Implementation of the Trust Law in Cambodia
A year and a half have passed since the promulgation of the Trust Law (“Trust Law”) in Cambodia on 2 January 2019. The much-anticipated law has since been welcomed by the Cambodian business community, local and the foreign businesses, as well as members of the legal profession. The great enthusiasm expressed for the new trust law’s potential to smoothly facilitate business in Cambodia cannot be overstated.
Aside from the numerous business advantages that the trust law offers, there are also important things to note about its legal aspects and the trust law’s place in the Cambodian legal system. Cambodia is a civil law jurisdiction, and thus has a Civil Code which provides the general framework of business contracts and other such arrangements. The trust law is an Anglo-Saxon legal concept which has historical roots in the doctrine of equity. Given that significant differences exist between the concept of contract law in the Civil Code and the trust laws developed under Anglo-Saxon common law equity, the legal profession has yet to see how this new concept would fit within the Cambodian legal context. Taking these factors into account, it would not be surprising if a smooth implementation of the trust law into Cambodian jurisprudence could not take place overnight. Though certain aspects of the interpretation of the Trust Law in light of the Civil Code still require time to be crystallised, the main implementation rules which are necessary to establish and register a trust are currently available and operational.
Many things have since taken place following the promulgation of the Trust Law by the Royal Kram (Decree) on 2 January 2019. Since its promulgation the Royal Government of Cambodia and the Ministry of Economy and Finance (“MEF”), the latter being the competent regulator, the MEF has been working on its implementation, in particular on the more nuanced rules of the registration process, as well as the maintenance and the control over the trusts. This article aims to provide a brief overview of what the legal sources governing the trusts in Cambodia are and what has been achieved since the introduction of the Trust Law.
The Trust Law itself provides the framework for the categories of trust and sets out the basic rules for its registration, management, supervision and termination. Besides that, the Sub-Decree of 2 August 2019 on the Trust Registration (“Sub-Decree”) provides for the implementation of the rules and procedures of the Trust Law. The registration process shall be administered by the MEF and regular timeframe for registration will take 30 days. The Sub-Decree sets out the list of documents (e.g. the trust instrument, the trustee’s compliance documents, the insurance policy) which must be submitted along with the application for the registration of the trust. Further to the registration process the Sub-Decree provides for the control and supervision of the trust and details on the liquidation of the trust following the end of trust’s term. In relation to the supervision of the management of the trust, the Sub-Decree grants broad rights to the trust inspectors working under the MEF and sets out the sanctions, including penalties, for non-complying trustees. Furthermore, for the purpose of transparency and efficiency, the Sub-Decree requires all trustees to disclose the records of trust, financial statements, and all other relevant information to the MEF.
To register trusts, the Trustee shall pay all registration fees set out in Prakas No. 854 of 30 September 2019 (“Prakas”). The Prakas provides two types of fees: the trust registration fee, namely the administrative fee, and the annual fee. Pursuant to the Prakas, the administrative fee and the annual fee vary depending on the type and value of the trusts. For example, commercial trusts with a value exceeding KHR 200 billion (approx. USD 50 million), the administrative fee is KHR25 million (approx. USD 6, 000) and the annual fee is KHR29 million per year (approx. USD 7, 000).
This alert is for general information only and is not a substitute for legal advice.