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Closing a company in Cambodia can be much longer and expensive than opening one, but needs to be done properly nonetheless. The Council for the Development of Cambodia recently warned companies to formally close down according to the law, if they’re no longer doing business.

Rather than declaring bankruptcy or dissolving, owners of failed companies too often simply take what they can and walk away. This leaves behind the legal entity, which still must file taxes and make the annual declaration to the Ministry of Commerce. The ghost company can also be sued, even though it probably won’t have any assets remaining. The real danger is that directors and shareholders be held personally liable for the unpaid taxes, and fines, for the ghost company.

So how to close a company? Chapter L of the Law on Commercial Enterprises lays out the procedures:
– A director or shareholder proposes to the shareholders to voluntarily liquidate and dissolve the company.
– If the resolution passes (requiring a two-thirds majority), the company must send a statement of intent to dissolve to the Director of Companies, which would then issue a Certificate of Intent to Dissolve.
– At that point the company must stop carrying on all business, except for actions necessary to the closure.
– The company must immediately send notice of its intent to dissolve to all its known creditors, and publish a statement for two consecutive weeks in a newspaper.
– It then must collect its property, dispose of its properties, discharge its obligations, distribute its assets to shareholders, and anything necessary to liquidate the business

The legal personality continues until the Ministry of Commerce issues the Certificate of Dissolution, which means it can be sued and still has ongoing obligations. The company will also need to have an official audit performed by the Department of Taxation, which can be somewhat costly. Hopefully the company still has some assets that can be set-aside for these expenses.

It’s tempting to just flee into the night, rather than take the time and expense to properly close down. But it’s really not a good idea, and the government is clearly on the watch-out.

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Update: The January 28th Post has some more on the draft law.

The long-awaited Draft Law on Associations and Non-Governmental Organizations was recently released, and public consultation is ongoing. The law has already attracted some controversy, and there will undoubtedly be more lively discussion. For those who haven’t seen a draft, below is a quick summary of the main provisions. A warning though – this is a DRAFT, there probably will be future drafts, including the final enacted law, that render this information obsolete. In addition a number of Prakas would follow which give more detail to the law. Proceed with caution.

Broadly speaking, the draft’s rules can be separated into two parts:

1] associations, domestic NGOs, and their alliances, and

2] foreign NGOs.

Associations, Domestic NGOs, and their Alliances

Associations and domestic NGOs would need to be registered with the Ministry of Interior. An association needs at least 21 Cambodian nationals, who select at least seven leaders. There’s no mention of whether foreigners may join the association, or form associations themselves. Domestic NGOs must have at least three Cambodian “initiators”, who choose a president who takes care of the registration. Alliances of at least two associations or two NGOs can also be formed, and also need to be registered with the MOI.

The draft lays out the documentation required, and gives the MOI 45 days from receipt to issue a decision. There will also be a registration fee, to be determined at a later date. They will also need to enact a charter to govern the organization, the content of which is outlined in the draft. All existing Domestic NGOs, associations, and alliances will need to re-register within 180 days of the law coming into force.

Foreign NGOs

As is currently required, Foreign NGOs must sign a memorandum with the Ministry of Foreign Affairs and International Cooperation. Before doing so, they’ll need to enter into an agreement with the relevant line ministry or governmental institution. The draft lists the necessary documentation for signing the MOU, and gives the MFAIC 45 days to issue its decision. The MOU is valid for one to three years, renewable indefinitely upon request. The draft also required the collaboration between the Foreign NGO and the relevant ministry in preparing project plans, implementing, monitoring, aggregating and evaluating the results of activities. A new rule would cap administrative expenses at 25% of the total budget.

The draft also spells out the resources, properties, rights, interests and obligations of the organizations. For instance, they must annually report to the government on the year’s activities, plan for the coming year, and budget.

There should be some more developments in the months to come, following the public consultations and debate in the National Assembly. Stay tuned.

It’s no secret that tourism is a big part of the kingdom’s economy, and hopefully set to get much bigger.

This short publication outlines the steps needed for opening a travel agency – from registering at the Ministry of Commerce, to getting the proper license from the Ministry of Tourism, to filing with the Tax Department.

It’s not overly complicated, but doing it right the first time can save a lot of hassle down the road.

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The work of a handful of attorneys at BNG Legal, this blog's mission is to keep the world up-to-date on legal issues in the Kingdom of Cambodia.

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