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What are the most common business entities in Cambodia?
There is no doubt that Cambodia is emerging as a promising land for businesses looking to capitalise on the exponential growth of the Southeast Asian economy. With strong GDP growth, increasing foreign direct investment, and a solid plan to transition to a digital economy, Cambodia is setting itself up to become an attractive new business hub in the region.
With many companies looking to take advantage of this, the first thing when considering setting up a company is selecting the right business structure or entity for your business. The good news is there are various separate and non-separate legal entities you can choose from in Cambodia.
In this article, we take a brief look at some of the options available for businesses that would like to establish a presence in Cambodia.
What are the most common types of business entities in Cambodia?
There are numerous options available for businesses looking to establish a presence in Cambodia. Below we have listed the most common types of business entities in Cambodia:
- Sole proprietorship
- Partnerships
- General partnership
- Limited partnership
- Limited liability company
- Private limited liability company
- Single-member private limited company
- Public limited company
- Foreign business entities
- Representative office
- Branch office
- Subsidiary
Sole proprietorship
A sole proprietorship in Cambodia is a business entity that is owned and operated by one person.
Under a Sole proprietorship, the owner of the entity owns all capital and profits. However, it is important to note that the sole proprietorship is not a separate legal entity, and the owner will be personally liable for any debts and legal issues encountered by the company.
Partnership
Partnerships are a popular choice for local and small businesses. In Cambodia, there are two types of partnerships available to businesses, the general partnership, and the limited partnership.
General partnership
As stated in article 8 of the Law on Commercial Enterprises (LCE), a general partnership is a contract entered into between two or more persons who combine their property, activities, or, knowledge to undertake business activities.
A general partnership creates a legal personality that is separate from the partners. The general partnership will have its own independent legal personality upon registration with the Law on Commercial Rules and Registers and has the following rights:
- To carry on business in its own name
- To enter contracts in its own name
- To own movable and immovable property in its own name
- To sue and be sued in its own name
When choosing a name for the partnership, it must include the name of one or more partners. The term General Partnership or GP must be at the end of the name or below it.
A general partnership is considered to have Cambodian nationality if:
- The general partnership has a place of business and a registered office in Cambodia
- More than 51% of the recorded ownership interest is held by natural or legal persons of Cambodian nationality
The partnership must also appoint a manager who is responsible for managing the affairs of the general partnership. When there is more than one manager, each manager must act separately unless stated differently in the contract.
Limited partnership
A limited partnership is a contract between one or more general partners. These partners are the sole persons authorised to administer and bind the partnership. These limited partners are bound to provide the capital of the company, according to article 64.
Limited partnerships will have a term of 99 years, but this term may be extended. A limited partnership must be registered with the Ministry of Commerce, otherwise, it will be considered a general partnership.
The name of the limited partnership must include the name of one or more general partners and the term Limited Partnership or LP at the end or below the name.
The liability of the limited partner is limited to the amount of money they have contributed to the partnership. The general partners will be liable for the debts of the partnership to third parties.
Limited partners are not entitled to:
- Manage the partnership
- Negotiate business on behalf of the limited partnership
- Act as agents for the partnership
- Allow his/her name to be used
Limited partners can examine reports and the progress of the partnership and provide advisory opinions on the management of the partnership.
Limited liability company
A limited liability company (LLC) is the most commonly used business entity in Cambodia. An LLC can be 100% Cambodian-owned, 100% foreign-owned, or a combination of Cambodian and foreign shareholdings.
An LLC can have between 1 to 30 shareholders.
There are three types of LLCs available in Cambodia:
- Private limited company
- Single-member private limited company
- Public limited company
For more information about Limited Liability companies, please click here.
Private limited company
A private limited company is required to have between 2 and 30 shareholders and requires a minimum of one director. A director in a 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.
Private limited companies 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 million.
The company name must include the words Private Limited Company or Ltd at the end of the name.
Single-member private limited company
Single-member private limited companies have at least one person or entity as the shareholder and at least one person as the director. Single-member private limited companies can be converted to private limited companies at a later date. In order to do this they must receive shareholder’s approval to increase the number of company shareholders.
Public limited company
Public limited companies are permitted to issue shares and securities to the public. The name of a Public Limited Company must include the term Public Limited Company or Plc at the end of the company name.
Public limited companies are required to have a minimum of three directors and at least two or more shareholders.
Foreign business entities in Cambodia
In Cambodia, a foreign business is a legal person formed under the laws of a foreign country that undertakes business in Cambodia.
There are three types of foreign business entities available in Cambodia:
- Representative office
- Branch office
- Subsidiary
Representative office
In Cambodia, it is possible for foreigners to set up a representative office. A Representative Office will allow the foreign business to establish a presence in Cambodia. Representative Offices may also promote the products and services of the parent company.
It is important to note that the representative office cannot engage in any form of trade or provide services, sell, purchase, manufacture, process, or construct in Cambodia.
Representative offices may undertake the following activities:
- Contacting customers and introducing customers to the parent company
- Researching commercial information and providing information to the parent company
- Conducting market research
- Market goods at trade fairs and exhibit samples and goods in offices or trade fairs
- Rent an office and employ local staff
- Enter contracts with local customers on behalf of the parent company
The name of the Representative Office must be the same as the parent company and have the words Commercial Representative office or Commercial Relations Office in front or above the name.
For more information about Representative Offices, please click here.
Branch office
Branch Offices are not considered separate legal entities from the foreign parent company. As a result, the parent company will be liable for the branch’s debts and obligations.
Branch Offices are permitted to undertake commercial activities, such as buying and selling products, and can engage in manufacturing, processing, and construction.
The name of the Branch Office can be the same as the parent company and must have the words Branch above or in front of the name.
Branch Offices are not eligible for Qualifying Investment Projects (QIP) for which tax incentives are available. QIP incentives are only available for companies that have been incorporated in Cambodia.
For more information about Branch Offices, please click here.
Subsidiary
A subsidiary is a foreign company in Cambodia that has at least 51% of the shares held by a foreign parent company.
Subsidiaries are separate legal entities from the parent company and it is also possible for them to be set up as a partnership or limited company.
Subsidiaries can conduct business the same as local companies except for activities that are prohibited to foreigners, such as owning land.
In conclusion
If you need more information about incorporating your company in Cambodia, you can talk directly with one of our experts.
Please note that this article is for information purposes only and does not constitute legal advice.
Up to 1 hour consultation on general legal and business matters in Cambodia.
If some research is necessary to reply to your questions, our expert will check and revert to you with any complementary elements by email.
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