Formation of Local Company in Thailand

Formation of Local Company in Thailand

There are a number of considerations for foreigners who wish to set up a company:

  • The company name must be reserved before registration can start. The name must not be identical or closely resemble the name of a already registered company or partnership.
  • A company must have a registered address where it maintains an office.
  • The company must have a minimum of 7 promoters (shareholders). These 7 must be persons, not juristic persons.
  • When registering the company a list of objectives will also be submitted. It is standard practise to submit an extensive list of objectives covering “everything”.
  • The company can be wholly-owned by foreigners unless the objectives of the company includes any activity restricted for foreigners. In that case an alien business license must be obtained. If the company is to own land, however, the foreign ownership is limited to 49%.
  • The minimum capital requirement for foreign majority-owned companies is 2 or 3 milliion baht, depending on the type of business. For Thai majority-owned companies there is no minimal capital requirement. The capital most be divided into shares of an equal value not less than 5 baht. The minimum paid-up amount on the share capital is 25%, however this is generally not enforced. The Alien Business Law requires 2 million baht per work permit. Sometimes it is also required that this capital should be fully paid-up.
  • The Articles of Association specifies how the company’s internal affairs, such as share transfers, approvals, and who is authorized to sign on behalf of the company.
  • At least one director must be appointed.
  • Within 60 days upon registering the company with the Ministry of Commerce it must also be registered for tax. If the annual gross income is in excess of 1.2 million baht the company is also required to register for VAT.
  • The applicable government fee is about 12.000 baht for 2 million in capital. The company registration process takes around 14 days.

There are two types of limited companies, i.e. private or closely held companies and public companies; the first is governed by the Civil and Commercial Code, the second by the Public Company Act.

Private Limited Companies registered in Thailand have basic characteristics similar to those of western corporations. A private limited company is formed through a process which leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws) as its constitutive documents.

Shareholders enjoy limited liability, i.e. limited to the remaining unpaid amount, if any, of the par values of their shares. The liability of the directors, however, may be unlimited if so provided in the company’s Memorandum of Association or the Articles of Incorporation. The limited company is managed by a Board of Directors according to the company’s charter and by-laws.

All shares must be subscribed to, and at least 25 percent of the subscribed shares must be paid up. Both common and preferred shares of stock may be issued, but all shares must have voting rights. Thai law prohibits the issuance of shares with no par value. It also stipulates that only shares with a par value of 5 Baht or above may be issued. Treasury shares are prohibited.

A minimum of seven shareholders is required at all times. Aliens may wholly own a private limited company. However, in those activities reserved for Thai nationals, the aliens’ participation is generally allowed only up to a maximum of 49 percent.

The registration fee for a private limited company is 5,500 Baht per 1,000,000 Baht of registered capital.

Public Limited Companies registered in Thailand may, subject to compliance with the prospectus, approval, and other requirements, offer shares debentures and warrants to the public and may apply to have their securities listed on the Stock Exchange of Thailand (SET).

A minimum of 15 promoters is required for the formation and registration of the Memorandum of Association of a public limited company, and the promoters must hold their shares for a minimum of two years before they can be transferred. The Board of Directors of a public limited company must have a minimum of five members, at least half of whom are Thai nationals. Shares must have a par value of at least 5 Baht each and be fully paid up. Restrictions on share transfers are unlawful, except those protecting the rights and benefits of the company allowed by law and those maintaining a Thai/foreigner shareholder ratio. Debentures may only be issued with the approval of three quarters of the voting shareholders.

The registration fee is 2,000 Baht per 1,000,000 Baht of registered capital. Corporate Name Reservation

The name to be reserved must not be the same or close to that of other companies. Certain names are not allowed and therefore the name reservation guidelines of the Commercial Registration Department at the Ministry of Commerce should be observed. After approval the name will be reserved for 30 days. No extension is allowed.

File a Memorandum of Association

A Memorandum of Association, to be filed with the Commercial Registration Department, must include the name of the company that has been successfully reserved, the province where the company will be located, its business objectives, the capital to be registered, and the names of the seven promoters. The capital information must include the number of shares and their par value. At the formation step, the authorized capital, although partly paid, must all be issued. Although there are no minimum capital requirements, the amount of the capital should be respectable enough and adequate for the intended business operation.

The Memorandum registration fee is 50 Baht per 100,000 Baht of registered capital. The minimum fee is 500 Baht, the maximum 25,000 Baht.

Convene a Statutory Meeting

Once the share structure has been defined, a statutory meeting is called, during which the articles of incorporation and by-laws are approved, the Board of Directors is elected and an auditor appointed. A minimum of 25 percent of the par value of each subscribed share must be paid.

Registration

Within three months of the date of the Statutory Meeting, the directors must submit the application to establish the company. Company registration fees are 500 Baht per 100,000 Baht of registered capital. The minimum fee is 5,000 Baht; the maximum is 250,000 Baht.

Tax Registration Businesses liable for income tax must obtain a tax I.D. card and number for the company from the Revenue Department within 60 days of incorporation or start of operations. Business operators earning more than 1,200,000 Baht per annum must register for VAT with in 30 days of the date they reach 1,200,000 Baht in sales.