Company Registration

Registering a company in Cambodia is relatively straightforward. It has a more liberal business environment since becoming a member of the World Trade Organization and passing the Law on Commercial Enterprises in 2005. This law brought changes in procedure and requirements for company registration, and more reforms are expected as this law becomes fully implemented.

  1. What types of business entities can be formed in Cambodia? What is the most common vehicle used by investors?

One of the first steps that any investor will take is to select the right structure for their investment. The 2005 Law on Commercial Enterprises lists the principal forms of legal entity – the most common of which by far is the private limited company. The law also allows for the establishment of branches and representative offices, sole proprietorships and partnerships. The most common type of business structure is the Limited Liability Company (LLC).

  1. How does an investor set up a Private Limited Company? What are the minimum capital requirements? What are the shareholders’ liabilities?

The first step is to reserve the proposed company name with the Ministry of Commerce (MoC). Once an acceptable company name has been reserved, an application is completed and submitted to the MoC. Once this step is completed, the investor will receive the following corporate records:

  • the original of the company Articles (in Khmer with a copy in English if filed),
  • the Commercial Registration Certificate, and
  • the MoC Registration Authorization Letter.

The Law on Commercial Enterprises requires a minimum capital investment of four million Cambodian Riel (approximately US $1,000 at the current exchange rate).

The liability of each shareholder is limited to the value of its capital contribution.

  1. Can a company be 100% foreign-owned? Is a foreign enterprise required to have a Cambodian partner?

A limited company can be 100% foreign owned and a Cambodian partner is not a legal requirement for most business activities, unless the company will own title to land in Cambodia – in which case a minimum local shareholding of 51% is required. Both single shareholder and multiple shareholder companies are permissible.

  1. What government approvals, permits and licenses are required? Which ministries or other government institutions are in charge of granting licenses and approvals?

All companies must have a Commercial Registration Certificate (also known as a Certificate of Incorporation or Business Certificate) from the MoC; a Patent Tax Certificate and a VAT certificate from the General Department of Taxation of the Ministry of Economy and Finance; and an office registration letter from the local authority. Depending on the type of business activity, the company may also require specific license(s) from the relevant Ministry in addition to the commercial registration certificate issued by the MoC, for example, for tourism, mining, handicrafts, factories, energy, water supply, banking, construction, land or water transportation and for agro-industry, forestry and fisheries.

  1. Can these licenses and permits be assigned?

Generally speaking, no. A limited company cannot assign government approvals to a third party.

  1. How long does it take to register an LLC? Is there a One-Stop-Shop system to make the process easier?

The entire company and tax registration process generally takes around two to three months. The general outline of the procedure is:

(1) preparation and compilation of the application pack (generally two to three weeks);

(2) processing by the MoC (four to six weeks); and

(3) Once the MoC approval is granted the company must register with the General Department of Taxation. Tax registration takes an additional six (6) weeks to complete but the company is established as a legal entity upon its registration with the MOC. There is a One-Stop-Shop system for setting up an investment project company (supervised by the Council for the Development of Cambodia (CDC), but not for an ordinary limited company registered only with the MOC.

  1. When is registration required? Are there any penalties for failure to register?

A company engaging in a commercial activity must be listed on the Commercial Register of the MoC. Registration with the General Department of Taxation (GDT) is required within fifteen (15) working days of commercial registration with the MoC.

Failure to register with the General Department of Taxation can give rise to fines of up to ten million Cambodian Riel (approximately US $2,500 at the current exchange rate) and the possibility of a criminal charge and imprisonment of up to one year. The General Department of Taxation can, of its own accord, register companies that fail to register on their own and determine the effective dates of those registrations. As a result, companies that have not registered for tax could owe back taxes plus penalties and interest.

Note that as of 1 November 2014, a director of each company registered in Cambodia will need to provide proof of residence in Cambodia. The General Department of Taxation is required to send a reminder letter to a taxpayer at least fifteen (15) days before proceeding with any recovery measure, which can include a lien on the property of the taxpayer or confiscation of such property and can request that other authorities nullify various permits and licenses. Such action could result in cancellation of the business license or de-registration of the company from the Commercial Register.

  1. What kind of information must an investor disclose and report in applying to register a company and an investment project? Does this information become available to the public and competitors?

For the purposes of establishing a company, the Ministry of Commerce does not require financial or project information. However, for an investor seeking to obtain investment incentives by registering with the CDC, the investor must disclose to the CDC information concerning corporate structure, investment plans, sub-projects, and development schedules. Information about the corporate structure is considered public, but most other information is kept confidential.

  1. Are share certificates issued? What is required to transfer shares?

Although the Law on Commercial Enterprises mentions share certificates, issuance of such is not common in Cambodia. Neither the MoC, nor in the case of investment companies, the CDC, maintain a register of share certificates. As such, the document proving the shareholding status is the company’s latest Memoranda & Articles of Association, as approved by and filed with the MoC. Share certificates are considered internal instruments within the company, which are not filed with or endorsed by any government authority.

Share transfer will therefore be done by way of an amendment to the shareholding stated in the Memoranda & Articles of Association, and will be completed once the relevant authorities (MoC and CDC) have approved and accepted to register the new Memoranda & Articles of Association reflecting the post-transfer shareholdings and issue a letters of approval to that effect.

  1. Is a company required to carry insurance? If so, what kinds of risks are insured?

Insurance law in Cambodia is still under development. The existing law basically covers many types of liability risks and medical risks, but not business risks. Risks fall into two categories in the law:

  • risks against property or benefits in relation to the property; and
  • risks against life, health and physical injury.

Certain companies in particular those using motor vehicles or engaged in construction – are required to carry liability insurance.

  1. Does Cambodia have Special Economic Zones (SEZs)? Are there any special rules to follow?

Aware of the success of SEZs in attracting investment, increasing exports and creating jobs in other countries, the government has instituted a system for establishing and regulating these separate, fenced customs territories.

The CDC is the government office that approves and regulates SEZs. The SEZs in operation are located in Phnom Penh, Sihanoukville, Kampot, Kandal, Poipet, Koh Kong, Banteay Meanchey and Svay Reing.

All legal business activities are allowed in SEZs. There are no special restrictions on the type of business activities that may be conducted within an SEZ. Businesses locating in an SEZ that are approved as Qualified Investment Projects (QIPs) are eligible for all QIP benefits and incentives. In addition QIPs located in SEZs are also entitled to VAT exemption for imports (this does not apply to QIPs located outside of SEZs).

SEZ customs regulations generally allow a free flow of materials and products into and out of the SEZ, although goods that move into the country for retail are subject to standard import duties. SEZs offer investors One-Stop-Shop services and other benefits.

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