Understanding directors’ & shareholders’ roles and duties in Cambodia.

Establishing and managing a company in Cambodia involves compliance with various legal and governance requirements, particularly regarding the roles and responsibilities of directors and shareholders. These roles are defined by the Law on Commercial Enterprises (2005) and relevant sub-decrees and guidelines issued by Cambodian authorities.

This guide offers a comprehensive overview of the qualifications, responsibilities and legal obligations of directors and shareholders, helping business owners and investors navigate corporate governance in Cambodia effectively.

Directors in Cambodia

A director is an individual appointed to manage the business and affairs of a company. Directors are accountable to the shareholders and must act in the best interests of the company.

Roles of a director

Directors of a Cambodian company are responsible for a wide range of functions, including:

• Appointing and removing company officers
• Determining compensation for officers
• Proposing changes to the articles of association or major corporate actions such as mergers or consolidations
• Proposing the dissolution or liquidation of the company
• Declaring dividends in line with accounting principles and share classes
• Issuing or reissuing company securities
• Issuing debt instruments like bonds and debentures
• Issuing shares within the limits set by the company’s memorandum and articles of association
• Finalising year-end financials and submitting annual profit reports to shareholders

Eligibility and appointment

To be eligible to serve as a director in Cambodia, an individual must be legally competent, at least 18 years old and may be of any nationality. Unless the company’s articles of incorporation state otherwise, there are no further qualification requirements.

Initial directors are appointed in the company’s articles of incorporation and serve until the first general meeting. Thereafter, directors are elected by an ordinary resolution passed by the voting shareholders. Each director serves a two-year term and may be re-elected upon completion of their tenure.

Resignation and removal

A director may resign at any time by submitting written notice to the company. The resignation becomes effective immediately or at a future date specified in the notice. However, if the resigning individual is the last remaining director and fails to appoint a replacement, they may be held liable for any resulting damage to the company.

A director may also be removed through a majority vote by shareholders, who are entitled to vote on the matter.

Fiduciary and statutory duties

Directors must fulfil both fiduciary and statutory duties. Fiduciary duties require directors to act honestly, in good faith and in the best interests of the company. They are expected to exercise the care, diligence and skill that a reasonable person would apply under similar circumstances.

Statutory duties include acting within the powers granted by the company’s constitutional documents, avoiding conflicts of interest, promoting the company’s success and exercising independent judgment. Directors must also avoid receiving benefits from third parties and are required to disclose any interest in contracts to which the company is a party.

Liability

Directors in Cambodia can be held both civilly and criminally liable for acts of misconduct, whether intentional or negligent. Liability may arise in cases where directors fail to ensure tax obligations are met, knowingly withhold reporting to the General Department of Taxation (GDT), or fail to disclose material interests in contracts involving the company.

Shareholders in Cambodia

A shareholder is a person or entity that holds at least one share in a company, thereby acquiring partial ownership. Shareholders are distinct from directors in that they do not manage daily operations but are responsible for making high-level decisions. Their liability is limited to the value of the shares they hold.

Who is eligible?

Shareholders must be at least 18 years old and can be either individuals or corporate entities. Both Cambodian nationals and foreigners are permitted to be shareholders, making the jurisdiction attractive to international investors.

Rights and duties

Shareholders possess several key rights, including the ability to transfer or register their shares, access company information and vote at general meetings. They are entitled to attend these meetings and influence decisions on critical issues, such as approving financial statements and altering company capital. One of their most important responsibilities is to elect or remove directors through ordinary resolutions.

While shareholders are not required to be directors unless the company’s governing documents specify otherwise, they may assume both roles if desired.

Conclusion

Understanding the roles and responsibilities of directors and shareholders is essential for effective corporate governance in Cambodia. Directors are entrusted with managing the company and ensuring compliance with legal and ethical standards, while shareholders exercise oversight through voting and key strategic decisions. With a regulatory framework that accommodates both local and foreign participation, Cambodia presents a flexible and favourable environment for business operations. Adhering to the legal duties and maintaining transparency among all stakeholders not only ensures compliance but also supports sustainable business growth and investor confidence.

How Acclime can help with corporate governance in Cambodia

Acclime offers complete support for director and shareholder compliance and corporate governance advisory. From company formation to ongoing secretarial support, our team of experts can assist with everything from appointing qualified directors to maintaining statutory compliance. By partnering with us, business owners and foreign investors can confidently meet legal obligations and operate smoothly within Cambodia’s corporate framework. Contact us to learn more about how we can support your director-related compliance needs and shareholder governance responsibilities.