subject: Business Organisation In Thailand [print this page] Business Organisation In Thailand Business Organisation In Thailand
Forms of Business OrganisationThe principal forms of business organisation available to foreigners in Thailand are:
Private Limited Companies;
Public Limited Companies;Branches of Foreign Corporations;Representative Offices; andJoint Ventures.Private Limited CompanyA Private Limited company may be wholly owned by foreigners, except those in businesses reserved for Thai nationals under the Foreign Business Act, in which case aliens are generally allowed up to 49% participation. The liability of shareholders is limited to the amount of their shares remaining unpaid.
A private Limited company is managed by a Board of Directors in accordance with the Civil and Commercial code and its Articles of Association, under the control of the shareholders. Subject to the applicable laws and regulations, Directors may be alien.
The following are the principal requirements for the formation of a Thai Private Limited company:
Application must be made to the Registrar of Partnerships and Companies for approval of the name.
Seven or more promoters, each subscribing to at least one share in the proposed company must sign a Memorandum of Association, which must be submitted to the Registrar together with other documents in the prescribed form. The fee for registration of the Memorandum of Association is 50 Baht per 100,000 Baht of share capital with 500 Baht set as the minimum fee and 25,000 Baht set as the maximum fee.
Although there is no established minimum level of capital, the company's capital must be sufficient to accomplish its objectives.
All shares must be subscribed for and at least 25% of the subscribed shares must be paid up. Both ordinary and preferred shares may be issued. As soon as all the shares have been subscribed for, the promoters call a statutory meeting for the purposes of adopting the Articles of Association, electing a Board of Directors and appointing an auditor.
After the statutory meeting is held, the promoters hand over the conduct of business to the directors, who must apply for registration of the company within three months. The fee for registration of the company is 500 Baht per 100,000 Baht of capital with 5,000 Baht set as the minimum fee and 250,000 Baht set as the maximum fee. A certificate of registration is normally issued following payment of the fee and the company may then commence business operations.
Public Limited CompanyA Public Limited company is a company established under the Public Companies Act B.E. 2535 (1992). A Public Limited company must have fifteen or more shareholders whose liability, similar to Private Limited companies, is limited to no more than the unpaid amount (if any) of the par value of the shares.
The procedures for incorporating a public limited company are similar to that for a private limited company, although there are some significant differences, as follows:
Private Limited Company
Public Limited Company
There must be at least 7 persons as promoters
There must be at least 15 persons as promoters,
and the total number of subscribed shares paid up
in money shall not be less than 5% of the
registered capital
At least 1 director required
At least 5 directors required and majority of whom
must reside in Thailand
Public subscription of shares and debentures by
prospectus are not allowed
Public subscription of shares and debentures by
Prospectus are allowed
At least 25% of each share must be paid up
Each share must be fully paid up
Minimum of 7 shareholders are required at all
times
There must be at least 15 shareholders
Branch of a Foreign CorporationA company incorporated under foreign laws may establish a branch office to undertake business in Thailand, subject to the provisions of the Foreign Business Act.
To establish a branch of a foreign company, an application must be submitted to the Foreign Business Committee, which normally takes between four to six weeks to process upon completion and submission of the required documents.
The establishment of a branch normally requires the support of a Government Ministry/Agency or of a major organisation engaged in a particular activity.
The following documents, notarised and certified by a Notary Public or the Royal Thai Consulate/Embassy in the country in which the Head Office is located are required for the registration of a branch:
Articles of Incorporation / Memorandum of AssociationBy laws / Articles of AssociationAffidavit of the Company Officer stating the name of corporation, registration number, date of registration, jurisdiction of the registered office, authorised capital and share structure, amount of paid up capital and the details of each director and shareholder.Power of Attorney for the branch manager to establish a branch office in Thailand, to register the branch office with Thai government authorities and to have normal operating powers.A copy of a Board of Directors resolution and other related documents. The Government authorities are empowered to request supplementary information about the company at their discretion.A Branch office is treated as the same legal entity as its Head Office. A branch intending to engage in any business specified in the Foreign Business Act must submit an application to the Foreign Business Committee of the Department of Business Development and must obtain a foreign business license prior to commencing operation.
The amount of the required working capital for a Branch is dependent on a calculation of the annualized amount of estimated Branch expenses over a 3 years period, provided that the working capital amount shall not be less than 3,000,000 baht, to be brought in from abroad as follows:
By the end of the first 3 months
25%
st
By the end of the 1 year
50%
nd
By the end of the 2 year
75%
rd
By the end of the 3 year
100%
Representative OfficeA foreign entity may also establish a representative office in Thailand to engage in non-revenue earning activities only. These activities are restricted to:
Searching for local sources of goods or services for its head office;Inspecting and controlling the quality and quantity of goods procured by its head office;Providing advice in various fields relating to products directly sold by its head office to local distributors or consumers;Disseminating information about new products and services of its head office; andReporting to its head office on local business developments and activities.The procedures for establishment of a representative office are similar to those of a branch office.Joint VentureA Joint Venture, in accordance with general practice, is a group of persons (between juristic persons jointly with natural and/or juristic persons) entering into an agreement in order to carry on a business together. It is not recognised as a legal entity under the Civil and Commercial code, but the income derived by a joint venture is subject to corporate income tax under the Revenue Code, which regards it as a single tax entity.
It is generally required for a foreign investor to have Thai participation in joint ventures. It is not possible to engage in certain types of business activities unless there is such participation.
Dissolution of Business OrganisationsWith the exception of a Representative Office, the dissolution of a business organisation is a lengthy procedure in Thailand. The dissolution is required to follow the procedures of the Civil and Commercial Code and the Revenue Department must provide a tax clearance certificate before final dissolution by the Company's Registrar is approved.
