During the company registration process, the applicant must submit a bank statement as part of its application with the equivalent of the registered capital amount stated in the company Articles being shown as deposited into the company account. The minimum capital required for a limited company or branch office is US$1,000.
However, following registration, funds may be spent or removed from the company account (without Ministry of Commerce approval) and therefore the amount in the company account at a later time may not reflect the registered capital stated in the company Articles.
Minimum Registered Capital
Article 144 of the LCE states that the capital of a Limited Liability Company (“LLC”) must be at least 4,000,000 KHR (approximately US$1,000) with a minimum of 1,000 shares issued (each share having a par value of not less than 4,000 KHR). If the shareholders intend that LLC will be a QIP under the LOI a higher minimum capital of at least US$500,000 to US$1,000,000 is required in practice as the LOI in interpreted by the Council for the Development of Cambodia (CDC).
Article 95 of the LCE requires all shareholders of the newly incorporated LLC to sign the Articles and initial all pages. In addition, the application form for filing the registration of the company with the MOC and application form of CDC must be signed by all future shareholders and directors.
By the date of registration, only twenty-five percent (25%) of the registered capital is required to be paid up so long as this amount exceeds US$ 1,000. However, a share shall not be issued until that share is fully paid up (Article 146 paragraph 3 of LOCE). A shareholder will not own the share(s) and will have no right to vote until the fully paid up share(s) have been issued.
Article 149 of the Law on Commercial Enterprise requires shares issued by a company to be fully paid in cash, in kind, or in past services received. We cannot confirm what amount of the registered capital has actually been paid-in – this must be confirmed by accountants.
Increase of Registered Capital
The registered capital may be increased by special resolution[ii] of the shareholders. The registered capital may be increased by additional contribution by some or all shareholders or new subscribing shareholder with issuance of new shares, or by increase of the par value of share by capitalization of the reserves or proportional contribution by all shareholders.
An increase of registered capital requires amending the Articles. The application form for the amendment together with the special resolution approving the increase of the registered capital shall be filed with CDC within 10 days and the MOC no later than fifteen (15) days after the meeting at which they were approved (Article 239 of LOCE). The increase of registered capital is valid when it is approved by MOC and CDC (Article 240 of LOCE, and Article 7.7 of Sub Decree 111 dated September 27, 2005).
Reduction of Registered Capital
To reduce the share capital of a company, a special resolution of shareholders must be obtained and the resolution must specify the capital amount to be reduced. The registered capital can be decreased by reducing the par value of shares or the total number of authorized shares.
The reduction of the registered capital cannot be made, unless the following requirements are satisfied:
- The registered capital may not be reduced to less than one half (½) of the originally registered capital provided for in the Articles (Article 238 of LOCE);
- No reduction of capital shall occur until ninety days after the amendment has been filed with MOC. If during that time there has been any objection by any creditor, whose debt is not disputed by the company, the creditor shall be paid in full before the reduction can take effect (Article 238 of LOCE); and
- The registered capital shall not be decreased if there are reasonable grounds for believing that (Article 155 of LOCE):
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- (i) the company is, after the reduction would be, unable to pay its liabilities as they become due; and
- (ii) the realizable value of the company’s assets after the reduction would be less than the aggregate of its liabilities.
If the company is a registered with the CDC as a QIP, the required minimum capital provided in the negative list must be observed.
A reduction of registered capital also requires amendment to the company’s Articles. Once approved by the shareholders, the amendment must be filed with the CDC/MOC.
A Special Resolution is a resolution passed by a majority of two-thirds of the votes cast by the shareholders who voted on that resolution or signed by all the shareholders entitled to vote on that resolution (Article 88-10 of LOCE).