Law on Commercial Enterprises

LAW ON COMMERCIAL ENTERPRISES
Chapter 1 – General Provisions

Article 1:                      Scope

This law applies to a partnership and company carrying on business in the Kingdom of Cambodia. A partnership composes of a general partnership and a limited partnership. A company composes of a private limited company and public limited.

 
Article 2:
Definitions
(1).

"person" includes a natural person and a legal person.

(2).
"Registrar" means the Registrar appointed pursuant to the Law on Commercial Rules and
 
Register.
(3).

"Registrar's Office" means the office created pursuant to the Law on Commercial Rules and

 
Register.
(4).

"subsidiary" means   a partnership or company controlled by another partnership or company,

 
called a "parent"
 
(a)

In the case of a subsidiary partnership, the parent partnership owns at least a majority of

 
 
the interest of the subsidiary.
 
(b)

In the case of a subsidiary company, the parent company owns at least a majority of the

 
 
company's voting shares.

Article 3:                      Registered agent and registered office

A partnership or company shall continuously maintain in the Kingdom of Cambodia, a registered office and a registered agent.

A partnership or company shall file with the Registrar the specific location of the registered office, including street address, and mailing address in the Kingdom of Cambodia, if different from the street address.

A partnership or company shall file with the Registrar the name of the registered agent. The registered agent shall be a legally competent natural person. The registered agent shall have authority to receive official papers and documents, including summonses and subpoenas from the courts, on behalf of the partnership or company.

A partnership or company shall file with the Registrar any changes to the registered office or registered agent within fifteen (15) official business days after the change takes effect.

Any company that incorporated under this Law shall govern by the laws of the Kingdom of Cambodia.

Article 4:                      Delivery of documents

Documents of any description required by law to be delivered to a partnership or company shall be delivered to the registered agent at the registered office during the normal business hours of the partnership or company, unless another method is specified by law.

Alternatively, the documents may be delivered to a partner in the case of a general partnership, a general partner in the case of a limited partnership, or a director in the case of a company.

If delivery cannot be made by the methods above, the documents may be delivered to the Registrar who shall mail them to the last known address of the partnership or company as shown on the Registrar’s records. Delivery to the Registrar shall be considered delivery to the partnership or company

Article 5:                      Use of Khmer name

A partnership or company shall display its name in the Khmer language. The Khmer name shall be placed above and shall be larger than the name in another language. The translation of company’s name from one language to another language shall be prohibited. The Khmer name shall sound phonetically the same as the name in the other language.

A partnership or company shall display the Khmer name on all seals, signs letterhead, and forms and documents used for public purpose, and on all public advertisements displayed on land, on water or in the air within the Kingdom of Cambodia.

A partnership or company may use and be designated by a name in another language outside of the Kingdom of Cambodia.

Article 6:                      Non-payment of fees, fines, interest and penalties

A partnership or company that has failed to pay any fee, fine, interest or penalty which is owed to the Ministry of Commerce shall be barred from filing any lawsuit or asserting any defense in any civil lawsuit against it until all such fees, fines, interest and penalties have been paid in full.

This section does not bar a partnership or company from filing or defending a lawsuit to determine whether the fee, fine, interest or penalty is owed.

If a party alleges that a partnership or company owes a fee, fine, interest or penalty to the Ministry of Commerce, the partnership or company may submit a receipt to the court. The court shall accept the receipt as proof of payment until proven otherwise.

Article 7:                      Annual declaration

Each partnership or company shall file an annual declaration with the Ministry of Commerce concerning the status of the partnership or company.

Chapter 2 – General Partnerships
 
Part 1. General Provisions
 

A.        The Establishment of a General Partnership

Article 8:                      Nature of partnership

A general partnership is a contract between two or more persons to combine their property, knowledge or activities to carry on business in common with a view to profit.

Article 9:                      Form of contract

The contract of general partnership may be verbal or in writing. If the general partnership contract is in writing, all partners shall sign it.

Article 10:                    Rules of determining existence of partnership

When the contract is ambiguous the court shall consider the following rules to determine whether the parties had a common intention to form a general partnership:

(a)           The fact that two or more persons jointly own property, whether the persons share in the profits made by the property or not, whether a general partnership does by itself create a partnership by the property or not.

(b)           The fact that two or more persons share the gross receipts from commercial activity, whether or not the persons have joint or common rights in any property that generates the receipts, whether a general partnership does by itself create a partnership by joint or common rights in any property.

Article 11:                    Date of creation

When a general partnership is formed, the parties are bound to the contract at the time the contract is made, unless the contract states otherwise.

Article 12:                    Legal personality

A general partnership has a legal personality separate from that of each of its partners. A general partnership shall acquire legal personality when it registers in accordance with the Law on Commercial Rules and Register, and shall have the following rights.

(a)           to own movable and immovable property in its own name;

(b)          to carry on business in its own name;

(c)           to contract in its own name; and

(d)           to sue and be sued in its own name.

Article 13:                    Nationality

A general partnership that has acquired legal personality shall be deemed to be of Khmer nationality only if:

(a)           The general partnership has a place of business and a registered office located in the Kingdom of Cambodia; and

(b)           More than 51% of the record ownership interest in such general partnership is held by natural or legal persons of Khmer nationality.

Article 14:                    Name of partnership

The name of a general partnership shall include the name of one or more of the partners, and the words "General Partnership" shall be placed at the end or below the name. A general partnership shall use its name when carrying on business.

Article 15:                    Liability for registration, filing and publication

Each partner is individually responsible for complying with the registration, filing and publication requirements for the general partnership.

B.        Relations of Partners to One Another

Article 16:                    Nature of partner’s contribution

Each partner may:

(a)           Contributions to the general partnership in cash, in kind, in past services actually rendered or future services.

(b)           Contribution in services consists of the general partner’s knowledge or activities, but shall not consist of the exercise of influence obtained from public officials.

Article 17:                    Partner’s debt for contribution

Each partner is a debtor to the general partnership for everything he promises to contribute to it.

Article 18:                    Contribution of property

When a partner undertakes to contribute property, the partner shall transfer the rights of ownership or enjoyment and shall place the property at the disposal of the general partnership.

Article 19:                    Monetary contribution

When a general partner undertakes to contribute a sum of money and fails to do so, the general partner is liable for interest from the day his contribution should have been made, subject to any additional damages which may be claimed from him.

Article 20:                    Contribution of knowledge or activities

When a general partner undertakes to contribute knowledge or activities, the general partner owes the obligation continuously as long as he remains a general partner.

The written general partnership contract, the books and records of the general partnership shall indicate whether a general partner’s contribution consists of knowledge, services or activities.

Article 21:                    Capital of the partnership

The capital of the general partnership shall include the contributions in cash and in kind. The contributions in kind shall be valued and all general partners shall agree to this valuation.

The computation of the general partnership’s capital shall not include contributions of knowledge, services or activities.

Article 22:                    Currency of capital

The capital of a general partnership shall be calculated in the national currency.

Article 23:                    Participation in profits and losses

Each general partner shares in the profits and losses of the general partnership.

A contract provision that excludes a general partner from sharing in the profits is not effective.

A contract provision that exempts a general partner from the obligation to share in the losses is not effective against third parties.

Article 24:                    Allocation of partner’s interest

The proportion of the interest of each general partner in the assets, profits and losses is equal unless otherwise provided in the contract.

If the contract establishes a general partner’s interest by referring only to the assets, profits or losses, the proportion established in that case is presumed to apply to all three cases.

Article 25:                    Partner accountable to partnership

Each general partner shall account to the general partnership for all benefits and profits the general partner derives without the unanimous consent of the other general partners from any transaction connected with the business of the general partnership or from the use of partnership property. The general partners may not waive this obligation.

Article 26:                    Partner’s entitlement to wages

No general partner is entitled to wages for employment in the general partnership business.

Article 27:                    Liability for damage

A general partner is liable to the general partnership for damages caused the general partner’s fault.

Article 28:                    Disbursement on behalf of the partnership

A general partner, acting in good faith, has the right to recover the amount of the disbursements he makes on behalf of the general partnership and to indemnification for contractual obligations he makes and losses he suffers in acting for the general partnership.

Article 29:                    Receipt of amount by a partner

This article applies where

(a)           a general partner, on his own behalf, and the general partnership are both creditors of the same debtor;

(b)           both debts are payable; and

(c)           the debtor pays the general partner, but not the general partnership. In this case, the amount the general partner receives shall be allocated proportionately to the personal claim and the general partnership’s claim.

Article 30:                    Partner and partnership’s property

Each general partner may use the property of the general partnership, provided he uses it in the interest of the general partnership.

Each general partner may use the property of the general partnership for his personal use provided that he obtains the unanimous consent of the other general partners.

Each general partner shall use the property of the general partnership in such a way as not to prevent the other general partners from using it, as they are entitled.

Article 31:                    New partner

No natural or legal person may become a general partner without the unanimous consent of all general partners.

A general partner may assign his right to receive moneys to which he is entitled without the consent of other general partners. This assignment does not make the recipient a general partner in the general partnership.

Article 32:                    Transferability of partner’s interest

A general partner may transfer his interest in the general partnership with the unanimous consent of all general partners.

Article 33:                    Partner’s interest as guarantee

The share of a general partner in the assets or profits of the general partnership may be used as a guarantee of personal obligations of that general partner. Such a guarantee shall be given with the unanimous consent of the general partners.

Any agreement to the contrary is not effective.

Article 34:                    Management of partnership – general

The general partners may decide their respective powers in the management of the affairs of the general partnership.

Article 35:                    Appointment of manager

The general partners may appoint one or more fellow general partners or a person who is not a general partner to manage the affairs of the general partnership.

The manager may perform any act within his powers, provided he does not act fraudulently. The act of the manager binds the general partnership.

A manager shall be removed by a vote of a majority of the general partners unless otherwise provided in the general partnership contract.

Article 36:                    More than one manager

When several persons are appointed as managers, each manager may act separately unless otherwise provided in the general partnership contract.

Article 37:                    Partner’s power to manage

The general partners are deemed to have conferred the power to manage the affairs of the general partnership.

Any act performed by a partner in respect of the common activities of the general partnership binds the other general partners.

Article 38:                    Decision making process of the partners

Every general partner has the right to participate in general partnership decisions, and may not be prevented from exercising that right by the general partnership contract.

Unless otherwise provided in the general partnership contract, decisions are taken by the vote of a majority of the general partners, regardless of the value of their interest in the general partnership. However, decisions to amend the general partnership contract are taken by a unanimous vote.

Article 39:                    Right to information

Each partner has the right to obtain information about the affairs of the general partnership and to consult its books and records even if he is excluded from management.

In exercising this right, the partner shall not unreasonably impede the operations of the general partnership or prevent the other general partners from exercising the same right.

C.        Relation of General Partnership with Third Parties

 

Article 40:                    Partner as agent

Each general partner is an agent of the general partnership in respect of third parties acting in good faith and each general partner binds the general partnership for every act performed in its name in the ordinary course of its business. Any agreement to the contrary is not effective.

Article 41:                    Partnership bound by contracts of partner

An obligation contracted by a general partner in his own name binds the general partnership when the obligation is within the scope of the business of the general partnership or when its subject matter is property used by the general partnership.

Article 42:                    Partner’s liability

All general partners are jointly and severally liable for the obligations of the general partnership.

A third party shall seek enforcement of obligations against the general partnership and general partnership assets prior to seeking enforcement against the general partners.

Article 43:                    New partner’s liability

A person admitted as a general partner into an existing general partnership shall be liable for all liabilities the general partnership incurred before his admission as if he had been a partner when such liabilities were incurred. However, all liabilities incurred prior to his admission as a general partner can be satisfied only out of the general partnership property and not out of his personal property unless he agrees otherwise in writing.

Article 44:                    Knowledge of partnership

Notice given to any general partner concerning general partnership affairs or the knowledge of any general partner shall be considered notice to or knowledge of the general partnership except in the case of a fraud committed on the general partnership with the participation of that general partner.

Article 45:                    Misrepresentation

A person who directly or indirectly causes another person to believe that he is a partner, although he is not, may be held liable as a general partner to third parties acting in good faith.

In case of fraud as mentioned above, the general partnership is not liable to third parties unless the general partnership gives reasons to believe that the person is a general partner and the general partnership fails to take measures to prevent third parties from being mistaken.

Article 46:                    Silent partner

A general partner who has not been declared is called a silent partner and is liable to third parties for the same obligations as declared general partners.

Article 47:                    Distribution of security

A general partnership may not make a distribution of securities to the public or issue negotiable instruments.

Any contract entered into and any issuance of securities or instruments made in contravention of this article are void.

The general partnership shall compensate a third party acting in good faith for damages resulting from the void contract, securities or instruments.

 

D.        When a Person Ceases to be a General Partner

 

Article 48:                    When a person ceases to be a partner

A person ceases to be a general partner of a general partnership when the person:

-       transfers his interest,

-       dies,

-       is placed under protective supervision bankrupt

-       exercises his right to withdraw,

-       is expelled from the general partnership,

-       a judgment authorizes his withdrawal or orders the seizure of his interest.

Article 49:                    Effect on partnership

Unless the general partnership contract provides otherwise, the fact that a person ceases to be a general partner does automatically cause the dissolution of the general partnership.

The general partnership may continue by unanimous consent of all of general partners and by complying with filing and registration requirements to reflect the changes in the general partnership.

Where there is a written contract of general partnership, the contract shall be amended in accordance with the changes.

Article 50:                    Right of a person who ceases to be a partner

A person who ceases to be a general partner of the general partnership, otherwise than by the transfer or seizure of his interest, may obtain the value of his interest upon ceasing to be a general partner. The other general partners are bound to pay the person the amount of the value as soon as it is established, with interest from the day on which he ceases to be a general partner.

The value of the interest is determined as provided in the general partnership contract or an agreement among the general partners. Otherwise, the value is determined by an expert designated by the general partners or by the court.

Article 51:                    Right of withdrawal

A general partner of a general partnership constituted for a term that is not fixed or whose contract of general partnership reserves the right of withdrawal may withdraw from the general partnership by giving the general partnership notice of his withdrawal, in good faith.

Unless the general partnership contract provides otherwise, a general partner of a general partnership constituted for a term that is fixed may withdraw only with the agreement of a majority of the other general partners.

Article 52:                    Expulsion of a partner

The general partners may, by a majority vote, agree on the expulsion of a general partner who fails to perform his obligations or hinders the carrying on of the activities of the general partnership.

In the case of any objection, a general partner may, in these circumstances, apply to the court for authorization to withdraw from the general partnership. The court shall grant the demand unless the court considers it more appropriate to order the expulsion of the general partner at fault.

E.         Dissolution and Liquidation of the General Partnership

Article 53:                    Cause of dissolution

A general partnership is dissolved by the:

(a)           causes of dissolution provided in the contract of general partnership

-       the termination of the general partnership’s object,

-       the impossibility of accomplishing it,

-       the unanimous consent of all the general partners.

(b)           The court may dissolve a general partnership for a legitimate cause. Once the general partnership is dissolved, it shall be proceed with the liquidation of the general partnership.

Article 54:                    Continuation of partnership with a fixed term

Any general partnership constituted for an agreed term may be continued by unanimous consent of all the general partners.

Article 55:                    One partner

The uniting of all the interests in the hands of a single general partner does not cause dissolution of the general partnership, provided that at least one other person becomes a general partner within one hundred and twenty (120) days after the interests are united.

Article 56:                    Rights of partners upon dissolution

The powers of the general partners to act on behalf of the general partnership cease upon the dissolution of the general partnership, except for acts that are a necessary consequence of business already begun but not complete. However, anything done in the ordinary course of business by a general partner who is not aware of the dissolution of the general partnership and acting in good faith binds the general partnership and the other general partners as if the general partnership were still in existence.

Article 57:                    Rights of third parties upon dissolution

Dissolution of the general partnership does not affect the rights of third parties acting in good faith and who entered into a contract with a general partner or an agent acting on behalf of the general partnership.

Article 58:                    Legal personality of partnership

The legal personality of the general partnership continues to exist for the purpose of liquidating its business.

Article 59:                    Notice of dissolution

The general partners shall file a notice of the dissolution in the prescribed form with the Registrar and appoint a liquidator.

The general partners shall immediately publish the notice of dissolution for four (4) consecutive weeks in a Khmer language newspaper in the Kingdom of Cambodia published or distributed in the place where the general partnership has its registered office or in other publications as provided by regulations of the Ministry of Commerce. The notice published in newspaper shall be set in regulations adopted by the Minister of Commerce.

Article 60:                    Powers of the liquidator

Upon dissolution of the general partnership, the possession and the use of general partnership property is delivered to the liquidator.

The liquidator acts as an administrator of the property. The liquidator is entrusted with full administration powers.

The liquidator is entitled to require from the general partners any documents and any explanation concerning the rights and obligations of the general partnership.

Article 61:                    Order of payment in liquidation

The liquidator first shall pay the salary of employee, tax, and other priority debts , then reimburses the capital contributions.

The liquidator partitions the remaining assets among the general partners in proportion to their rights or, if not provided in the general partnership contract, in equal portions.

If the assets include property owned by third parties, the liquidator may return the property to the third party.

Article 62:                    Books and records

The liquidator shall keep the books and records of the general partnership for ten (10) years from the closing of the liquidation. The liquidator shall keep books and records for a longer period if they are required as evidence in a proceeding.

Article 63:                    Closing of liquidation and legal personality

The liquidation of a general partnership is closed by the filing of a notice of closure in a prescribed form with the Ministry of Commerce. The filing of this notice is ceased to exist the legal personality of the general partnership.

Part 2. Limited Partnerships

Article 64:                   Nature of Limited Partnership

A limited partnership is a contract between one or more general partners who are the sole persons authorized to administer and bind the partnership, and one or more limited partners, who are bound to contribute to the capital of the partnership.

Article 65:                    One person as both limited and general partner

Aperson may at the same time be both a general partner and a limited partner in the same limited partnership.

A person who is at the same time both a general partner and a limited partner in a limited partnership has the rights and obligations of a general partner

Article 66:                    Form of contract

The contract of limited partnership may be verbal or in writing. If the contract is in writing, all general partners and at least one limited partner shall sign it.

The term of the limited partnership contract may not be in excess of 99 years but may extend.

Article 67:                    Date of creation

The limited partnership is formed on the date on which it is registered in accordance with the Law on Commercial Rules and Register.

If the limited partnership is not registered, it is deemed to be a general partnership. In this case, such general partnership does not have a legal personality.

Article 68:                    Name

The name of a limited partnership shall include the name of one or more of the general partners, and the words "Limited Partnership" shall be placed at the end or below the name. A limited partnership shall use its name when carrying on business.

Article 69:                    Record of limited partners

The general partners shall keep a record containing the name and domicile of each of the limited partners and any information concerning their contributions to the capital of the limited partnership.

The general partners shall keep the record at the principal place of business of the limited partnership.

The general partners shall responsible for complying with the registration, filing and publication requirements for the limited partnership.

Article 70:                    Nature of partners’ contribution

A limited partner’s contribution to capital may consist of a sum of money or property only. The limited partner may make additional contributions at any time.

A general partner’s contribution to capital may be in cash, in kind, in past services actually rendered or future services.

Article 71:                    Participation of limited partner in profits and losses

A limited partner is entitled to receive his share of the profits. If the payment of the profits reduces the capital of the limited partnership resulting in a deficit, the limited partner who received the payment shall return the sum necessary to cover his share of the deficit.

Article 72:                    Liability of limited partner

The limited partner is liable only to the extent of the sum of money or value of the property he agreed to contribute.

Article 73:                    Name of limited partner used in limited partnership’s name

A limited partner whose name appears in the name of the limited partnership is liable for the obligations of the limited partnership in the same manner as a general partner, unless his status as a limited partner is clearly indicated.

Article 74:                    Powers, rights, obligations of general partner

General partners have the rights and obligations of the partners of a general partnership. General partners shall account for their administration to the limited partners.

The general partners have the obligations to the limited partners’ property of the limited partnership.

The limited partnership contract may not waive this obligation.

Article 75:                    Liability of general partner

The general partners are jointly and severally liable for the debts of the partnership to third parties.