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Company Law and Corporate Governance
Company law is crucial in market economies; it sets the legal environment for the creation and operation of privately owned businesses. Good company law is especially critical in transition economy countries. It can encourage entrepreneurship by making it easy to start up and register a company; it can encourage businesses to move from the underground economy into the publicly registered taxpaying economy; and it can encourage new investment – and provide investor protection – by setting forth clear and objective rules for a company’s ongoing internal governance.
In 2005, Cambodia enacted a new company law. Implemented with assistance from the Asian Development Bank (ADB), the law streamlined the procedures under which companies may register with the state. The law also sets forth corporate governance principles that, on paper, follow many international best practices for investor protection and encouragement of domestic and foreign investment.
Company start-up still requires approvals other than company registration, and the private sector reports many difficulties in this regard. In addition, governance rules in the new company law will require implementation over time. The new law also includes some governance provisions that could discourage transparency and new investment.
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