Drinking water finance makes a splash attracting investigators
Drinking water finance makes a splash attracting investigators
A fact-finding committee is set to investigate a drinking water manufacturer that has persuaded individuals to provide financing for business operations, which authorities say contravenes regulations, a senior government official has said.
PS Lao Enterprises, which produces ‘Lao’ brand drinking water, has convinced people to become business partners by contributing funds, with the enterprise offering monthly dividends of six percent as an incentive.
The enterprise was registered and licensed as a limited company, which means financing is required to be solely from the investor, but the company was later found mobilising finance from individuals – an action that contravenes regulations, Deputy Minister of Industry and Commerce, Mr Bounmy Manivong said.
He spoke to local media yesterday at a National Assembly (NA) press conference in response to a public inquiry raised through the NA hotline that called for clarification over the issue.
The issue came to light following many people joining the venture after the enterprise started its drinking water business last year.
It was reported recently that more than 50,000 people have put money into the business, with a huge amount of money believed to have been raised.
While some partners have praised the partnership for generating robust dividends, many members of the public however have questioned the tactics of the business in sourcing its money.
Earlier, the Vientiane Industry and Commerce Department issued an announcement that warned the business to cease its illegal action and address the existing issue.
Mr Bounmy said the committee would investigate the issue and report findings to higher authorities to seek guidance for a solution.
He noted that the dividend offered by the enterprise was exceptionally high compared to interest rates from banks.
The deputy minister admitted it was a good idea for a business to joint venture with individuals for investment in operations if the relevant regulations and laws were observed.
“An enterprise must be registered as a public company so that it would be eligible to mobilise finance from its business partners,” he said.
Asked if PS Lao Enterprises could apply for being registered as a public company to enable it to continue raising finance from individual partners, Mr Bounmy said there might be ways. However, if this was the case, many factors and conditions would be taken into account for such an application proposal.
If an application was made, he added, authorities needed to study if the business’s financing could really afford such a high rate of dividend and other related requirements.
Established in 2012, the enterprise started out by running organic vegetable and mushroom farms. In 2014, it added drinking water production.
Public contributions to the partnership started at a minimum of 500,000 kip. The largest amount contributed by an individual was reportedly one billion kip, Deputy Director and General Manager of the enterprise, Mr Chankham Phoumanivong said.
Subscribers to the venture are required to stay with the business for at least one year after which they may withdraw their share. People who have contributed a larger amount are required to stay in the scheme for longer.
If a contributor wishes to withdraw their money before the time stated in the agreement, they are required to inform the enterprise six months in advance.
