A business in Cambodia considers to insolvent when:
- It cannot pay debts at maturity (cash-flow insolvency), or
- Its liabilities exceed its assets (balance-sheet insolvency), or
- Creditors file a claim due to non-payment
Either the debtor or one or more creditors may initiate proceedings.
- Legal Framework
Insolvency in Cambodia is primarily governed by:
- Law on Insolvency (2007) – main legislation
- Law on Commercial Enterprises (LCE) – dissolution and liquidation aspects
- Civil Procedure Law and court regulations
Insolvency is court-driven or regulator enforcement and applies when a company is unable to pay its debts as they fall due.
- Temporary or Interim director Proceedings
Normally, a company may seek advice from its Board of Directors or top management to undertake restructuring or reorganization with the objective of business recovery, rather than immediate closure.
Where the regulator or court considers that independent control is required, it may appoint a Temporary Director (or Interim Director) to assume full control of the company’s affairs for a defined period, typically three (3) to six (6) months.
The outcome of the temporary management period is generally as follows:
- ✔ Successful: the company stabilizes and continues operations
- ✖ Unsuccessful: the process is converted into formal liquidation
- Liquidation (Winding Up)
The process is converted into formal liquidation as the following
- Court issues insolvency judgment Or Regulator enforce to liquidate
- Appointment of Liquidator
- Suspension of directors’ powers
- Asset identification and valuation
- Sale of assets
- Distribution to creditors (Settlement)
- Company dissolution and deregistration
- Priority of creditors payments
In liquidation, Settlement proceeds are distributed in the following order:
- Insolvency administration costs
- Employee wages and severance
- Secured creditors
- Tax obligations (state claims)
- Unsecured creditors
- Shareholders (if any surplus)
- Tax Deregistration (General Department of Taxation)
This is the most important and time-consuming step:
- Apply for tax deregistration
- File all outstanding tax returns
- Undergo a tax audit or tax review
- Obtain a Tax Clearance Certificate
- Deregistration with the Ministry of Commerce
After tax clearance:
- Submit the dissolution application through the Ministry of Commerce online system
- Provide required documents (tax clearance, shareholder resolution, liquidator details)
- The Ministry publishes a public notice of dissolution
- Notifications to Other Authorities (if applicable)
Depending on the business type, notifications may be required to:
- Ministry of Labor and Vocational Training
- National Social Security Fund (NSSF)
- Sector regulators (e.g. National Bank of Cambodia, Ministry of Tourism, Health, Education)
- Close Bank Accounts and Cancel Licenses
- Close all company bank accounts
- Cancel business licenses, permits, leases, and utility contracts
- Final Closure
- Distribute remaining assets to shareholders
- Retain accounting and tax records for at least 10 years, as required by law
- Expected Timeline
Insolvency proceed will take approximately 12 to 20 months, mainly due to the tax audit and clearance process. After completion, the company name cannot be reused for one year.
How We Can Help
We will continue to closely monitor developments and provide the latest information promptly from Ministry of Commerce and the General Department of Taxation.
Tax services to be implemented by licensed tax agents in Cambodia are provided by Cam Accounting & Tax Service Co., Ltd., a member firm of Kreston Global, holding GDT tax agent license, Accounting, Auditing and liquidator licenses from ACAR, and accredited by National Bank of Cambodia (NBC) and Trust Regulator (TR).
Our Audit, Tax & Accounting Expert
Ms. Haing Sivtieng, MIPA, MBA
Tax & Accounting Partner
Mobile: +855 89 777 589
Mr. Keat Heng, ACCA, CPA, FCCA
Audit Partner
Mobile : +855 12 753 257
E-mail : info@krestoncambodia.com
Website : www.krestoncambodia.com
