Thailand
Firm merging rules to balance Cambodia’s economy, experts say
The sub-decree on requirements and procedures for business mergers and acquisitions that the Royal Government of Cambodia (RGC) issued on Monday last week would enable the country to provide its business communities with a better-balanced economy and markets, said experts who have served those communities with extensive long experience.
The sub-decree on conditions or requirements and procedures for business mergers and acquisitions released on Wednesday by RGC stipulates that either local or foreign businesspeople are required to submit applications of request for mergers or acquisitions to the Competition Commission of Cambodia (CCC) before this transaction completes.
The sub-decree signed by Prime Minister Hun Sen also states that CCC has to consider three main conditions before issuing an approval on coverage of the mergers or acquisitions of business. First, the commission has to examine the total assets that any party or related groups of that party have in Cambodia in their financial year before the year of notification.
Second, CCC also has to look at the total profits or revenue from purchasing orders that any party or related groups of that party make in Cambodia in their financial year before the year of notification and thirdly the transaction value of the mergers or acquisitions, according to the sub-decree, adding that the commission has seven working days to inform the applicants.
Khun Darith, Managing Partner of audit, accounting and tax solutions at accountancy and auditing firm K Professional Accountants (KPA), told Khmer Times on Thursday last week that the sub-decree mainly covers three categories of businesses that include vertical, horizontal and multi-product businesses in Cambodia, but it also sets some exceptions from its coverage.
Darith explained that vertical mergers refer to a new venture merged by two different firms that have complementary products or services, while horizontal mergers mean a combination between two firms that produce and or supply similar products or services and multi-product one is the merger between two firms that supply unrelated products or services.
“Previously, mergers or acquisitions have been done without notifications to the government which means such transactions were not under the law and they want… but now they have to transact them under the law that exists… to balance the economy and market as too much merging would make markets less and less or not competitive or too competitive,” he said.
Darith pointed out that the sub-decree would be beneficial for all stakeholders related to the market that include the government itself, firms and consumers through a balanced economy and market.
The sub-decree would be effective six months after the date of issuance, while it will be enforced by CCC led by MoC and the private sector will have to follow the enforcement.
“When the market is too competitive, general firms would not be able to survive as they would not be able to compete with mergers that may reduce their prices for competition and when the market is not competitive, consumers in the market would be much negatively affected as the mergers would increase the price as they may become a monopoly,” he added.
Penn Sovicheat, Under-Secretary of State of the Ministry of Commerce (MoC), told Khmer Times that firstly, the sub-decree is a part of legal documents that Cambodia is obliged to make on behalf of a member of the World Trade Organisation (WTO). Secondly, to leave its LCD category, the country has to be well prepared to respond to the demand and development in the domestic and overseas markets.
Sovicheat further said that to merge businesses in these forms, the parties concerned are required to submit a request to CCC for permission to proceed with such acquisition and the commission will study impacts and legal procedures before issuing approval to the applicants. All these activities are also specified in Cambodia’s law on competition.
“So far there’s no proof of negative impacts or incidents in the competition in our market as the government has not conducted a comprehensive study or supervision as most probably there are not sufficient laws, regulations and procedures to take all of these actions regarding forms and impacts of mergers and acquisitions on market competition,” he said.
Source: https://www.khmertimeskh.com/501253564/firm-merging-rules-to-balance-cambodias-economy-experts-say/