Business Combinations is one of the major aspects set out in the Law on Competition which was promulgated on 05 October 2021. This law prohibits any business combinations which could significantly prevent, restrict, or distort competition in Cambodian market. Under the competition law, business combinations refer to “the acquisition of the right of control or voting rights through the purchase of shares or assets by one person from other person; or the combination of two or more persons to acquire joint ownership of an existing legal person or a new legal person” (“M&A”).
The followings are the sources for the legal aspects of M&A in the area of competition:
Although the Competition Law has entered into force since the late 2021, its supporting regulations for the enforcement of M&A provision had just been issued in the first half of 2023. Sub-decree No. 60, which is an important regulation governing the conditions and procedures for M&A, was issued on 06 March 2023. However, this sub-decree and its supporting regulations, including Decision No. 095, Prakas No. 177, Prakas No. 178, and Decision No. 179 will enter into force in 06 (six) months commencing from the effective date of Sub-decree No. 60.
Other than Competition Law and its supporting regulations, Cambodian Law on Commercial Enterprises 2005 also set outs the basic legal aspects of M&A, including the proposal of board of directors and shareholder approval of M&A, voting criteria, notice period to shareholders, M&A agreement criteria, filling the amendment of M&A, and the effect of M&A.
Based on the Competition Law and its supporting regulations, legal aspects of M&A may include the followings: pre-and post- notification obligation, primary and second review, exception, advanced ruling certificate, and M&A registration.
Party request for M&A which fall into any condition of the thresholds determined by the Competition Commission of Cambodia (“CCC”) shall subject to the pre-notification obligation to the CCC prior to the closing of the M&A.
Table 1: Threshold Limitations for Pre-Notification Obligation
(The exchange rate under this table is USD 1 equals 4,000 Riels)
The Pre-Notification shall subject to the following procedures:
Step 1: Application Submission
Party request for M&A shall submit the pre-notification application to the CCC. The followings are the contents for the applications:
Step 2: Application Check
The CCC shall issue notification within 07 (seven) working days on the completeness or incompleteness of the documents and information submitted to the CCC by the applicant.
Step 3: Application Review
Figure 1: Pre-Notification of M&A
Any M&A which fall into the threshold of pre-notification obligation and fall into any of the following cases is subject to the simplified notification:
This simplified notification only requires the submission of the following documents and information:
After the receipt of the notification, the CCC shall issue a notification within 07 (seven) working days to confirm the completeness, incompleteness, or the failure to fulfil the criteria of simplified notification. The notifying party shall submit the additional documents or information to the CCC within 07 (seven) working days after the receipt of the notification of incompleteness. The simplified notification criteria is deemed unfulfilled if the notifying party fail to meet the deadline. Upon the receipt of all additional required documents and information, the CCC shall issue a notification to clarify the completeness of the notification or the failure to meet the criteria of simplified notification.
One of the notifying parties of the CCC’s approved M&A must submit the application for M&A registration within 30 days after the closing of M&A to the CCC in accordance with the application form issued by the CCC. Consumer Protection Competition and Fraud Repression Directorate-General (“CCF”) is the secretariat of the CCC for the receipt of M&A registration application. The party request for M&A registration must submit the following documents and information:
Upon the receipt of application for the M&A registration, the CCF is required to issue a notification to the applicant confirming the completion of M&A registration obligation or confirming the completeness of documents and information submitted to the CCC. In the case that the application is incomplete, the applicant is required to submit the additional documents or information within 15 (fifteen) working days (subject to extension). The applicant is required to resubmit the application if the deadline is not met.
Parties to an M&A may voluntarily apply to the CCC for an advanced ruling certificate, including those who are required to pre-notify or post-notify. Similar to the pre-notification, the advanced ruling certificate application must be submitted prior to the M&A’s substantive completion and must submit a registration application once the M&A is completely finished. The advanced ruling certificate, however, may come with or without condition and the certificate with conditions shall be valid only after the conditions are met.
The benefits of the advanced ruling certificate are that it substitutes the pre-notification and provides a one-year guarantee that the CCC will not deny or obstruct the combination process because of documents or information submitted during the certificate application unless the CCC later finds that the documents or information is counterfeit. In that event, the certificate will be suspended and eventually voided if the applicant fails to produce evidence of its validity.
Certain businesses which are not required to file a pre-notification might be subject to an obligation of post-notification. According to Prakas No. 178, any party to the M&A which meets at least 50 (fifty) percent of the limitations of threshold as stated in Decision No. 095 subject to pre-notification shall file a post-notification to the CCC within 30 working days after the substantive completion of the M&A.
Table 2: Threshold Limitation for Post-Notification Obligation
(The exchange rate under this table is USD 1 equals 4,000 Riels)
M&A transaction subjected to the post-notification shall file a notification to the CCC within 30 (thirty) working days from the date of substantive completion of the M&A. The application must consist of:
Within 7 (seven) working days from the date of submission, the CCC will notify the applicant on the completeness or incompleteness of the application and require additional documents or information, if necessary. The applicant has 15 (fifteen) working days to submit the additional documents or information to the CCC upon receiving the notice of a requirement additional documentation. If the applicant fails to provide documents or information as required, the CCC will void the application and the applicant must resubmit the post-notification. However, Prakas 178 allows the CCC to notify the applicant of the deadline extension for submission of additional documents with valid reason.
Figure 2: Post-Notification of M&A
Any M&A which could lead to the prevention, restriction or distortion of the competition may be allowed in the case that the agreement offers significant identifiable technological, economic, or social benefits that significantly outweigh the anticompetitive effect, would not eliminate competition in any substantial part of a market, and could not have arisen without such agreements or activities. The CCC shall conduct the review on the information and documents submitted by the applicant with respect to the exception provision in the Law on Competition.
This publication is a general information only and is not considered as legal advice or opinion. If you require any further information or have any questions, please contact Mr. HOUN Vannak, managing partner of RHTLaw Cambodia.