An Analysis of The Lesotho Companies (Beneficial Ownership) Regulations 2024

1. Background

As of June 2025, the Ministry of Trade, Industry, and Business Development(The Ministry ) has begun implementing the Companies (Beneficial Ownership) Regulation 2024. The Regulation was enacted to bring Lesotho in line with international standards set out by the Financial Action Task Force (FATF). One of the findings from the Lesotho 2023 Mutual Evaluation Report was that there was an absence of measures to ensure that there is verification of the Beneficial owners and those in control of the companies at the time of registration. The report also highlighted weaknesses in ensuring that the information kept at the Registrar of Companies is updated and accurate.

The introduction of the Regulations, therefore, represents a critical reform in strengthening Lesotho's Anti–Money laundering (AML) framework and in closing the legal gaps that allowed companies to operate with limited transparency regarding their true ownership. This article aims to provide an analysis of the regulation, discuss the implementation process, and outline the challenges and potential challenges associated with it.

2. Key Provisions

2.1 Definition of Beneficial Owner

According to the Act, a Beneficial Owner is defined as;

A person:

a) who owns or controls a company;

b) on whose behalf a transaction is being conducted;

c) who exercises ultimate effective control over a company;

d) who has a beneficial interest in a company

Significance

This definition is specifically significant in two aspects:

· The definition makes it clear that only natural persons can be Beneficial Owners

· The definition also includes individuals who may not appear on the registered shareholders' list but who exercise control and derive benefit from the Company.

This approach ensures that the regulations are consistent with FATF standards, which promote transparency in ownership, control, and the source of corporate vehicles' assets, such as property acquired through a corporate structure or funds managed under a trust.

2.2 Measure of Control over the Company

The Regulation provides a criterion to measure control:

a) Control is first established when a natural person directly or indirectly holds more than 10 percent of the shares or voting rights.

b) Beyond the shareholding, control is also determined by the natural person’s right to appoint or remove the majority of Directors and Other Officers of the Company, and without whose approval the Directors and Officers cannot be appointed or removed.

c) The regulation further includes control in instances where the natural person has the right to exercise or exercises influence, power, or authority over such a company, regardless of formal ownership rights.

d) Lastly, the regulation recognises ultimate effective control, which happens in instances where ownership or control is exercised through a chain of ownership or means of control other than direct control.

Significance

· In determining the measure of control, the regulation seems to have taken a holistic, inclusive approach. The threshold of more than 10 percent shareholding or voting rights is relatively low compared to some other jurisdictions, where the standard of 25 percent is more favoured. By adopting such a low threshold, the regulation reflects a stricter standard of transparency designed to capture a wider range of persons with control within a company.

· The regulation’s inclusion of the power to appoint and remove Directors reflects the understanding that control can be exercised in other ways beyond just shareholding. Similarly, the recognition of control through influence, power, or authority, as well as ultimate effective control, reflects the appreciation that control can be exercised through less formal or indirect mechanisms.

2.3 Disclosure Obligation

The Regulation imposes a mandatory duty for Companies to disclose their Beneficial Owners and to maintain a register of such Beneficial Owners at the Company’s registered offices. Additionally, Companies are required to collect, file, and lodge particulars of Beneficial Owners with the Registrar of Companies.

This obligation is continuous; Companies are not only obligated to disclose at the time of incorporation, but they must ensure that such information is updated and the registrar notified when there are any changes in ownership or control.

Significance

· The disclosure obligation is a central pillar of this Regulation. The responsibility is primarily on companies to provide complete and accurate information on their Beneficial Owners. While there is heavy reliance on companies, the regulation isn’t without mitigating measures from the Registrar, including inspections and fines for non-compliance.

2.4 Record Keeping

The Regulation requires a Company to retain entries relating to individuals who are, or have previously been, Beneficial Owners for ten (10) years. This obligation extends to both former Beneficial Owners and deceased Beneficial Owners.

In the event of liquidation, the Liquidator, trustee, or other designated officer assumes this responsibility and is required to maintain the Beneficial Ownership records for the same ten (10) year period.

Significance

· This requirement reinforces transparency by mandating the retention of information for an extended period. It ensures the existence of a reliable ownership trail that is particularly important for investigations and regulatory scrutiny.

· By extending the obligation beyond the life of the Company, the Regulation closes potential loopholes where critical information could be lost.

3. Implementation and Challenges

3.1 Implementation

In practice, the filing of Beneficial owners has happened in four ways ;

a) At the incorporation of a new company -

b) When lodging any changes in directorship, transfer of shares, or allotment of shares

c) When lodging annual returns

d) By submitting the document physically at the trade offices

The filing is done using the official Beneficial Owner form provided by the Ministry. The form necessitates a comprehensive list of beneficial owners' full names, their physical and postal addresses, the nature of ownership (direct or indirect), and the ownership percentage. This form is to be submitted together with Beneficial Owner’s Identity Documents, Proof of residence, and, where a Company is a shareholder, the organisational structure of the Company.

3.2 Challenges

While the mechanisms in place indicate active implementation, these are some of the challenges:

a) Most Companies remain unaware of the extent of their disclosure obligation, thereby causing incomplete or delayed filings.

b) Integrating beneficial ownership disclosure into other company processes, such as changes in directorship or shareholding, has also caused delays; a process that ordinarily takes three to five days can take much longer because companies must first collect supporting documents from all Beneficial Owners.

c) Even when information is submitted, verifying its accuracy, reliability, and whether it's up-to-date remains a difficulty.

d) Beneficial owners may deliberately conceal their position through nominees, complex structures, corporate vehicles, and offshore entities.

e) Because there is no prescribed deadline for filing Beneficial Ownership information, companies that are not actively changing directors, their ownership structures, or engaging with the trade office may never lodge their Beneficial Ownership details.

4. Conclusion

The Companies (Beneficial Ownership) Regulation 2024 represents a significant step towards enhancing Lesotho’s Anti-Money Laundering framework. By providing a broad definition of Beneficial Owner, establishing clear criteria for control, and mandating disclosure of Beneficial Owner information, the regulation addresses key challenges previously identified within Lesotho’s AML framework.

While the Regulation establishes a robust legal framework, it is not without its practical challenges. These include, but are not limited to: education and awareness among company officers, absence of a clear filing deadline, and verification of documents. Addressing these challenges will be essential in ensuring that the Regulation achieves its intended purpose of ensuring transparency and accountability in Lesotho Companies.

Sources

1. Companies (Beneficial Ownership) Regulations 2024

2. FATF Guidance for a Risk-Based Approach Beneficial Ownership and Transparency of Legal Arrangements March 2024

3. FATF guidance Transparency and Beneficial Ownership October 2014

4. Report of The Portfolio Committee On The Economic and Development Cluster On Companies (Beneficial Ownership) Regulations, 2024.

5. The Anti-money laundering and counter-terrorist financing measures Lesotho 2023 Mutual Evaluation Report by Eastern and Southern Africa Anti Money Laundering Group

ABOUT AUTHOR

Completed her Bachelor's degree in Law (Hons) at the National University of Lesotho.

Admitted Advocate of the Courts of Lesotho