Cambodia: nationality of a company

Today I wish to discuss about the nationality of the company according to laws of Cambodia. A company which has been registered in a form of private limited or public limited company with the Ministry of Commerce acquires the legal personality.  Accordingly, the company can own the properties, operate the business operation, enter into the contract, sue or be sued any person. In short, the company can acquires rights, assume obligations and act as natural person.  Depending on the shares holdings of Cambodian shareholder, the company established under the laws of Cambodia is a legal person with or without Khmer nationality.

Pursuant to Article 101 of Law on Commercial Enterprises promulgated in 2005, a company is deemed to have Khmer nationality if it fulfills 2 main requirements. The first requirement is that the company has a place of business and registered office located in Cambodia. The second requirement is that more than 50% of the voting shares of the company are held by natural or legal person having Khmer nationality. For example, Mr. Sok, a Cambodian or Khmer citizen, holds 600 shares and Mr. John, British citizen holds 400 shares of a company named ABCD having a registered office in Phnom Penh, Cambodia. The total shares of this company are 1,000 shares and the value for per share is 4,000 Khmer Riels which are approximately equal to US$1. According to the above provision, ABCD is a company having Khmer nationality.

Now I revise the above example. If Mr. Sok holds 400 shares and Mr. John holds 600 shares of the total shares in the company ABCD, the company does not have the Khmer nationality. This is because more than 50% of the total shares of the company are owned by Mr. John who is British citizen. In this case, company ABCD is considered as company without Khmer nationality although it is registered in Cambodia.

In the examples discussed earlier, shareholders are natural persons. This does not mean that shareholders of a company are restricted to natural person. Legal persons can also become shareholders of a company in Cambodia. Furthermore, under Article 270 and Article 271 of the Law on Commercial Enterprises, a company or legal person incorporated under the laws of foreign country can also do business in Cambodia in the forms subsidiary in Cambodia. If I further review the Law on Commercial Enterprises, I find that Article 283 of this law has defined what subsidiary means. This Article 283 reads:

A subsidiary is a company that incorporated by the foreign company in the Kingdom of Cambodia with at least fifty-one (51) percent of its capital that held by the foreign company.

According to above provision, a foreign company which is formed under the law of other country can establish a subsidiary if it hold at least 51% of the total shares. In this sense, a subsidiary of foreign company does not have Khmer nationality.

Under Article 273 of the Law on Commercial Enterprises, all forms of foreign business doing business in Cambodia must be subject to the laws and the jurisdiction of courts of the Kingdom of Cambodia.  The company without Khmer nationality can do business in Cambodia; however, there are a few laws restricting foreign person (natural or legal person) from owning land in Cambodia, which I will discuss below as well.

Firstly, the Constitution of Cambodia which has been promulgated since 1993, in particular Article 44 reads:

All persons, individually or collectively, shall have the right to ownership. Only Khmer legal entities and citizens of Khmer nationality shall have the right to own land…

Although the Constitution does not clearly state that foreign person does not have right to own land in Cambodia, it does state clearly that only Khmer legal entity and citizen of Khmer nationality to own land in Cambodia.

Secondly, Land Law of 2001, in particular Article 8 reads:

Only natural person or legal entities of Khmer nationality have the right to ownership of land in the Kingdom of Cambodia.

Thus, the following persons or entities may be owners of land in Cambodia: Cambodian citizens, public territorial collectives, public institutions, Cambodian communities or associations, public enterprises, Cambodian civil or commercial enterprises and any Cambodian organization which is recognized by law as a legal entity.

A foreigner who falsified national identity to become an owner of land in Cambodia shall be punished as determined under article 251 of this law. Any property bought under these circumstances will be seized as State property without compensation from the State.

With respect to ownership of land by legal entity, Article 9 of the Land Law of 2001 reads:

An enterprise registered in Cambodia, in respect of which 51% or more of the shares are held by natural persons of Cambodian nationality or by Cambodian legal entities recognized pursuant to the laws of Cambodia, may be the owner of land. Only percentages stipulated in the articles of incorporation are taken into account. Any private agreement signed by a shareholder that is contrary to this article is null and void.

If percentages stipulated in the articles of incorporation are changed in a way that it [the enterprise] ceases to be Cambodian, the enterprise has the obligation to amend the articles of incorporation to comply with the actual circumstances and shall inform the competent institutions of such amendment according to the law in force.

Thirdly, Law on Investment of 1994 which was amended in 2003, in particular Article 16 New reads:

Ownership of land by investor for the purpose of carrying on a QIP shall be vested in natural persons holding Cambodian citizenship or in Cambodia Entities…

While the Constitution, Land Law and Law on Investment restrict the foreign natural or legal person from having ownership of the land in Cambodia, the Law on Providing Foreigners with Ownership Rights Over Private Part of the Co- Owned Buildings promulgated in 2010 allows the foreigners to have ownership rights over the private parts of the co-owned buildings only from the first floor up. The ground floor and under-ground floor must not be owned by the foreigners. (Article 6)

In conclusion, a company is of Khmer nationality if it is established and located in Cambodia and more than 50% of its shares are held by Cambodian natural or legal person. The company having Khmer nationality can do business and own land in Cambodia while the company without Khmer nationality can also do business and own private parts of co-owned building from the first floor up. However, the company without Khmer nationality cannot own land in Cambodia.

This text is not legal opinion or legal advice.

Categories Commercial Laws

Leave a Reply

error: Content is protected !!
Don`t copy text!
%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close