Legal update: Amendment on Law on Commercial Enterprises
Issue: No. 004P/22 22 February 2022
On this 29 January 2022, the Amendment Law to the Law on Commercial Enterprise which was promulgated introducing several changes.
The Amendment Law has:
- Abrogated article 166, 175, 182, 184, 185, 186, 187, 188, 189, 190 and Article 196,
- Amended to article 1, 2, 3, 4, 5, 59, 62, 87, 101, 106, 110, 114, 115, 137, 144, 161, 174, 192, 195, 225, 234, 255, 262, 270, 271;
- Added article 8-bis, 53-bis and 147-bis.
The Amendment Law has remarkably introduced the notion of the sole proprietorship as a new legal form in addition to the partnership and the limited company from the establishment to dissolution, the appointment of the secretary in the limited company, the abrogation of the provisions and removal terms related to the security in bearer and endorsement form, appointment of licensed auditor/accountant as the liquidator in the liquidation process for the partnership and limited company, and the notion of the local branch.
The Amendment Law also take out the minimum capital requirement, if the statute fails to stipulate, which may allow the company to determine its minimum capital as it may deem fit or the minimum capital required by any specific regulation depending on the type of business. This will need the interpretation from the Ministry of Commerce and legal practitioner.
Another noticeable amendment is the presence of the “shareholder representative agreement” which applies on the case that a shareholder does not intend to disclose their identity in the statutes. The Amendment Law allows shareholder who does not want to disclose its identity to nominate a representative to act on their behalf. The nomination of a representative shall be made through shareholder representative agreement, which shall be filed at Ministry of Commerce. However, the procedure, requirement, and form of the filing of such agreement is yet to determine and shall be determined by a Sub-Decree, separately from the Amendment Law.
The amendments made to the Law on Commercial Enterprise are listed as follows:
| Article | Law on Commercial Enterprise | Amendment Law |
| 1 | This law applies to Partnership and Limited Company | This law applies to Sole proprietorship, Partnership and Limited Company |
| 2 | Definition of terms used in this law | Term “Merchant” is added to the definition |
| 3 | – Requirement for the partnership and the limited company to appoint, register and update in case of the change, the registrar agent with the registrar.
– Requirement for the partnership and the limited company to register the office and update in case of change to the registrar. |
– Requirement for the sole proprietorship, partnership and limited company to register its office address to the registrar, and update in case of change.
– No requirement for the sole proprietorship and partnership to appoint the registrar agent/company secretary – Requirement for Limited Company to appoint company Secretary, and register the company secretary’s name in with the registrar. – Determine the qualification for a company secretary – Requirement for Limited company to update the change of the company’s secretary with the registrar within 15 days. |
| 4 | Delivery of documents is to hand over to the registrar agent of the partnership or the limited company | Delivery of documents is to hand over to the company secretary of the limited company.
In case of sole proprietorship and the partnership is to hand over to its owner, partner (general partnership), general partner (for limited partnership). |
| 5 | A partnership or limited company shall display its name in the Khmer language. The Khmer name shall be placed above and shall be larger than the name in another language. | Sole proprietorship a partnership or company shall display its name in the Khmer language. The Khmer name shall be placed above and shall be larger than the name in another language |
| 8 bis | No provision on the sole proprietorship | The definition, establishment and liability, of sole proprietorship is defined. |
| 53 bis | No provision on the liquidation and dissolution of sole proprietorship. | Termination of dissolution and liquidation of sole proprietorship |
| 59 | No provision on the appointment of the qualified auditor or accountant as the liquidator for the dissolution of a partnership. | The requirement on the appointment of the auditor or accountant who obtained the license from Accountant and Auditor Regulator as the liquidator for the dissolution of a partnership. |
| 62 | The obligation of a liquidator to maintain the books and records of the general partnership for 10 (ten) years from the closing of the liquidation. | The obligation of a liquidator to maintain the books and records of the general partnership for 5 (five) years from the closing of the liquidation. |
| 87 | “A “Public Limited Company” is a form of a limited company that is authorized by this Law to issue securities to the public.” | “A “Public Limited Company” is a form of a limited company that is authorized by this Law to issue securities to the public.
The public offering shall be according to the related regulation.” |
| 101 | “A company shall be deemed to be of Khmer nationality only if:
(a) The company has a place of business and a registered office located in the Kingdom of Cambodia; (b) More than 51% of the voting shares of the company are held by natural or legal persons of Khmer nationality.” |
A company shall be deemed to be of Khmer nationality only if:
(a) The company has a place of business and a registered office located in the Kingdom of Cambodia; (b) More than 51% of the voting shares of the company are held by natural or legal persons of Khmer nationality as stipulated in the registered statute of the company.
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| 106 | Protection for the person who guarantee and obligation for the company | The term “agent” is replaced with “company secretary” |
| 110 | Persons who can access to corporate records | The term “agent” is replaced with “company secretary” |
| 114 | “A company and its agents shall take reasonable precautions to ensure that company books and records are maintained in an accurate and properly preserved condition.” | The term “agent” is replaced with “company secretary” |
| 137 | Disclosure of conflict of interest of a director before voting | The term “register agent” is replaced with “company secretary” |
| 144 | Requirement of the minimum of one thousand (1,000) shares with a par value of not less than four thousand (4,000) Riels per share If the articles fail to provide the number and price attached to the shares | The removal of the requirement of the minimum of one thousand (1,000) shares with a par value of not less than four thousand (4,000) Riels per share If the articles fail to provide the number and price attached to the shares |
| 147 bis | No provision on the shareholder who does not intend to disclose their identity | The shareholder who does not intend to disclose their identity in the statutes may nominate a representative to act on its behalf. The nomination of a representative shall be made through an agreement, between the shareholder and the representative (a natural person or physical person) called “shareholder representing agreement”. Such agreement shall be recorded at Ministry of Commerce. The procedure, requirement, and form of the filing of such agreement shall be determined by a Sub-Decree. |
| 161 | Definition of terms used in the in the section of “Security Certificates, Registers and Transfers” | Definitions of the terms used in the section of “Security Certificates, Registers and Transfers”, related to the security in bearer form and endorsement are removed. |
| 174 | Burden of proof related to the action on security | Removal of the term “endorsement” |
| 192 | Right to reclaim possession related to the transfer of security | Removal of the paragraph related to transfer by endorsement” |
| 195 | “Where a security in registered form is presented for transfer, the issuer shall register the transfer if (1). the security is endorsed by an appropriate person; (2). Reasonable assurance is given that that endorsement is genuine and effective; (3). any applicable law relating to the collection of taxes has been complied with; (4). the transfer is rightful or is to a bona fide purchaser.” | – The paragraphs related to security by endorsement are removed.
– The related laws and regulations related to tax shall be applicable
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| 225 | “Shareholders of a company and their agents and legal representatives, upon request, may examine the annual financial statements during the normal business hours of the company and may make extracts free of charge.” | The term “agent” is replaced by the “company secretary” |
| 234 | […] On the demand of an auditor of a company, the present or former directors, officers, employees or agents of the company shall furnish such information, explanations, and access to books and records as the auditor deems necessary to fulfill his functions. [….] | The term “agent” is replaced by the “company secretary” |
| 255 | After issuance of a certificate of intent to dissolve, the company shall
– collect its property, – dispose of properties that are not to be distributed in kind to its shareholders, – discharge all its obligations, and – do all other acts required to liquidate its business. […] |
After issuance of a certificate of intent to dissolve, the company shall
– collect its property, – dispose of properties that are not to be distributed in kind to its shareholders, – discharge all its obligations, and – do all other acts required to liquidate its business. – appoint a liquidator […] |
| 262 | “The official in charge of company of Ministry of commerce may require that a document or a fact stated in a document to be sent to him shall be verified by affidavit.” | The official in charge of company of Ministry of commerce may require that a document or a fact stated in a document to be sent to him shall be verified by affidavit.
If necessary, the official in charge of company of Ministry of Commerce may require the company update the registered information or the annual declaration in any circumstance. The official in charge of company is entitled to verify the updated information at the office of the company or require the company to provide additional information or documents. Procedure of requiring the company to update the updated information or filing the annual declaration and verification of the information or documents shall be determined in Prakas of the Minister of Ministry of Commerce. |
| 270 | “A foreign business is a legal person formed under the laws of a foreign country having a place of business in, and doing business in the Kingdom of Cambodia.” | The definition of the foreign trade company is removed from this article and replaced with the general definition, liabilities, and establishment of the branch of the partnership or the limited company. |
| 271 | “A foreign business may conduct business in the Kingdom of Cambodia in the following forms:
(a) commercial representative office or commercial relations office, or (b) branch, (c) subsidiary. The commercial representative office and branch are agents of their principals and do not have legal personality separate from their principals.” |
The definition of the foreign business was added to this article. |
We hope that the above legal update is helpful for your investment and help you to invest more confidently.
Disclaimer
The article is merely for general information purposes. It does not constitute a legal advice on the subject matter. If you have any question or need any assistance, please feel free to contact us:
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SON Sokeng,
Partner, Managing Director sokeng.son@sithisak-lawoffice.com +855 12 885 870
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Sokeng has more than 8 years of professional experiences in corporate, commercial, investment and capital market sector in Cambodia. He advised and assisted various companies in various legal compliance issues, major investment projects and in conducting legal due diligence for major M&A and IPO projects. He has led many legal counsel teams to advise and assist ACLEDA Bank Plc., Phnom Penh Autonomous Port and other SMEs in the process of listing and proposed listing on the Cambodia Securities Exchange (CSX). |
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NOEUM Sokvichhai,
Partner, Head of Corporate, Commercial and Investment Practice Group sokvichhai.noeum@sithisak-lawoffice.com +855 12 826 785
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Atty. Sokvichhai has more than 6 years of experiences in labour, corporate, commercial and investment advisory in Cambodia. He actively advices and assists various businesses in commercial, tax, and labour registration, business licensing, products registration & distribution, business recapitalization & restructuring, and mergers & acquisitions transaction. He also has particular experiences in advising collective investment fund and trust business, investment incentives & qualified investment project, and labour & employment related issues. Sokvichhai also assists major business in preparing various commercial agreements. Currently, Sokvichhai is also leading Sithisak’s Investigation Team to investigate any labour related misconduct within client’s company. |
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