Cambodia - Regulations For Cross-Border Security Offerings

Legal News & Analysis - Asia Pacific – Cambodia - Regulatory & Compliance

8 May, 2016

 

Survey of ASEAN Regulations

 

Applicable Regulatory Body and Market Information

 

  • Securities and Exchange Commission of Cambodia (“SECC”)
  • Cambodia Securities Exchange (“CSX”) where the securities are to be listed onshore. • Three listed companies as of December 2015.
  • Market capitalization of approximately USD 176 million as of end 2015.

 

Securities Offering and/or Registration and Exemption Requirements

 

In general, no securities can be sold or offered for sale or distribution within Cambodia without approval from the SECC and unless all requirements in relation to proposed public offer are fully ful lled and complied with in accordance with the Cambodian securities regulations. The disclosure document in relation to the proposed offer must be registered with the SECC.3

 

The above requirements are not applicable to exempt offer which are:

 

(i) an offer which is guaranteed by the Royal Government of Cambodia,

(ii) an offer of which the price is set for the trading within the ordinary course of trading in the market, and

(iii) any other offers which are determined by the SECC.4

 

Marketing of Securities Where Issuer/Sponsor Offshore and Investor Onshore

 

Onshore offering5 requires the securities to be registered with the SECC and listed with the CSX6. Upon the registration of securities, such offering is to be made and the securities are to be distributed within the territory of Cambodia only.

 

Cambodian law does not restrict offshore investors from participating and acquiring securities being offered within Cambodia.

Likewise, Cambodian law does not restrict Cambodian investors from participating and acquiring securities being offered offshore; however, issuer/sponsor offshore cannot market its offshore offering7 to Cambodian public. Furthermore, there is no legal requirement under Cambodian law for offshore issuer/sponsor to notify or report to the SECC upon the completion of the sale of such securities. 

 

Need to Engage Onshore Sponsor, Licensed Placement or Other Distribution Agent

 

For onshore offering, all players and intermediaries in relation to the securities offering must be registered in Cambodia and licensed/accredited by the SECC. Offshore offering is not permitted in Cambodia.

 

Legends or Other Disclosure Requirements on Offering Materials

 

The Disclosure Document must ful ll the requirement in accordance with the laws and regulations in place.8 However, the SECC has currently not published any standard legend with regard to the selling restriction. The only current prescribed wordings that are required to be included in the Disclosure Document are (i) the responsible parties with regard to the Disclosure Document9 and (ii) the note to investors.10 

 

Other Relevant Considerations

 

The Royal Government of Cambodia has recently put in place a tax incentives scheme for companies intent on listing in order to promote and encourage public listing.11 

 

To view the complete guide, please click here.

 

3 Article 12 of the Law on the Issuance and Trading of Non-Government Securities (2007) and Article 5 of the Sub-decree on the Imple- mentation of the Law on the Issuance and Trading of Non-Government Securities.

4 Article 16 of the Law on the Issuance and Trading of Non-Government Securities (2007) and Article 6 of the Sub-decree on the Imple- mentation of the Law on the Issuance and Trading of Non-Government Securities

5 “Onshore offering” refers to any offer made in Cambodia by companies incorporated and registered in Cambodia.
6 Only companies which are incorporated and registered in Cambodia are allowed to be listed on the CS
7 An offshore offering refers to any offer that is made by entities established outside Cambodia that targets investors in Cambodia. 

8 In accordance with Article 9 of the Sub-Decree on the Implementation of the Law on Issuance and Trading of Non-Government Securities, the Disclosure Document that is submitted to the SECC for approval and registration shall (1) be a written document; (2) have clear date; (3) set out the conditions related to the public offer, including other conditions with a brief, suf cient, and precise description; (4) contain suf cient information to enable the public and investment advisors to make an assessment by relying on precise information on the rights and obligations attached to the securities being offered, and to evaluate the assets and liabilities, nancial situation, strength and weakness of the issuer that has issued or will issue the securities; (5) contain suf cient information and other attached documents along with forms of prescribed disclosure document; (6) contain consent by an expert in case that statement, citation, or references to statements which belong to that expert are included in the disclosure document; and (7) be signed by all members of the governing board of the issuer on the disclosure document.

9 The prescribed wording is as follows: “the issuer and relevant persons who prepare the disclosure document shall be responsible for the information containing in this disclosure document.”

10 The prescribed note to investors is as follows: “the company’s directors have approved this disclosure document for public issuance of equity securities. The board of director collectively and individually takes full responsibility for the accuracy of the information contained in this document. Having made all reasonable enquires and to the best of his/her knowledge and belief, the board assures there is no false or misleading statement or other facts if omitted would make any statement in this document false or misleading. The company’s directors have approved this disclosure document for public issuance of equity securities. The board of director collectively and individually takes full responsibility for the accuracy of the information contained in this document. Having made all reasonable enquires and to the best of his/her knowledge and belief, the board assures there is no false or misleading statement or other facts if omitted would make any statement in this document false or misleading. The secc has approved our public offering and a copy of this disclosure document has been registered and led with the secc. The approval and registration of this disclosure document is not an indication that the secc neither recommends to subscribe this securities offering nor assumes responsibility for the accuracy of information, opinion or statement contained in this disclosure document. The secc is neither liable for any non-disclosed information and the content of this disclosure document, nor certify the accuracy or completeness. The secc is not liable for any loss that investors may suffer from a whole or part of this disclosure document content. Investors should rely on his/her own valuations to assess the accuracy and risks related to the public offering to invest in the company by considering the objective of the investment, risk profie, his/her own nancial position and so on. If investors have any doubt about this disclosure document or in considering the investment, they should consult with securities firms, investment advisors, or other professional advisers.” 

11 On 08 January 2015, the Royal Government of Cambodia issued Sub-Decree No. 01 ANKr.BK on Incentives in the Securities Sector (“Sub-Decree”), which aims to determine the various types, activities and conditions which could be granted with tax incentives in the securities sector. This Sub-Decree cov- ers two types of securities players: (1) company/enterprise issuing for the sale of equity securities and/or debt securities which are licensed by the SECC, and registered as securities trading in the permitted securities market and (2) public investors holding and/or purchasing-selling state securities, equity securities, and/or debt securities which are issued for sale to the public, and registered as securities trading in the permitted securities market. Public investors include both residence and non-residence investors. The offered incentives are as follows:

-50% Reduction of Tax on Pro t: This incentive is the reduction of pro t tax for 50% of the pro t tax to be paid and is offered for a period of three years. Company/enterprise issuing for sale equity securities and/or debt securities, licensed by the SECC and registered as securities trading at the permitted securities market within a period of 03 years starting from the date of this Sub-Decree comes into force shall complete required formalities and submit to the General Department of Taxation through the SECC in order to be granted with tax incentives. This incentive period counts from (i) the beginning of the tax year that such securities are issued for sale to the public, in case such issuances are made within six months of the beginning of the tax year and (ii) the beginning of the tax year after the tax year that such securities are issued for sale to the public, in case such issuances are made within six months of the end of the tax year.

-Tax Amnesty: Company/enterprise issuing for sale equity securities and/or debt securities, licensed by the SECC and registered as securities trading at the permitted securities market shall be granted with tax amnesty for 5 ( ve) years, commencing from the date this Sub-Decree enters into force. Such tax amnesty is granted on the condition that (i) tax debt on pro t founded by the independent auditor, after the General Department of Taxation (“GDT”) has done comprehensive audit; and (ii) tax debt on pro t founded from re-audit by the GDT, after the GDT has done comprehensive audit.

-50% Reduction of Withholding Tax: Finally, Article 6 of this Sub-Decree grants public investors the reduction of 50% ( fty per cent) on the withholding tax on the interest and/or premium received from the holding and/or purchase-sale of the state securities, equity securities and debt securities for a period of 03 (three) years commencing from the date of this Sub-Decree entering into force. 

 

Rajah & Tann

 

For further information, please contact:

 

Eng Beng SC, Partner, Rajah & Tann

[email protected]