The prerequisites for business registration in Cambodia vary based on the sort of company you want to start. The majority of foreign entrepreneurs who establish businesses in the Kingdom do so using a ‘Limited Liability Company’ form, which limits shareholders’ liability to the capital put in the business. Other business structures, such as those that apply only to corporations controlled by a foreign parent company, are also available.
Company structures
The company structures available in Cambodia are explained below
Sole proprietorship
A sole proprietorship is a firm owned entirely by a single natural person who has sole personal responsibility for all of the company’s duties and liabilities.
General partnership
A general partnership is made up of two or more natural persons who are the only ones authorized to govern and bind the partnership and who share full responsibility for the business’s responsibilities and liabilities. Professionals such as doctors, lawyers, and accountants are most suited for this type of business. The legislation on Commercial Enterprises also allows for a ‘limited partnership,’ in which one or more limited partners contribute capital and are entitled to a share of profits, but are only accountable to the extent of the quantity of money or value of the property that they have agreed to contribute.
Limited liability company
The most typical choice for entrepreneurs beginning a business in Cambodia is to form an LLC, which limits shareholders’ possible liability to their investment in shares. An LLC can have anywhere from one to thirty stockholders, and the minimum capital need is simply 4 million KHR (1,000 USD). The LLC can have one or more directors, who then appoint officers to run the business.
A foreign parent firm can establish an LLC in Cambodia as a wholly-owned subsidiary or as a joint venture. The parent company is only potentially accountable for the subsidiary’s obligations and liabilities up to the point of its subscribed capital in the subsidiary under this organizational structure. Subsidiaries are free to engage in all business activities that are available to local enterprises, but they are not allowed to possess the land because they are foreign-owned.
In comparison to a sole proprietorship or general partnership, forming an LLC necessitates the submission of a few more paperwork. When registering with the Ministry of Commerce, you will need a Company Memorandum and Articles of Association.
Public limited company
A Public Limited Company (PLC) is a type of limited company that is permitted by law to issue public securities. It may have more than 30 shareholders, unlike private limited companies. A Public Limited Company must have at least three directors elected for two-year terms by the shareholders.
The Cambodia Securities Exchange is new in Cambodia (CSX). Only four firms were listed on the CSX at the end of 2016. With a few exceptions, such as a Taiwanese clothes maker and the privately-held Phnom Penh Special Economic Zone, the bulk of enterprises interested in the listing has been state-owned. To recruit SMEs in the future, CSX has created a ‘Growth Board,’ which has much lower minimum equity requirements.
Branch office
A branch office is a less restrictive choice for foreign parent firms, as it can engage in the same types of economic operations as a Cambodian LLC.
The branch office, on the other hand, is not protected by the limited liability that an LLC or subsidiary enjoys. The branch office and the main firm share responsibility for the branch’s debts and liabilities, making it a riskier organization. According to anecdotal evidence, branch office investment initiatives are unlikely to profit from investment incentives, as the Development Council prefers to work with locally established corporations.
Representative office
A representative office (RO) is a facility that a foreign parent business can use to conduct sales liaison and market research in Cambodia. The RO is not a different legal organization from the parent company, and its commercial activities are highly constrained – it is only meant to be used as a cost center, and it should not generate any revenue from its operations.
Article 274 of the Law on Commercial Enterprise (LCE) outlines the activities that a RO may engage in:
- Contact customers to introduce them to the company’s principals.
- Gather commercial data and send it to the company’s principal.
- Conduct market analysis
- Promote products at trade shows and display samples and products at its office or trade shows
- Purchase and store a large number of goods for trade shows.
- Hire local employees and rent an office.
- On behalf of its principal, enter into contracts with local clients.
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