What is the main source of law authorising this entity form?

Law on Commercial Rules and Register dated June 26, 1995, as amended.

Law on Commercial Enterprises dated June 19, 2005, as amended.

Law on Taxation dated February 24, 1997, as amended.

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

A private limited company has legal personality.

(Maximum) period of existence

A company is required to insert into its Articles of Incorporation the date of expiration of the company. In practice, a term of 99 years is used. The term may be extended or reduced upon the approval of the Company’s shareholders.

Governing document(s)

A private limited company is governed by its Articles of Incorporation.

Liability of incorporators / shareholders

Incorporators/shareholders are not personally liable for the debts of the company, and a shareholder’s liability is limited to paying the subscription price for the shares.

(Governing) bodies

A private limited company is managed by its Board of Directors.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

Yes. A private limited company can be involved in international restructurings, such as asset acquisitions, equity acquisitions and mergers.

Can this type of entity be publicly listed or held?

No. If a company is to be listed or publicly held, it must be structured as a public limited company.

Can this type of entity be used for a non-profit or charitable organization?

No.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

• Articles of Incorporation (AOI) (Leakkhaknikak Kromhoun) must be signed by all persons listed in the AOI, including shareholders, corporate representatives and directors.
• Power of Attorney to authorize one incorporator to submit documents.
• Evidence of the company’s registered office address.
• Documents for the registration of shareholders, shareholder representatives and directors.
• Shareholder Resolution (for corporate shareholders).
• Corporate bank account confirmation letter.

Unless a document must be submitted in Khmer, a document may be submitted in either Khmer or English.

Signatures, company stamps and thumbprints on an application and related documents must be in blue ink.

Involvement of notary, company register, governmental authorities

In order to incorporate a private limited company it is necessary to register with the Ministry of Commerce (MOC) (Krasuong Peanechchokam), General Department of Taxation (GDT) (Akkoneayork Dthan Ponthda), and Ministry of Labor and Vocational Training (MLVT) (Krasuong Kangea ning Bondos bondal Vicheachivak).

Timing (estimate)

The registration of a company with the relevant ministries should take approximately 8 working days.

Main costs, including registration and similar fees (excluding legal fees)

The main costs are official government fees, being approximately:

• USD 430 at the MOC;
• USD 100 at the GDT; and
• USD 30 at the MLVT.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The business objectives of the company must be listed in the company’s AOI and filed with the Business Registration Department of the MOC.

The chairman of the board of directors may appear at a bank in Cambodia to open a corporate bank account.

Minimum number of incorporators / shareholders and residency requirements

There must be at least one incorporator/shareholder, and there are no residency requirements.

Minimum number of directors (or other applicable officers) and residency requirements

A private limited company must have at least one director. There are no residency requirements for directors.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

Under the Law on Commercial Enterprises, the minimum share capital of a company is KHR 4,000,000 (approximately USD 1,000); however, in practice, the GDT may require a company to have a minimum share capital of KHR 20,000,000 (approximately USD 5,000).

A company is required to open a bank account and submit the bank confirmation letter to the GDT within 15 days after receiving their approval from the MOC. The bank confirmation letter must contain the name of the incorporated company and reflect a deposit of at least USD 1,000.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Upon registration with the GDT, the GDT will issue the company a tax identification number (TIN) which is the VAT number. The TIN will be stated on the patent tax certificate and VAT certificate issued by the GDT.

What is the title of the applicable company registry?

Online Business Registration Portal of the Ministry of Commerce, which is located at www.businessregistration.moc.gov.kh.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

The information listed below must be filed at the MOC and will be publicly available:

• Company address and contact information
• Directors
• Business activities
• Number of employees

The information listed below must be filed at the MOC, but will not be publicly available:

• Articles of incorporation
• Shareholders
• Share capital

 

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Board of Directors (Krombroeksaea Phibeal)

The board of directors has broad powers to manage the business and affairs of a company, including appointing and removing all officers and determining their salaries, and approving a number of corporate transactions, amongst other matters. The directors are also obliged to present an annual financial statement to the shareholders () at every annual general meeting (Moha Sannibea

How are the members of the executive body appointed, dismissed and replaced?

All directors are appointed by an ordinary shareholders resolution, and a director may be removed with or without cause by a majority of the shareholders entitled to vote for the director.

The chairman of the board is elected by the directors from amongst its members. The chairman may be removed from the office of chairman by a majority vote of the directors.

Is it possible to appoint corporate directors or must all directors be natural persons?

No. All directors are appointed by the shareholders. All directors must be natural persons. Directors cannot be legal entities such as corporations.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

Yes. Cambodian law does not require directors to serve any executive functions for a company or otherwise act as an officer for a company. At the same time, Cambodian law would not prohibit the board of directors from appointing a director to serve in an executive function or as an officer of the company.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The general meeting of shareholders has the following main tasks under Cambodian law:

• Appoint directors and auditors
• Approve and amend the articles of incorporation
• Examine the annual financial statement
• Approve a merger request and various other corporate transactions.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

A quorum for a general meeting consists of the holders of a majority of the shares entitled to vote at the meeting being present in person or represented by proxy. The quorum requirements for a general meeting can be varied or changed if such change is set out in the company’s articles of incorporation.

Decisions of the shareholders are made based on a majority vote, unless the matter requires approval by a special resolution under Cambodian law, being approval by not less than two-thirds of the votes cast by the shareholders.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

No. However, special governance regimes apply to Public Listed Companies that are listed on the Cambodia Securities Exchange.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

All companies must submit a monthly tax declaration and an annual tax declaration at the General Department of Taxation or the company’s local tax branch.

Twenty-one days before each annual shareholders’ meeting, an annual financial statement must be sent to all shareholders. Before being issued, published, and circulated, annual financial statements must be approved by the board of directors, and, unless certain conditions are met by the company and the shareholders have waived the requirement to appoint an auditor, such approval must have a copy of an auditor’s report attached.

Under Prakas No. 643 of the Ministry of Economy and Finance, any company meeting two of the three criteria set out below must submit their annual financial statement to an auditor:

• Annual turnover above KHR 3,000,000 (approximately USD 750,000)
• Total assets above KHR 2,000,000 (approximately USD 500,000)
• More than 100 employees

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

The shareholders of a company must appoint an auditor by ordinary resolution at the first annual general meeting of shareholders and at each succeeding annual general meeting. The auditor holds office until the close of the next annual general meeting. If an auditor is not appointed at a general meeting of shareholders, the incumbent auditor continues in office until a successor is appointed.

However, if a company has not issued any securities to the public, or does not have any outstanding securities held by more than one person, the company may adopt a resolution not to appoint an auditor.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

Although there is no legal requirement to appoint a corporate secretary, under Cambodian law, a corporate secretary is required to prepare meeting minutes of the board and to distribute them to all directors. There is no residency requirement.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Different classes of shares are possible and share classes must be listed in a company’s articles of incorporation. However, in practice, the MOC has substantial discretion in approving and rejecting share classes and is likely to scrutinize any share classes that provide greater rights to foreigners as compared to Cambodian citizens.

What documentation is required for the transfer of ownership interests?

In order to transfer shares, it is necessary to submit a share transfer application and supporting documents to the MOC, local tax branch, and GDT. Main required documents include:

• Application form
• Meeting minutes
• Amended articles of incorporation of the company that contains information on all existing and new shareholders of the company
• A copy of company’s certificate of incorporation
• A copy of the most recent annual tax declaration
• A copy of the patent tax certificate
• Shareholders information
• Shareholder resolution
• Board resolution

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

The shareholder transferring his/her/its shares must personally sign the application form and related documents in front of an officer at the MOC, or in front of a Cambodian qualified lawyer or notary.

The share transfer application package and supporting documents must be submitted at the MOC for the MOC’s approval. Then, another application must be submitted to the local tax branch within 15 working days after receiving the approval from the MOC (no need to submit the application to the local tax branch if the company is a large taxpayer). Once an approval is received from the local tax branch, the GDT also requires the company to submit another application to notify them regarding the share transfer.

Are there any applicable stamp duties imposed when transferring ownership interests?

Share transfers are subject to a stamp duty tax of 0.1% of the value of the shares.

How are shares issued? (including information on payment obligations, registration requirements)

A share must not be issued until the share is fully paid up. A company must keep a separate stated capital account for each class and series of shares it issues. There are no registration requirements.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

A share must not be issued until the payment for the share is fully paid in money, in kind, or past services. Payment in kind, may include trademarks, copyrights, patents, and the right to use any intangible property or trademark license. The directors determine the value of the payment in kind or past services and their decision must be final and conclusive, if there is no actual fraud involved.

Share premiums must be deposited and recorded into a company’s stated capital account.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

When a company purchases, redeems or acquires its shares, the company must make corresponding adjustments to the capital account maintained for the class or series of shares purchased, redeemed or acquired.

Approval for such cancellation, repurchase or reduction is subject to certain financial metrics.

Any requirements with respect to distributions to shareholders?

Dividends may be declared out of a company’s surplus or its net profits, and are subject to satisfaction of certain financial metrics.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes. There are no prohibitions on shareholders entering into a Shareholders Agreement.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

A company is required to file an Annual Declaration of Commercial Enterprise on an annual basis. The fee is KHR 80,000 (approximately USD 20).

In addition, a company must obtain a Patent Tax Certificate for each permitted scope of business. The fee will depend on whether the company is classified as a medium or large taxpayer (being classified as a small taxpayer is not applicable for companies). The fee ranges from KHR 1,200,000 to KHR 5,000,000 (approximately USD 300 to 1,250).

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The general corporate tax rate for companies is 20%.

Summary of any specific matters, e.g. recent or prospective major legal developments

N/A.