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Starting a business in Cambodia

M ANY people dream of being their own bosses. This can mean starting your own business

which, in Cambodia, is a fairly straightforward procedure, especially when compared

to some of the surrounding countries in the region. This article will discuss how

to set up your own company in Cambodia by focusing on the ministries with which it

is necessary to interact. Of course, variations are required for particular circumstances

but the rough outline can be established in this article.

This article does not cover investment projects for which an additional step is necessary

prior to approaching the Ministry of Commerce. For investors seeking investment incentives,

such as a tax holiday and lower corporate profit taxes, it is first necessary to

apply to the Cambodian Investment Board for an investment license and award of the

various available incentives. In the interest of space, the steps necessary in order

to make this application are not included here.

Ministry of Commerce

Any person or group of persons "doing business" must register with the

Ministry of Commerce. While there is no particular definition of "doing business",

it will usually be obvious when this applies. Registration at the Ministry of Commerce

requires filing the company statutes. These are known by various names in various

countries and some readers may be more familiar with the term Memorandum and Articles

of Association or Certificate of Incorporation and company by-laws. They all serve

the same purpose; that is, they state who owns the company, who are the directors,

who are the shareholders and how many shares, of what value, each shareholder owns.

In addition, the rules by which the company is to be governed are specified.

The Ministry of Commerce has a standard statute it uses for companies unless the

persons establishing a company want to develop their own. Because the Ministry's

standard statutes are based on out of date laws which have never been updated, most

companies will want to develop their own statutes. These can also be better adapted

to fit the needs of each company. There is currently no companies law in Cambodia

specifying what information must be included in the company statutes. Therefore,

it is safest to submit statutes of a generally accepted international standard in

order to avoid the possibility of later needing to amend them to meet the requirements

of a companies law.

The statutes of the company must be approved by the Ministry of Commerce. The application

for approval must be submitted with various supporting documentation, including a

registered lease for the office premises, passport photocopies and photographs of

directors, and a letter from a local bank confirming that the registered capital

of the company has been remitted to Cambodia.

After the Ministry of Commerce reviews the documents and approves the application,

it will issue a License for the company and a Certificate of Registration. Sometimes

it is also necessary to register with the Ministry of Commerce's Phnom Penh Municipality

Office in order to register the company as doing business within the Municipality.

Once the company is registered, additional ministries must be contacted and various

formalities completed.

Ministry of Economy and Finance

The Certificate of Registration must be taken to the Central Branch of the Tax Department

in order to have an imprint stamp placed on it. This stamp demonstrates that the

company has paid the required tax on having received an official government document.

Once stamp-ed, the company can apply to the Ministry of Economy and Finance's Taxation

Department for a taxpayer identification number. This number must be included in

all future tax filings and must be applied for within fourteen (14) days of the company

having registered or beginning its business. At the time of applying for this number,

the company must also pay the first annual patent tax which is based upon the size

of the company, usually initially determined by the registered capital of the company.

Normally, the Taxation Department will issue the taxpayer identification number within

one to two weeks and registration at this Ministry is complete.

Ministry of Social Action, Labor and Veterans

More commonly referred to as the Ministry of Labor, this Ministry requires new businesses

to file various documents regarding their employees at the time of opening the business.

These include information on all employees hired by the company. In addition, a new

regulation requires submission of a company's proposed construction plans to this

Ministry in order to obtain its approval. Approval by a Labor Inspector of the company's

payroll register and business ledger is also required.

It is useful for new businesses to develop a working relationship with the Labor

Inspector responsible for their establishment as this individual is entitled to make

periodic inspections and can be an integral part of any future labor decisions by

an employer.

Other Ministries

Depending on the type of business in which the company is engaged, registration

or approval by other ministries may also be required. For businesses in the tourism

industry, the Ministry of Tourism must issue certain licenses. This is similarly

true for businesses in the agricultural industry (Ministry of Agriculture) or manufacturers

(Ministry of Industry). It is important to determine which additional ministries

may need to be contacted.

(This column, which should not be relied on as legal advice, was prepared by the

Mekong Law Group, affiliated with the law firm of Dirksen Flipse Doran & Le.

It was written by Roberta Thami.)

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