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.