Under the Insolvency Law, claims for employees' wages, provisional administrator remuneration, administrative fees and court fees rank above the claims of the debtor's secured creditors.

If the debtor is a legal entity covered under the Law on Banking and Financial Institutions, the following claims rank above those of the debtor's secured creditors:

• Fees or other charges for the provisional administration and for the liquidation, either voluntary or by order of the court
• Taxes and fees due to the National Treasury
• Salaries owed to staff for a period of up to three months preceding the date of the liquidator's appointment.

If the debtor is a legal entity covered under the Law on Insurance, the following claims rank above those of the debtor's secured creditors:

• Remuneration and other expenses related to the provisional administration and liquidation
• Claims by insurance claimants
• Claims by insurance policyholders
• Employees' wages, administrative fees, court fees and other court levies

If the debtor is a legal entity covered under the Law on Non-Government Securities, the following claims rank above those of the debtor's secured creditors:

• Remuneration and other expenses related to the provisional administration and liquidation
• Employee salary, administrative fees, court fees and other court levies.

Yes. Generally, security interests over the same collateral take priority according to the order in which they are filed or are otherwise perfected. However, secured creditors may agree to vary or forego the usual order of priority.

Yes, a security package over a changing pool of movable property is possible in Cambodia.

While there is no restriction under Cambodian law, the concept has never been tested with a Cambodian court.

The law is silent on this matter. However, it is now becoming a trend for a security interest to be created in favor of a trustee.

Not applicable.

However, in a syndicated loan transaction, an Asia Pacific Loan Market Association-style security agent structure (i.e., where the security agent holds the security on behalf of the original lenders and any assignees that become lenders of record) is commonly used to achieve substantially the same effect as a trust. See also the answer to question 7 of this section

No, taking new security on a change of lenders is unnecessary. It is possible for security to be given to and to be enforceable by a person such as a security agent as security for debts owed to other persons such as the syndicated lenders.

The security agent may hold a security interest on behalf of the lenders under the concept of a "mandate" under the Civil Code. The term "mandate" refers to a contract by which one party ("mandator") grants to another party ("mandatary") the power to administer business on behalf of the mandator. Moreover, under the Law on Secured Transactions 2007 (LST), the term "secured party" includes a lender, seller or other person in whose favor a security interest is created under a security agreement. Therefore, a security agent may hold a valid security interest on behalf of the syndicate of lenders whether it is a lender or not. The security remains the same without the need to make any changes to the registration when there is a change in the pool of lenders in the syndicate.

However, this structure has never been tested in a Cambodian court.

Security interests in Cambodia can be created under either the Civil Code or the LST

Under Cambodian law, there are two fundamental types of security: real security and personal security. Real security creates security interests over "real" rights, i.e., the right to control an object that may be directly asserted against any person. Personal security includes a guarantee and a joint obligation.

Civil Code

Under the Civil Code, only an object or right that is transferable can be the object of a real security right. The object of a real security right under the Civil Code includes movable property, immovable property, a perpetual lease, a usufruct of immovable property, and contractual and other claims.

LST

Under the LST, collateral may be goods or movable things of any nature. The collateral may be in existence or may arise in the future and may be located anywhere, within or outside Cambodia. The LST classifies movable collateral into various categories but generally, it can be divided into the following two broad categories:

• Tangible collateral
• Intangible collateral

Tangible collateral consists of "goods," defined as all things that are movable when a security interest attaches, and this broad classification can be further subdivided into five specific categories:

• Consumer goods
• Inventory
• Farm products
• Equipment
• Fixtures

Intangible collateral may consist of the following:

• Secured sale contracts, defined as records that create a monetary obligation and a security interest in or a lease of goods
• Documents of title or receipt, e.g., bills of lading, dock warrants and warehouse receipts
• Instruments, including negotiable instruments, share certificates or any other instrument in writing that evidence a right to the payment of money, is not itself a security agreement or lease and is of a type that is, in the ordinary course of business, transferred by delivery with any necessary endorsement or assignment
• Accounts, which are defined as any right to payment for goods sold or leased or for services rendered that are not evidenced by an instrument or secured sales contract
• Other intangibles, including any movable thing or right other than goods, accounts, secured sales contracts, documents, instruments and money

It may be difficult or impossible to grant effective and perfected security over any class of asset that is not in the above classifications, or security over it may be of limited effect.

No.

Types of security interest

As noted above, security interests in Cambodia can be created under either the Civil Code or the LST.

Under the Civil Code, there are five types of real security rights, as follows:

• Rights of retention, where a person possessing a thing belonging to another has a claim arising in relation to that thing and may retain the thing until the claim is satisfied.
• Statutory liens, where a creditor is granted a preferential right to secure payment, either from a specified property or from the assets of the debtor in general, in preference to the claims of other creditors.
• Pledge over movable property, immovable property or contractual and other claims.
• Hypothecation over ownership rights, perpetual leases and usufruct of immovable property.
• Transfer as security, where a debtor transfers ownership of a specified movable item to the creditor for the purposes of securing an obligation.

Security may be taken under the LST in respect of any transaction where its effect is to secure an obligation with collateral, including by way of pledge, transfer of title, consignment or assignment. The law applies to these transactions regardless of the form or terminology used in the agreement and regardless of whether the ownership right is held by the secured party or the debtor.

Perfection of security interests

No mandatory form, notarization or registration is required for the security agreement to be effective between the parties. However, to be effective against third parties (i.e., to perfect the security), the formalities set out below apply.

Under the Civil Code

Pledge of movable property: 

• Continuous possession of the pledged object is required.

Pledge of immovable property:

• Continuous possession of the pledged object, and notarization and registration of the pledge agreement in the land registry are required.

Pledge of rights and claims:

• The third-party obligor must be given notice or provide an acknowledgment. Further, to assert against a third party other than the obligor, this notice or acknowledgment must be in an instrument bearing a fixed date.

Hypothecation: 

• Notarization and registration of the hypothec agreement in the land registry are required.
• If the hypothec agreement is made in any language other than Khmer, a Khmer translation is required for the purpose of registration.

Transfer as security: 

• Possession of the object transferred is required.

Under the LST

Three means of perfection are available under the LST, as set out below.

Filing: Filing a notice in relation to a secured transaction at a filing office is the most common way to perfect a security interest. In general, by filing a notice, a secured party has all the rights of the holder of a perfected security interest for as long as the notice is effective.

Possession: Possession of the collateral by the secured party is another means of perfecting a security interest if the collateral comprises goods, instruments, documents, certificated securities or secured sales contracts.

Automatic perfection on attachment: A security interest in consumer goods is automatically perfected when it attaches to the consumer goods (i.e., goods used primarily for personal, family or household purposes) without the need for filing a notice or possession by the secured party. When a security interest is created, it becomes enforceable between the debtor and the creditor, and it is said to have "attached."

In relation to security documents, see the answer to "Perfection of security interests" in question 11 of this section. 

In relation to guarantees, subordination or intercreditor documents, there are no registration, translation or notarization requirements.

Registration and notarization fees payable for perfecting a security interest under the Civil Code vary from case to case, while the fee for filing a notice of a secured interest under the LST is KHR 40,000 (approximately USD 10) per filing.

No, except as noted in the answer to question 12 of this section.