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Incorporation

Setting up a company in Cambodia

When setting up a company you may want to consider these factors:

  1. Business Factors

    Business factors such as

    • The industry and type of business
    • Nationality of the headquarters/individual(s) and
    • Presence of existing trade agreements or relationships

     

  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

  3. Regional Language

    Regional language may be an influence. Although Khmer is the official language, different locations in Cambodia use varying dialects, and some minority languages are also used, meaning some terminology may be different in various regions. Some Khmer businessmen will speak English, but sometimes not to the proficiency required to conduct business.

Your Options

Cambodia imposes a significant number of procedures to be followed by entrepreneurs and those wishing to set up a business. It is complicated and expensive process, with notable start up capital requirements. Although the regulations are complex, the Cambodian government is progressively easing the difficulty to promote a pro-business nation.

Representative Office

This is one of the relatively faster and simpler ways to set up a company in Cambodia. ROs are prohibited from undertaking any profit-making activities including the buying or selling of goods, performance of services or engagement in manufacturing, processing or construction. The name of the RO must be the name of its principal.

Steps Required:

1. Apply for approval with the CDC – conditional registration certificate

2. Apply for approval with the CDC – final registration certificate

Time: Approximately 1 month

Cost: Varies

When a foreign company decides to try and sell to the Cambodian market, there are several options – working through an agency or distributor, or registering a Representative Office (RO). Whereas an agent or distributor may have limited loyalty or little interest in end-user satisfaction, an RO is an effective way for foreign investors to get a feel for the Cambodian market while demonstrating commitment to the market. Eligible foreign investors may choose this option to facilitate sourcing local goods and services and to collect information for its parent activity. It is the easiest type of foreign investment structure to set up and, unlike the wholly foreign-owned enterprise, has no registered capital requirements.

A point to note is that, even if you have set up a WFOE in a city where your manufacturing facility is based, you may want to consider having a representative office in your target sales cities to facilitate business operation. On the other hand, a good distribution partner with regional coverage can also help to rectify this problem.

In Cambodia, the MOC and CDC are the institutions responsible for overseeing all foreign direct investment and business development in Cambodia. FDI projects are known as Qualified Investment Projects (QIPs) and must be registered with the CDC. There are various schemes open to investors, including Build, Operate and Transfer (BOT), Build, Leaser & Transfer (BLT), Build, Own, Operate & Transfer (BOOT) and Build, Own & Operate (BOO).

The first step is to obtain a Conditional Registration Certificate from the CDC. Then, the investment project must obtain a Final Registration Certificate.

1. Apply for the Conditional Registration Certificate

The business must submit the following information to be granted a Conditional Registration Certificate:

  • A list of all required approvals, authorisations, licenses, permits and registrations for the QIP approval
  • The ministries, departments, or agencies responsible for issuing the permits
  • The applicant’s choice of tax exemption
  • Recognition of the status of the legal entity which will have the responsibility of the QIP
  • Investment guidelines and assessment criteria for each of the approvals, authorisations, licenses, permits and registrations

Time: Within 3 days

2. Apply for the Final Registration Certificate

The CDC is required to obtain all the approvals, authorisations, licenses, permits and registrations on behalf of the applicant, as listed in Step 1, within 28 business days of the issuance of the Conditional Registration Certificate.

Time: 28 days

Wholly Foreign-Owned Enterprise (WFOE)

WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. WFOEs are often used to produce the foreign firm’s product in mainland Cambodia for later export to a foreign country.   The WFOE must go through the entire registration and incorporation process, and is the most costly business structure to setup.

Steps Required:

  • Deposit required capital
  • Register company name
  • Incorporate company with Business Registration Department
  • Make company seal
  • Submit registration documents
  • Notify Ministry of Labour & receive approval 

Time: 2-3 months

Cost: US 800

A Wholly Foreign-Owned Enterprise (WFOE, sometimes incorrectly written as WOFE) is a common investment vehicle for mainland Cambodia-based business wherein foreign parties (individuals or corporate entities) can incorporate a foreign-owned limited liability company.

WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. This can give greater control over the business venture in mainland Cambodia, and avoid a multitude of problematic issues which can potentially result from dealing with a domestic joint venture partner.

Such problems often include profit not being maximized, leakage of the foreign firm’s intellectual property and the potential for joint venture partners to set up in competition against the foreign firm after siphoning off knowledge and expertise.

The unique feature of a WFOE is that involvement of a Cambodian investor is not required, unlike most other investment vehicles.

The steps to set up a WFOE in Cambodia are as follows:

1. Deposit the legally required start up capital in a bank, and obtain deposit evidence.

Startup capital of KHR 4 million is required before registration with any authorised bank in Cambodia. The bank must provide a bank statement certifying the deposit. No time limit is imposed on the company to pay the entire amount.

Time: 1 day

Cost: None

2. Conduct initial check to confirm the company name is not already in use.

Under Prakas no. 063 MOC/SM2013 on the General Procedure of Providing Services related to the Commercial Registration dated February 27, 2013, the company search application may only be submitted to the Business Registration Department of the Ministry of Commerce through the side window. The uniqueness of the company name will also be checked and confirmed at the same Department. To apply for a company name, the following documents need to be submitted:

  • Application for review of the name (1 copy)
  • Application for registering the name of the enterprise in the commercial registry (3 copies)
  • Copy of identification cards or passports of the owners (3 copies)
  • Passport sized photo of the sole owner (3 copies)
  • Receipt of payment fee (1 copy)

Time: 2-7 days

Cost: USD 10

3. Incorporate the company with the Business Registration Department, within the Ministry of Commerce.

The articles of association and memorandum of the company need to be prepared based on the company form and consistent with applicable law, regulations, and standards otherwise set out for such documents by the Cambodian Ministry of Commerce. Original copies must be submitted of the documents. The following information must be included:

  • Company name
  • Corporate form
  • Business objectives
  • Company duration
  • Registered office
  • Stated capital in Khmer currency and shareholding
  • Name, address, and nationality of shareholders and the director
  • Transfer and shares transfer
  • Accounts
  • Dissolution of company
  • Change of company legal form
  • Announcement of the company establishment

The following quantities are required of those documents:

  • 3 sets of the registration forms
  • 3 sets of the ID card or passport copies for each company member
  • 3 sets of the passport photos of each company member
  • 1 copy of the reference letter from a particular bank, clarifying the minimum KHR 4 million startup capital has been met
  • 3 sets of the articles of incorporation
  • 3 sets of the application for newspaper announcement
  • 3 sets of the declaration of non-guilt by directors

The Ministry publishes the company’s formation notice in the Official Gazette. During the transitional period where the Kingdom of Cambodia does not have a functioning Commercial Court, the organisation and maintenance of the Commercial Register and governance of the capacity to conduct commerce, as stipulated by law, is entrusted to the Ministry of Commerce.

Time: On average, 3 weeks.

Cost: USD 420

4. Make a company seal.

The Ministry of Commerce will issue a seal to the company alongside the registration certificate.

Time: 1 day

Cost: USD 15

5. Have registration documents stamped and approved; register for TIN, Patent Tax and VAT.

The following documents must be provided to the General Tax Department:

  • Memorandum and Articles of Association
  • Ministry of Commerce Letter of Approval
  • Certificate of Incorporation

This is obtained at one of the tax department branch offices at the Khan (district) level, of which there are 7 in each city.

Time: 30 days

Cost: USD 100

6. Notify the Ministry of Labour of the start of operations & hiring of employees.

Businesses are required to submit a written declaration to the Ministry of Labour before they may commence operations. All employers are required to submit a written declaration to the Ministry of Labour when an employee is hired or dismissed, within 15 days of the date of hiring or termination at the latest.

Businesses with at least 8 employees must have established internal regulations that adapt general provisions of the labour code as conditions of hiring and calculation and payment of wages and perquisites, inclusive of in-kind benefits, work hours, health and safety requirements, and personal leave, including holidays.

Internal regulations must be filed within 3 months of the business commencing operations. Businesses are required to maintain a payroll ledger, declaration of personnel, a book of establishment, and labour regulations, all in Khmer. Local employees are provided with a “labour book” upon completion of a physical health examination with the Labour Health Centre, at a cost of KHR 10,000 for each employee, usually covered by the employer.

The total cost of the procedure covers:

  • Announcement of the opening of a new company and its registration with the Ministry of Labour
  • Declaration of staff
  • Development of internal regulations
  • Obtaining the payroll ledger and book record of establishment
  • Electing staff delegates
  • Filing employment contracts
  • Obtaining employee handbooks and work permits for foreign employees
  • Registration with the National Social Security Fund
  • Payment of contributions to staff for the NSSF and obtaining occuptational risk insurance cards

Time: 30 days

Cost: USD 250 (for 8-250 employees)

7. Receive inspection from the Labour Inspector.

The Labour Inspector from the Ministry of Labour will inspect all new businesses.

Time: Occurs at the same time as the previous step

Cost: Covered in the cost of the previous step.

Branch

This is the final business form that may be set up by a foreign investor in the Kingdom of Cambodia. Branches are allowed to perform the same acts as a commercial representative office.

Time: Approximately 1 month

Cost: Varies

Branches are allowed to perform the same acts as a commercial representative office in Cambodia. They are also allowed to regularly buy and sell goods & services and engage in manufacturing, processing & construction, as the local company would be able to, except any acts that are prohibited for natural or legal persons who are foreigners.

The assets of the branch are the assets of the principal, who is liable for any obligations of the branch.

In Cambodia, the MOC and CDC are the institutions responsible for overseeing all foreign direct investment and business development in Cambodia. FDI projects are known as Qualified Investment Projects (QIPs) and must be registered with the CDC. There are various schemes open to investors, including Build, Operate and Transfer (BOT), Build, Leaser & Transfer (BLT), Build, Own, Operate & Transfer (BOOT) and Build, Own & Operate (BOO).

The first step is to obtain a Conditional Registration Certificate from the CDC. Then, the investment project must obtain a Final Registration Certificate.

1. Apply for the Conditional Registration Certificate

The business must submit the following information to be granted a Conditional Registration Certificate:

  • A list of all required approvals, authorisations, licenses, permits and registrations for the QIP approval
  • The ministries, departments, or agencies responsible for issuing the permits
  • The applicant’s choice of tax exemption
  • Recognition of the status of the legal entity which will have the responsibility of the QIP
  • Investment guidelines and assessment criteria for each of the approvals, authorisations, licenses, permits and registrations

Time: Within 3 days

2. Apply for the Final Registration Certificate

The CDC is required to obtain all the approvals, authorisations, licenses, permits and registrations on behalf of the applicant, as listed in Step 1, within 28 business days of the issuance of the Conditional Registration Certificate.

Time: 28 days

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Cambodia, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Cambodia they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Cambodia
  • the company needs help with tax, employment, immigration and payroll compliance in Cambodia

The complexity of employment regulations in Cambodia makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Cambodia allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Cambodia.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Cambodia. Read more about outsourced employment through Shield GEO.

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