Setting up a Thai Private Company Limited

Information provided by Sunbelt Asia’s legal advisors, February 2011

Setting up a Thai Limited Company in order to do business in Thailand is your safest way to form a company and, if needed, obtain a work permit for your active company. Legal advice is usually necessary for this rather complicated procedure.

Setting up a shell company with nominee shareholders in order to buy land is illegal. Nominee shareholders are Thai nationals who agree to hold shares on behalf of the true owner(s) of the shares and are shareholders in name only. Under this arrangement, typically they are given shares of a business so that they own 51% or more of that business, but the true foreign owner retains all voting rights, rights to receive dividends of the shares. The Foreign Business Act prohibits Thai nationals from acting as "nominee" shareholders with the penalties ranging from fines of 100,000 baht to one million baht and terms of imprisonment of up to three years or both.

You must have 3 shareholders to form a Limited company. You must also maintain 3 shareholders at all times.

A company must be registered with a valid corporate address. In most cases it is not possible to register in a condominium or home; it must be a commercial address. Virtual offices are available for this purpose.

If your company will require work permits, you must have registered the company in an actual office/commercial facility with a designated working area. Many companies can provide you with an Executive Desk for this purpose. Sunbelt Asia offers competitive rates on Executive Desks.

All Thai limited companies will be investigated if the foreigner invests 40% or higher but is not a foreign company or a business that has the foreigner as the authorized director who can act on behalf of the company. If the investment was made in the form of money, the Thai shareholders shall submit the proof showing the source of the invested money from the Thai shareholder.

Depending on your Thai shareholder, some shareholders will allow the foreigner to maintain complete control over the company by using a preferred share structure. The implementation of this structure changes the voting rights of the majority Thai shareholding to 10 shares = 1 vote. The foreign owned shares would remain 1 share = 1 vote thereby giving the foreigner a voting majority, and full control over all aspects of the company and investment.

In order to set up a limited company in Thailand, the following procedures should be followed:

Reservation of your Corporate Name

The name to be reserved must not be the same or similar to the name of any other company. There are names that are not allowed and the name reservation guidelines of the Commercial Registration Department in the Ministry of Commerce need to be observed. The approved corporate name is valid for 30 days. No extension is allowed.

File a Memorandum of Association

A Memorandum of Association must be filed with the Commercial Registration Department. This has to include the name of the company that has been successfully reserved, its business objectives, the capital to be registered, the province where the company will be located, and the names of the three promoters. The capital information must include the number of shares and the value per share. At the time of formation the authorized capital, although partially paid, must all be issued. Although there are no minimum capital requirements, the amount of the capital should be a respectable amount and adequate for the business operation to function healthily. The Memorandum registration fee is 50 baht for every 100,000 baht of registered capital. The minimum fee is 500 baht, and the maximum is 25,000 baht.

Convene a Statutory Meeting

Once the share structure has been decided a statutory meeting needs to be called, during which the bylaws and articles of incorporation are approved, the Board of Directors are nominated and an auditor selected. A minimum of 25% of the value of each subscribed share must be paid.

Registration

Within three months of the date of the Statutory Meeting, the directors must submit their application to establish the company.

Tax Registration

Within 60 days of incorporation, or within 60 days of the start of operations, businesses liable for income tax must obtain a tax identity card and number for the company from the Revenue Department. Business operators earning more than 1,800,000 baht annually must register for VAT within 30 days of the date they reach that figure in sales.

Reporting requirements

Companies must keep accurate books and follow the accounting procedures specified in the Accounts Act, the Civil and Commercial Code and the Revenue Code. Documents may be prepared in any language, provided that a Thai translation is attached. All accounting entries should be typewritten, printed or written in ink. Specifically, Section 1206 of the Civil and Commercial Code provides rules on the accounts that should be maintained as follows: "The directors must cause true accounts to be kept: Of the sums received and expended by the company and of the matters in respect of which each receipt or expenditure takes place. Of the assets and liabilities of the company."

Making your dreams of being an entrepreneur a reality
26th Floor Fortune Town
CP Tower 2, 1 Ratchadaphisek Rd
Din Daeng, Bangkok 10400
(Phra Ram 9 MRT Station Exit 1)

Tel: 02-642-0213
Fax: 02-641-1995
Website: www.sunbeltlegaladvisors.com

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