Cambodia Issues New Sub-decree on Market Competition for Mergers and Acquisitions
On 6 March 2023, the Royal Government of Cambodia issued Sub-Decree No. 60 on Requirements and Procedures for Business Combinations (“Sub-Decree No. 60”) , which sets out new rules for mergers involving local and international businesses operating in Cambodia.
Effective six months after the date of issuance, the sub-decree directly supplements the 2021 Law on Competition, which was the Kingdom’s first law regulating market competition.
Sub-Decree No. 60 applies to any merger or acquisition which, directly or indirectly, has or may have the object or effect of significantly preventing, restricting, or distorting competition in the Cambodian market, regardless of whether the merger or acquisition takes place in or outside Cambodia.
Prior to Sub-Decree No. 60, mergers and acquisitions in Cambodia could be completed without notification to the government. For a business combination to now be considered valid, relevant parties must first obtain approval from the Competition Commission of Cambodia (“CCC”) through a pre- and post-notification process. A simplified process may also apply in cases where the transaction is either internal or has already been approved by the Royal Government.
It is important to note that only transactions that meet a certain threshold established by the CCC will have to follow this process. Although the exact thresholds are yet to be defined, they will be based on the Cambodian assets and financial revenue of the Parties in the year prior, as well as the transaction value. A set of specific thresholds will also apply to banks and financial institutions, insurers, and securities.
The pre-notification process is divided into two steps – (i) Primary and (ii) Secondary Review. To begin the process, the Parties must first provide relevant information and documents (in Khmer) to the CCC – this includes the notification form, company details, financial reports, and transaction agreements. Following which, the CCC has 7 days to verify if the information is complete and correct, and an additional 30 days to complete its Primary Review of the transaction.
At the end of the Primary Review, the CCC will issue a written notice explaining whether the transaction can be completed or if it must go through Secondary Review. Although the sub-decree sets out the criteria under which a transaction will move to Secondary Review, which largely has to do with the market share of the Parties involved, the CCC still reserves the right to conduct Secondary Review if it has a reason to believe that the transaction will disrupt market competition. On the other hand, certain transactions that meet the criteria for Secondary Review may skip it entirely under specific conditions, such as in the event of foreclosure.
Secondary Review will require the Parties to submit additional information to the CCC; following which, it will have 60 days to issue a written notice with its final decision. This period is subject to two extensions of 30 days and may be paused at any point if further information is required. At the end of this time period, the transaction will either be approved (in full or with certain conditions) or rejected. Parties may file a complaint in accordance with Article 31 of the Law on Competition to appeal against the decision.
If the CCC fails to provide a written notice by the end of the time periods mentioned above, the transaction may be completed without further review.
Following the completion of the pre-notification process, at least one of the Parties must register the transaction within 30 days of its completion along with a certificate of tax compliance from the General Department of Taxation (“GDT”). The sub-decree also introduces the concept of an Advanced Ruling Certificate (“ARC”) which, if obtained, would protect the transaction from being challenged by the CCC for a full year, in accordance with Article 11 of the Law on Competition. The requirements and procedure for the registration and the ARC will be further set out by the MOC and CCC in a future Prakas.
This alert is for general information only and is not a substitute for legal advice.