alternative dispute resolution mechanisms are expected to bolster investor confidence and improve the overall business climate through 2025 and beyond.
Compliance Challenges and Enforcement Trends
Lesotho’s business law landscape in 2025 is characterized by evolving compliance requirements and ongoing efforts to strengthen enforcement, particularly in areas such as company registration, anti-money laundering (AML), and tax compliance. The Companies Act 2011 remains the principal statute regulating corporate formation and governance, but recent amendments and regulatory directives have placed greater emphasis on transparency, beneficial ownership disclosure, and financial reporting. The Lesotho Companies Registry has streamlined registration processes, yet compliance with statutory filings and annual returns continues to pose challenges, especially for small and medium-sized enterprises (SMEs).
Anti-corruption and AML compliance have gained prominence following Lesotho’s commitment to regional and international standards. The Financial Intelligence Unit (FIU) enforces AML obligations, requiring businesses in regulated sectors to implement customer due diligence, record-keeping, and suspicious transaction reporting. In 2024, the FIU reported an increase in suspicious transaction reports and began rolling out sector-specific compliance workshops to address persistent gaps in reporting and internal controls.
Tax compliance remains a key enforcement area, overseen by the Lesotho Revenue Authority (LRA). The LRA has intensified audits and introduced digital filing systems to improve VAT and income tax collection. According to LRA statistics, voluntary tax compliance rates improved to 69% in 2023 but remain below the authority’s 2025 target of 80%. The authority has also warned of stricter penalties for late filings and under-declaration of revenues.
Enforcement actions are increasingly visible, with the Directorate of Public Prosecutions collaborating with regulators to prosecute corporate fraud, tax evasion, and regulatory breaches. The judiciary, guided by the Lesotho Judiciary, has issued several notable judgments affirming directors’ duties and the consequences of non-compliance.
Looking forward, the compliance outlook for 2025 and beyond includes further alignment with the Southern African Development Community (SADC) protocols on business regulation, enhanced digitalization of compliance obligations, and increased scrutiny of cross-border transactions. Businesses are advised to invest in compliance training and internal controls to navigate the tightening regulatory environment and avoid costly enforcement actions.
Future Outlook: Opportunities, Risks, and Strategic Recommendations
As Lesotho approaches 2025, the business law landscape is shaped by both evolving opportunities and persistent challenges. The nation has undertaken significant reforms aimed at enhancing regulatory transparency, streamlining company registration, and improving investor protection. Notably, the enactment of the Companies Act 2011 and its ongoing amendments form the cornerstone of Lesotho’s corporate legal framework, facilitating easier business incorporation and strengthening corporate governance requirements. The Lesotho Revenue Authority has also worked to simplify tax compliance and reporting processes, a move expected to incentivize both local entrepreneurship and foreign investment.
- Opportunities: The government’s commitment to digitalizing company registrations via the Office of the Registrar of Companies is anticipated to further reduce bureaucratic delays, enhance transparency, and minimize corruption. Lesotho’s participation in regional initiatives under the Southern African Development Community (SADC) and the African Continental Free Trade Area (AfCFTA) is set to provide businesses with broader market access and harmonized legal standards. These efforts, combined with targeted support for small- and medium-sized enterprises (SMEs), may result in an uptick in business registrations and cross-border commercial activity.
- Risks: Despite progress, legal and regulatory uncertainty remains a risk, particularly regarding the predictability of court decisions and contract enforcement. The Judiciary of Lesotho continues to face case backlogs and resource constraints, potentially delaying dispute resolution and affecting investor confidence. Additionally, frequent changes in legislation and gaps in regulatory enforcement pose compliance risks for businesses, especially those unfamiliar with local legal nuances.
- Key Statistics: According to the Office of the Registrar of Companies, company registrations have shown a steady increase since the rollout of online services in 2023, with preliminary 2024 data indicating a year-on-year rise of approximately 15% in new business incorporations. The Lesotho Revenue Authority reports a parallel growth in tax compliance rates among SMEs, although challenges persist in the informal sector.
- Strategic Recommendations: Stakeholders are advised to invest in ongoing legal education and compliance monitoring, particularly as legislation continues to evolve. Businesses should develop robust internal risk management systems and seek timely guidance from qualified legal professionals familiar with Lesotho’s regulatory environment. Engagement with government reform initiatives and industry associations can provide valuable insights into upcoming legal changes and compliance best practices. Finally, leveraging digital platforms for registration and compliance is likely to yield operational efficiencies and enhance regulatory adherence.
The outlook for business law in Lesotho remains cautiously optimistic. Continued reforms, regional integration, and digital innovation present tangible opportunities, provided businesses proactively manage legal risks and adapt to the dynamic regulatory environment.
