Debt Collection in Cambodia

The debt collection process in Cambodia begins with an assessment of the debtor’s solvency, their business sector, business history, availability of documentary evidence of the debt, ongoing court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve early recovery of the debt.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan is agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period for debt collection is 5 years. The court applies the provisions on the limitation period only at the request of the defendant. The limitation period is interrupted in the event of partial payment of the debt, payment of interest on the debt, provision of security or recognition of the debt in any other way. After interruption, the limitation period begins to count anew.

Cambodian law provides for judicial recovery of debt through ordinary and summary judicial procedures, as well as through demand proceedings.

The ordinary judicial procedure is carried out by filing a statement of claim with the court, after which the court checks whether the content of the claim and the manner of its filing comply with the requirements of the law. If the court finds that the claim complies with the requirements of the law, it serves a copy of the claim on the defendant and sets a date for a preparatory hearing. The preparatory hearing must be set within 30 days from the date of filing the claim with the court.

If the plaintiff does not have a permanent residence or office in Cambodia, the court, upon the defendant’s motion, issues an order requiring the plaintiff to provide security for legal costs. The defendant who has filed such a motion may refuse to appear in court until the plaintiff provides security. The amount of security is determined based on the total amount of legal costs payable by the defendant.

On the day of the preparatory hearing, the court clarifies the factual or legal issues related to the claim, and also questions the participants on such issues or asks them to present relevant statements or evidence. If the defendant does not make it clear during the preparatory proceedings that he denies the facts relied upon by the plaintiff, the defendant is deemed to have admitted such facts. If the defendant states that he does not know the facts asserted by the plaintiff, the defendant is deemed to have denied such facts. The court may also require the parties to submit preparatory documents for oral arguments during the preliminary hearing. The preparatory documents must set out the allegations and evidence, as well as statements regarding the allegations and evidence of the opponent. During the preparatory hearing, the court systematizes the parties’ statements and clarifies the material issues in the case, and determines the evidence related to the disputed issues in order to ensure the brevity of the trial. After completing the preparatory proceedings, the court agrees with the parties on the facts to be proven and proceeds to the stage of examining the evidence. After examining the evidence, the court sets a hearing for oral arguments, during which it hears their final arguments.

If the defendant fails to appear at the first preparatory hearing, the court shall immediately terminate the preparatory proceedings and set the first hearing for oral argument. If the defendant fails to appear on the day set for oral argument, the court shall consider the defendant to have accepted the truth of the plaintiff’s allegations regarding the facts, and if there are grounds to support the plaintiff’s claims, the court shall satisfy the plaintiff’s claims by rendering a judgment in absentia (this provision shall not apply if the defendant contested the plaintiff’s allegations at the preparatory hearing). The judgment shall be rendered within one month from the date of the end of oral argument.

The simplified small claims procedure shall apply to debts of up to 1,000,000 riels. Unless special circumstances exist, the court shall realize the trial on the first day set for oral argument. The parties shall present all arguments and evidence before or on the day set for oral argument. Evidence may only be examined with respect to evidence that can be examined immediately. As a rule, the court issues a decision immediately after the completion of oral arguments. An appeal against a final decision made in a simplified procedure cannot be filed.

The demand procedure is used to collect specific amounts of money, provided that the demand order can be served on the debtor in Cambodia. If the creditor’s application complies with the provisions of this procedure, the court shall issue a demand order without summoning the debtor or hearing his position. The order shall enter into force upon its service on the debtor. Within two weeks after service of the order, the debtor must either comply with the requirements specified in the order or file an objection. If the debtor does not file an objection, or files an objection but the court finds it unfounded, the demand order shall become a final decision. If the debtor files an objection in a timely manner and the court finds it justified, the demand order shall lose its force.

The decision of the court of first instance may be appealed to the court of appeal within one month from the date of notification of the decision, if the amount of the claim exceeds 5,000,000 riel. The decision of the court of appeal may be appealed to the Supreme Court of Cambodia within thirty days from the date of the decision. The decision of the Supreme Court is final and cannot be appealed further.

After the court decision comes into legal force, the creditor should initiate the enforcement procedure. The court decision may be presented for execution within 5 years from the date of entry into legal force of the decision. As part of the enforcement of the court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating securities; seizing and confiscating any intangible rights and assets.

An alternative option for debt collection is to use the bankruptcy procedure of the debtor. According to the provisions of the Bankruptcy Law, a creditor has the right to initiate this procedure provided that the debtor is unable to fulfill one or more valid and payable obligations, the total amount of which is not less than 5,000,000 riel. At this stage, if the debtor’s assets are not sufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions entered into with the intention of causing damage to the creditors. Among such transactions, it is necessary to highlight in particular: a transaction entered into by the debtor with the intention of defrauding the creditors by placing the debtor’s assets out of the reach of the creditors; a transaction entered into within 3 years prior to the commencement of insolvency proceedings, for which the debtor did not receive consideration; a transaction entered into within 1 year prior to the commencement of insolvency proceedings, in which the amount of the debtor’s obligation significantly exceeds the amount of the obligation of the other party; a transaction concluded within one year prior to the commencement of insolvency proceedings, in the course of which the debtor has repaid a debt that has not fallen due or has provided new or additional security for the debt, and in which the other party to the transaction is a related party. As a result of the cancellation of the above transactions, it is possible to return back to the debtor what he lost from such transactions and, due to this, increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in Cambodia, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY CAMBODIA

09.10.2024

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