VLP Legal Press #13
Directors in Cambodia - Key Points to Know (Core Duties)
In our previous Legal Press, we introduced the basic requirements for directorship in Cambodia. This time, we take a closer look at some key duties of directors—covering core duties, calling of board/shareholder meeting, decision-making, dissent, conflict-of-interest disclosure, financial responsibilities, and the issuance of shares.
1. Core Duties of Directors
Act honestly, reasonably and in good faith in the best interests of the company.
Exercise care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances.
Remains in office until a replacement is appointed. The last remaining director cannot resign before a replacement is in place — otherwise, he/she may be liable for damages.
2. Board and Shareholder Meetings
Board meetings: Must be held at least once every 3 months. Chairman or 1/3 of the serving directors may call for a board meeting.
General meetings of shareholders:
Must be held annually and shall be called by the directors.
Can be called at any time for extraordinary matters.
Must also be called upon request by shareholders for the stated purpose.
Written notice must be given at least 20 days in advance, including the date, place, and agenda.
3. Decision-Making and Dissent
Directors present at a meeting are assumed to agree with board resolutions unless they:
request their dissent be recorded in the minutes.
send written notice of dissent to the secretary before the meeting ends.
Absent directors are also assumed to agree unless, within 15 days of learning about the resolution, they:
ensure their dissent is entered in the minutes; and
send dissent by registered mail or deliver it to the company’s registered office.
🚨Note: Recording dissent protects directors from being held personally responsible for decisions they disagree with, especially when directors carry a duty to exercise care, diligence, and skill. If a resolution later causes losses or liabilities, a director who properly documented their dissent can show they did not support the decision.
4. Conflicts of Interest and Disclosure
Obligation to disclose: Directors must disclose the nature and extent of their interest either in writing or by having a statement entered into the minutes.
What an interest is counted as a conflict:
when a director is a party to a contract with the company; or
when a director has a material interest in another person/entity that is a party to such a contract.
When disclosure must be made:
at the meeting where a proposed contract is first considered;
if interest arises later, at the first meeting after becoming interested;
if a contract already exists, at the first meeting after becoming interested;
if a person with an interest later becomes a director, at the first meeting after appointment.
Restriction on voting: Directors with a conflict cannot vote on approving the contract, unless the contract relates to:
a security for money lent or obligations undertaken by him for the benefit of the company/an affiliate;
the director’s remuneration;
an indemnity or guarantee; or
a contract with an affiliate.
🚨Note: When a director has a personal interest in a contract, they may not be able to act solely in the company’s best interests. To keep decisions fair and protect the company (and shareholders) from biased or self-serving choices, the law restricts conflicted directors from voting. This ensures that contracts are approved based on what benefits the company—not individual directors.
5. Financial Responsibilities
Financial statements: Annual financial statements must be approved by the board, with approval shown by the signature of one or more directors.
Dividends: Subject to restrictions in the articles, the board may declare dividends out of the company’s surplus or net profits, they shall not if:
the company is, or would be after the payment, unable to pay its debts; or
the company’s assets would be worth less than the total of its liabilities and stated capital.
🚨Note: Directors must be careful when approving financial statements or declaring dividends because they can be held responsible if the company’s numbers don’t add up. Declaring dividends when the company cannot afford them, or signing off on inaccurate financial statements, can expose directors to personal liability. In short: double-checking the numbers protects both the company and the directors themselves.
6. Issuance of Shares
The board determines the price of shares to be issued.
Shares can only be issued after full payment in money, in kind or past services.
If issued for non-cash consideration, the board determines the value.
Non-cash consideration must be at least the fair equivalent of the cash value the company would have received at the time of issue.
🚨 Note: Directors can be held personally liable if they approve issuing company shares for less than fair value (when shares are issued for something other than cash). They are responsible for covering the shortfall between what was received and the fair cash value the company should have received. However, a director is not liable if they can show they genuinely did not know, and could not reasonably have known, that the shares were undervalued.
Practical Tips for Directors
Don’t resign without a replacement – The last director cannot walk away until another is appointed — liability may follow if you do.
Keep meetings regular – Board meetings must be held at least once every 3 months; shareholder meetings must be called annually and when requested.
Record dissent properly – If you disagree with a board decision, make sure your dissent is in the minutes and send written notice. Silence = consent.
Disclose conflicts early – Always declare if you (or someone connected to you) have an interest in a contract. Better to over-disclose than under-disclose.
Check company solvency before paying dividends – Dividends cannot be declared if the company risks being unable to pay its debts.
Review share issuance carefully – Ensure shares are issued only after full payment and that non-cash contributions reflect fair value.
This is for general reference only and does not constitute legal advice. For further guidance, contact us at: