The steps required to establish a private limited company in Thailand are:
Reservation of Name
The first step involved in establishing a Thai company is to file via online an application to register the company’s proposed name(s) with the Registrar (the Registrar) of the Partnerships and Companies Registration Office, Department of Business Development (DBD), Ministry of Commerce. Within one working day the Registrar will advise if the proposed name is available (i.e., does not conflict with an existing company name or identical to any prohibited name). If the name is approved, the applicant will have 30 days from the date of approval to file the memorandum of association (the “Memorandum of Association”) of the company.
Filing of Memorandum of Association
The Memorandum of Association is a relatively simple document, which must contain the following information:
- Name of the company;
- Location of the registered office of the company (at this stage only the changwat (i.e., province) need be specified);
- The list of business objects of the company;
- A declaration that the liability of the shareholders of the company shall be limited;
- The total amount of registered share capital and the number of shares and the par value thereof (which must be at least five Baht per share); and
- The names, addresses, occupations and signatures of three (3) promoters, and the number of shares subscribed by each of them.
A minimum of three promoters is required, and each promoter must subscribe to at least one share in the company. The signatures of the promoters on the Memorandum of Association must be certified by two witnesses.
A private limited company must then continue to have at least three shareholders at all times, otherwise it risks a court order for dissolution. The shareholders do not have to be residents of Thailand.
The Registrar will examine the Memorandum of Association, particularly the list of business objects. Unless the DBD’s standard form of list of business objectives are submitted, will take approximately three business days for the Registrar to provide comments or to approve the filing. A registration fee of Baht fifty 50 per Baht per 100,000 Baht of registered capital is payable in connection with the filing of the Memorandum of Association, subject to a minimum fee of 500 Baht and a maximum fee of 25,000 Baht.
There is no minimum capitalization requirement of a majority Thai owned company, but the Registrar has the discretion to raise objections if it appears that the registered capital is too low for purposes of conducting the proposed business.
However, if one-half (50%) or more of the company’s shares are held by aliens and if the company is engaged in an activity which requires a license under the Foreign Business Operations Act B.E. 2542 (the “FBA”), the Ministerial Regulations issued under the FBA require, inter alia, that any alien who has been licensed under the FBA must have a minimum capital of:
(i) not less than 25% of the yearly average of the estimated expenses (which include the acquisition of the company’s permanent assets) for each business of the alien for a period of three years, or
(ii) Baht 3 million for each business for which a license is required under the FBA,
whichever of (i) or (ii) is more.
This means that for each type of business activity listed in the FBA, the company must have minimum capital for such business activity. For example, if a company were to engage in, say, wholesaling, retailing and servicing, the company would require minimum capital of not less than 25% of the yearly average of the estimated expenses for each of said three activities, which, in effect, are equivalent to 25% of the yearly average of the total estimated expenses of the company’s operations for those activities, but not less, in any event, than Baht nine million, being Baht three million for each of said three activities. This would presumably require the company to prepare three different sets of estimated expenses, one for each of said activities. If that same company were also to engage in, say, a manufacturing activity for which a license was not required, then the yearly average of the estimated expenses would only be the three activities for which a license is required, but in any event not less than Baht 9 million.
If the company will employ expatriates, to obtain work permits for those expatriates, the registered and paid-in capital is two million Baht per expatriate, unless that expatriate is married to a Thai, in which case the registered and paid-in capital is one million Baht. This is a complex area where the rules and practices change frequently, for more information on work permits, click here.
Holding of Statutory Meeting
After the Registrar has accepted the registration of the company’s Memorandum of Association, the promoters must hold a statutory meeting. Prior to holding the statutory meeting, all of the shares of the company three must be a subscription to all of the shares. The shares may not be issued at a price lower than the par value per share. The first payment on the shares must be at least 25% of their par value. It is possible to issue the shares at a premium if so provided in the Memorandum of Association (this is usually included as one of the business objects).
As early as seven days after the Memorandum of Association has been approved by the Registrar (seven days’ notice of the statutory meeting is required), the statutory meeting of the share subscribers may be held.
At the statutory meeting, the following business must be transacted:
- The adoption of the Articles of Association of the Company;
- The ratification of any contracts entered into and any expenses incurred by the promoters in organizing the company;
- The fixing of the amount, if any, to be paid to the promoters for their services in organizing the company;
- The fixing of the number of preference shares, if any, to be issued, and the nature and extent of the preferential rights of such shares;
- The fixing of the number of ordinary shares or preference shares to be allotted as fully or partly paid-up otherwise than in money, if any, and the amount up to which they shall be considered as paid-up;
- The appointment of the first directors of the company and designating the directors authorized (the “authorized directors(s)”) to bind the company; and
- The appointment of the first auditors of the company.
A private limited companies controlled by foreigners will often want two directors whom reside outside of Thailand. Although work permit requirements have been relaxed so that foreigners directors do not need a work permit, there are practical advantages to having the ability to hold board meetings outside of Thailand.
Further, it is often convenient to have at least one director with signature authority to be resident in Thailand for purposes for filings with government authorities. Depending upon commercial control and compliance concerns, it is also useful to grant the local director with at least some authority to sign contracts and bind the company on other commercial matters. A trusted local lawyer can often serve this purpose. (Analytics can provide this service for dedicated clients).
The authorized director(s) must be designated and registered with the Department of Business Development. The authorized director(s), vis-a-vis third persons, are empowered to effect juristic acts on behalf of the company and which are legally binding on the company. The authorized director(s) can be designated in various ways, such as (i) the signature of any one director, (ii) the joint signatures of any two director(s), (iii) the joint signatures of Mr. A and Mr. B on contracts for more than 100,000 Baht or, (iv) the signature of Mr. A or Mr. B together with the signature of Mr. C or Mr. D, altogether two signatures, and, in each case, with or without the company seal, as desired. Multinational companies need to strike a balance between (a) the convenience of of having someone local authorized to bind the company and (b) compliance concerns.
After the statutory meeting has been held, the promoters must hand over the business of the company to the new directors. Promptly after the holding of the statutory meeting, the directors must procure that the promoters and share subscribers to pay the amount due on each share (not less than 25% as stated above). After the promoters and share subscribers have made payment on their shares, the directors must register the incorporation of the company within three months after the date of the statutory meeting (otherwise the company is not formed, and all the money received from the promoters and subscribers must be returned without deduction). At such time, a second registration fee is payable, in an amount equal to 500 Baht per 100,000 Baht of registered capital, subject to a minimum of 5,000 Baht and a maximum of 250,000 Baht. Upon payment of the registration fee, the company is officially incorporated as a private limited company and may commence doing business. A certificate of registration will generally be issued within the same date of payment of the registration fee.
If, for any reason, the registration of incorporation of the company cannot be completed within three months after the date of the statutory meeting, the subscribers may consent to the holding of another statutory meeting. The matters to be transacted at any such reconvened statutory meeting will be the same as those transacted at the original statutory meeting. The new directors appointed at the reconvened statutory meeting will then have another three months in which to complete the registration of incorporation of the company.
The required period for this incorporation processes may be shortened under the current law and registration regulations by having the registration for memorandum of association and incorporation can be completed on the same day. In such case, the notice of the statutory meeting can be waived. But all share subscribers must attend the statutory meeting and make payment for all subscribed shares on the same date of such registration. This can present obvious practical difficulties, particularly with foreign shareholders.
Registration of the Company
To register the incorporation of the company, the directors must furnish to the Registrar various standard forms and other information including copies of the Articles of Association and the minutes of the statutory meeting, all in the Thai language. The Registrar will examine the documents filed and, if they are in proper order, should approve the registration of incorporation of the company. When this occurs, a second registration fee is payable, in an amount equal to 500 Baht per 100,000 Baht of of registered capital, subject to a minimum of Baht five thousand (5,000) and a maximum of 250,000 Baht. Upon payment of the registration fee, the company is officially incorporated as a private limited company and may commence doing business. A certificate of registration will generally be issued within the same date of payment of the registration fee.
Once the registration of incorporation has been completed, the company’s registration number can be used as its taxpayer identification number in dealing with Thai tax authority. If the company will commence business operations shortly after registration of incorporation, it should typically apply for Value Added Tax registration before commencing business operations. A system for meeting the company’s recurring filing obligations should also be established when the company is formed.
Corporate Secretarial Matters
It has been said that while Thailand does not have a monopoly on red tape, it has more than its fair share. Directors of private limited companies reasonably expect those companies to comply with Thai corporate formalities since the authorities will direct their inquiries to local directors if they have questions about corporate formalities. It is therefore only fair that foreign investors take appropriate measures to ensure compliance with corporate formalities and protect local directors if and when any inquiries are made about compliance with corporate formalities.