The first thing to undertake if you're considering setting up a company in Cambodia is choosing the appropriate business entity, as there are various separate and non-separate legal entities to choose from. According to law on the amendment of commercial rules and commercial registration, there are four main types of business registration in Cambodia. The fair main types are sole proprietorship, partnership, limited liability company, and foreign business entities.
Among the four types, a limited liability company ("LLC") is the most common option for entrepreneurs starting a business in Cambodia. A LLC can consist of 1 to 30 shareholders, with a minimum capital of only 4,000,000 million Riel (US$1,000). Moreover, the LLC can be 100% Cambodian-owned; 100% foreign-owned; or a combination of Cambodian and foreign shareholdings. There are three types of limited liability company, which are private limited liability company, single-member private limited company, and public limited company.
I. Private Limited Company
The first type of LLC in Cambodia is a private limited company. In order to register as a private limited company, the company must have 2 to 30 shareholders and a minimum of one director. The director of the private limited company can be either a Cambodian national or a foreigner. Private limited companies cannot issue shares or securities to the public and may have one or more restrictions on the transfer of each class of its shares.
Shareholders of the private limited company are separate legal entities, and they will not be held personally liable for the company's debts. The minimum share capital required for setting up a private limited company is KHR 4,000,000. The company name must include the words Private Limited Company or Ltd at the end of the company name.
II. Single-Member Private Limited Company
A private limited company with a single shareholder and at least one director is known as a single-member private limited company. The shareholder of the private limited company can be a person or an entity. Upon shareholder approval to increase the number of shareholders, a single-member private limited company can be transformed into a private limited company. In order to do this, they must receive shareholder's approval to increase the number of company shareholders.
III. Public Limited Company
A public limited company must consist of at least two shareholders, and at least three directors as required by law. With registration to this type of company, owners can issue shares and securities to the public. The company's name must end with "Public Limited Company" or "PlC" Banks, insurance companies, and finance companies must register as public limited companies. This company has the capacity to carry on its business, conduct its affairs and exercise its rights in any jurisdiction outside of the Kingdom of Cambodia to the extent that the laws of such jurisdiction permit.
Via article 101 of Law on Commercial enterprise, a public limited company shall be deemed to be of Khmer (Cambodian) nationality only if:
- The company has a place of business and a registered office located in the Kingdom of Cambodia; and
- More than 51% of the voting shares of the company are held by natural or legal persons of Khmer nationality.
A foreign parent company may set up a LLC in Cambodia as a wholly owned "subsidiary" or jointly owned. In this type of company, the parent company may be liable to the subsidiary for the debts and liabilities of the subsidiary, up to the amount of the subscribed capital. Subsidiaries may engage in any business activity open to local companies but are not permitted to own land as a foreign company.
Registration of a limited liability company requires additional documents than a sole proprietorship or general partnership. When registering with the Ministry of Commerce, a Memorandum of Incorporation and Articles of Incorporation are required. An LLC may register one or more directors who in turn appoint officers to direct the company. This is to limit a shareholder's potential liability for an investment in the stock.
If you would like further advice, please contact experienced lawyers at https://www.harveylawcorporation.com/contact/.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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