While a private limited company is the most common form of business entity in Cambodia, business owners may choose to set up a public limited company in Cambodia if they wish to raise capital by issuing shares and bonds to the public. Unlike a private limited company that can only have up to 30 shareholders, there is no limit to the number of shareholders for a public limited company. A public limited company is also subjected to limited liability, which means that shareholders and directors are only held liable to the amount of shares they hold in the company. Before you set up your public limited company, it is important to understand the requirements of setting up a public limited company in Cambodia.
1. Minimum number of directors and shareholders
A public limited company in Cambodia must have at least 3 directors and 2 shareholders. Similar to a private limited company in Cambodia, there is no nationality or residency requirement for a director in a public limited company. This means that a Cambodia public limited company can be wholly foreign owned. Each director must be at least 18 years old and will be appointed for a term of 2 years. The director can be re-elected after his/her term ends.
2. Minimum capital requirement
The minimum capital requirement for a Cambodia company registration is KHR 4 million which is approximately USD 1000. This requirement applies to both private limited companies and public limited companies in Cambodia.
3. Requirement for a registered agent and registered office address
To register business in Cambodia, it is mandatory to appoint a registered agent who reside in Cambodia. The registered agent must be a legally competent natural person and will receive official documents on behalf of the company. The company must also have a registered office to keep and maintain corporate documents such as the Memorandum and Articles of Association, meeting minutes, shareholders’ resolutions and securities register.
4. Board of Director meetings
Every company is required to hold a Board of Director meeting at least once every 3 months. A Board of Director meeting may also be called by the chairman or with the consensus of at least one-third of the total number of serving directors in the company. Unless otherwise stipulated, board meetings must be held within Cambodia.
5. Annual reporting
Every year, public limited companies are required to prepare an audited annual report, consisting of all financial statements, a note by the director and the auditor’s report. Generally, the annual report should be prepared in the Khmer language and financial records of the company should be in terms of the Khmer Riel. The auditor employed by the company must also be registered by the Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA) and licensed by the National Accounting Council (NAC). After the financial period has ended, the company must submit the audited annual report to the NAC within 6 months.
Since Cambodia has adopted the International Financial Reporting Standards (IFRS) as its accounting standards without modifications, companies should adhere to the IFRS when preparing their financial statements.
6. Annual declaration
Every company in Cambodia is required to submit an annual declaration to the Ministry of Commerce (MOC). For public limited companies, this includes the audited annual report, as well as information about the company such as its tax identification number, tax registration date, patent tax certificate for all business activities, employee list, as well as the phone number and email address of the contact person. Companies are also required to report changes to their company name, registered office address and business objectives if applicable.
Companies that fail to file their annual declaration by the stipulated deadline will be subjected to a penalty of KHR 1 million.
7. Tax return
The standard corporate income tax in Cambodia is 20% and resident companies are taxed based on worldwide income. To be considered a resident taxpayer, the company must be directed and managed from Cambodia or has its principal business activities within Cambodia. Non-resident companies in Cambodia will only be taxed based on income sourced from Cambodia.
In addition, companies are required to pay an annual patent tax return. Typically, big companies will pay a patent tax of USD 750 or USD 1,250 while medium companies will pay a patent tax of USD 300. To be classified as a big company, the company either meets the annual turnover threshold of USD 1-2 million; is a subsidiary or branch of a multi-national company; or is recognised to have undertaken a Qualified Investment Project (QIP). An additional tax of USD 750 will apply if the company has a principal place of business in a different city or province.
Both tax returns must be filed annually, within three months after the end of the tax year. The tax year in Cambodia is based on the calendar year. However, companies may apply to have a different accounting year if necessary.
8. Registration with the National Social Security Fund
All businesses in Cambodia with at least one employee are required to register with the National Social Security Fund (NSSF). The NSSF in Cambodia is in charge of providing basic social security to workers in private sectors by ensuring that they are insured against employment injury. Businesses are required to register a new worker with the NSSF and submit a monthly report on the total number of workers in the company.
A public limited company is an attractive option for companies that wish to be listed on the Cambodia Securities Exchange (CSX). This will allow them to issue shares to the public, which could potentially attract interest from hedge funds, mutual funds and individual traders, enabling them to raise more capital. Moreover, it may sometimes be preferable to raise capital through equity rather than debt because it allows your company to have a lower debt-equity ratio and there is no obligation to repay the money by a stipulated deadline. When a company is listed on the stock exchange, it has a greater ability to raise capital through equity as compared to a company that is not listed on the stock exchange.
Tetra Consultants will not recommend you set up a public limited company in Cambodia if you are a foreigner because the CSX is one of the smallest stock exchanges in the world. Although the number of transactions in the CSX has increased over the years, it is still recommendable to register a public limited company in a country with a more reputable stock exchange.
Generally, Tetra Consultants will recommend you set up a private limited company in Cambodia. Branch company and representative offices may also be viable options, depending on your long-term goal and business model. Starting business in Cambodia has been especially appealing in the recent years because of the country’s long term economic stability, strong economic growth and the wide array of investment opportunities available in different sectors.
Tetra Consultants provides you with a fast and easy way to register company in Cambodia through our service package which includes company registration with the Cambodia Ministry of Commerce (MEC); provision of local company secretary and a registered address; opening of corporate bank account; tax registration; Cambodia business visa applications; and other tax and accounting services.