Many foreign individuals and foreign-owned companies consider to purchase or lease land in Laos for residential or commercial purposes. Although foreign individuals and foreign-owned companies (even in case of one foreign-owned share) are prohibited to own land in Laos, certain legal structures with a limited foreign-owned interest in land exist. Either you would like to have a house for a residential purpose or a hotel to run a hospitality business, you will need to properly structure the legal arrangement with respect to the concerned land plot in Laos in order to protect your rights. Below, we have outlined a possible structure.

The above structure may be tailored to fit different situations. In this case, a foreign investor (either a foreign individual or a company registered outside of Laos) (For Co) set up a company in Laos (Lao Co A). The funds from For Co to Lao Co A can be transferred via a shareholder loan which needs to be approved by the Bank of Lao PDR (BOL). Further, Lao Co A lent money to Lao Co B (a 100% Lao-owned company) for a specific purpose to purchase a concerned land plot (Land). Unlike a loan agreement between a foreign company and a Lao company, a loan agreement between companies registered in Laos does not generally require an approval of the BOL. The loan agreement between Lao Co A and Lao Co B can be secured by a security agreement over the Land and a security agreement over the shares in Lao Co B. Further, a long-term land lease agreement between Lao Co A and Lao Co B can be signed.

Below, we outlined a brief description of some important agreements and steps.

1. Conduct Land Due Diligence

Firstly, you or your attorney in Laos need to prepare and submit an application to the Land Management Authority to investigate the Land Title Certificate relating to the Land to determine the owner and whether any security interests, easements etc. are registered on the Land.

2. Land Sale-Purchase Agreement

Further, a land sale-purchase Agreement between a previous owner of the Land and Lao Co B needs to be executed. The agreement will need to be witnessed by the Village Chief, registered with the relevant Land Management Authority and notarised by the Lao Notary Office.

3. Lease Agreement

A long-term land lease agreement between Lao Co B and Lao Co A may be entered into. This agreement should be notarised by the Notary Office and registered with the relevant Land Management Authority.

4. Loan/Security Agreement

The loan agreement between Lao Co A and Lao Co B can be for a specific purpose to purchase the Land. In order to protect Lao Co A’s interests and ultimately For Co’s interests, such a loan may be secured by a security agreement whereby a mortgage over the Land and a pledge over shares in the Lao Co B are created. These agreements will need to be notarised by the Lao Notary Office and registered with the relevant Land Management Authority (in case of a mortgage) and the Ministry of Finance (in case of a share pledge). This process ensures the mortgage is registered against the Land Title Certificate and the share pledge is registered against Lao Co B’s shares.

Our legal advisers can assist with:

• drafting, reviewing and negotiating lease agreements, loan agreements and security agreements;
• advising on land use rights and taking a security over land use rights in Laos;
• notarising various agreements with the Notary Office;
• registering loan agreements with the Ministry of Finance; and
• registering lease agreements and security agreements with the land department.