Types of companies that can be set up in Cambodia

Investing and establishing a company in Cambodia is an attractive option for investors thanks to many outstanding advantages such as a favorable business environment, with preferential tax policies and simple administrative procedures, which saves time and costs. Corporate income tax in Cambodia is only 20%, along with special incentives for companies in industrial parks. In addition, Cambodia’s geographical location, located between major economies such as Vietnam, Thailand, and China, offers opportunities for trade connections and market expansion. In addition, labor costs in Cambodia are lower than in many countries in the region, helping businesses reduce production costs. Moreover, the country has favorable trade agreements with many countries and international organizations, facilitating the import and export of goods. All of these factors make Cambodia an ideal destination for businesses looking to grow and expand their business in Southeast Asia. However, choosing the type of company to establish in Cambodia is one of the important things. Viet An Law would like to introduce the types of companies that can be established in Cambodia through the article below.

Types of companies that can be set up in Cambodia

Single-member Limited Liability Company

A Single Member Limited Liability Company (SMLLC) in Cambodia is a popular choice for foreign investors, especially small businesses or individuals who want to establish a business in Cambodia.

Main features of Single-member Limited Liability Company:

• A single owner: As the name suggests, an SMLLC has only one member, which can be an individual or an organization.
• 100% foreign ownership: Allows foreign investors to own the entire capital of the company without the need for a local partner. This is a major advantage over some other countries that require a certain percentage of ownership for natives.
• Limited Liability: The owner is only responsible for the company’s debts to the extent of the contributed capital. The owner’s personal property is protected from the company’s obligations.
• Suitable for small scales: This type is especially suitable for small businesses, family businesses, or private businesses that want to benefit from limited liability.

Private Limited Liability Company

A Private Limited Liability Company (PLC) in Cambodia is a popular form of business chosen by many foreign investors when looking to establish a company in Cambodia.

Main Features of Private Limited Company (PLC) in Cambodia:

• Number of Shareholders: A minimum of 2 to a maximum of 30 shareholders is required. This is different from a Single Member Limited Company (SMLLC) which has only one owner.
• 100% foreign ownership: Similar to SMLLC, PLC allows foreign investors to own 100% of the company’s charter capital. This is a great advantage to attract foreign investment in Cambodia.
• Limited Liability: This is an important feature of the limited liability company type. The liability of shareholders is limited to the amount of capital contributed to the company. The personal assets of the shareholders are protected from the company’s debts and financial obligations.
• Not allowed to issue shares to the public: Unlike a joint stock company (Public Limited Company), PLC is not allowed to list shares on the stock market to raise capital from the public. The capital mobilization is mainly based on the contributed capital of shareholders.

Other types that can be established in Cambodia

Representative offices of foreign company

A Representative Office in Cambodia is a suitable choice for foreign businesses who want to explore the market, explore business opportunities, and build partnerships without directly participating in profitable commercial activities. Below are the details of the Representative Office in Cambodia:

Main Features of Representative Office:

• Not allowed to do direct business: This is the most important difference between a Representative Office and other forms of business such as a Limited Liability Company or Branch. Representative offices are not allowed to carry out activities of buying and selling goods, providing services and generating revenue in Cambodia.
• Main Functions:
  • Market research and search for business opportunities.
  • Trade promotion, promotion of the parent company’s image.
  • Establish and maintain relationships with customers, partners, and local authorities.
  • Supervise and support the activities of the parent company in Cambodia (if any).
• No independent legal status: The Representative Office is a dependent unit of the parent company in an overseas country, without a separate legal status. The parent company is responsible for all the activities of the Representative Office.
• Allowed to recruit employees: Representative offices can recruit employees to perform their functions.

Branch of foreign company

A branch office of a foreign company in Cambodia is a form of expanding the business of an overseas parent company to the Cambodian market. Unlike the Representative Office (which is only allowed to carry out market research and trade promotion activities), the Branch is allowed to conduct profitable business activities directly in Cambodia.

Main features of the Branch:

• No independent legal status: A branch is considered an extension of the parent company, without a separate legal status. The parent company is fully responsible for the activities and legal obligations of the branch.
• Allowed to do business: This is the most important difference from a Representative Office. The branch is allowed to carry out revenue-generating business activities, including the purchase and sale of goods, provision of services and other commercial activities in accordance with the provisions of Cambodian law.
• Subject to the management of the parent company: All activities of the branch must be subject to the direction and management of the parent company.

Subsidiary

A Subsidiary is a separate legal entity formed and owned by another company, known as a Parent Company. In Cambodia, setting up a subsidiary is a popular option for foreign businesses that want to have an independent and long-term presence in the market.

Main characteristics of the Subsidiary:

• Independent legal status: This is the most important difference compared to a Branch. The subsidiary has a separate legal status, its own assets, legal responsibilities and management structure.
• Parent company owns shares: The parent company owns part or all of the shares of the subsidiary, thereby controlling the operations of the subsidiary. The degree of control depends on the percentage of shares owned. If the parent company owns more than 50% of the shares, the subsidiary is considered a majority-owned subsidiary. If the parent company owns 100% of the shares, the subsidiary is considered a wholly-owned subsidiary.
• Permitted to do business: Subsidiaries are allowed to carry out revenue-generating business activities in accordance with Cambodian law.
• Limited Liability: The parent company is only limited liability to the extent of the capital contribution to the subsidiary. This means that if the subsidiary is in financial difficulties or goes bankrupt, the parent company will not be affected by its assets other than the capital invested in the subsidiary.

Summary of types that can be established in Cambodia