Thailand - Company Incorporation
Incorporation usually takes between 3-4 weeks. Please contact us for a quote.
From our experience with incorporating companies in Thailand it is easier for you to visit Thailand in order to obtain the relevant work permits, activate the company bank account and source the necessary nominee officers, however if you are unable to do this then we can assist.
The incorporation process does not require the physical presence of the shareholders or directors in Thailand, as long at the relevant signatures are certified by a Thai Consulate or Embassy officials outside Thailand.
A popular way to complete a property acquisition in Thailand is to incorporate a Thai Limited Company, which owns the property.
While it is possible to register a company with majority foreign ownership in Thailand, this company will be governed by the rules of the Alien Business Law. Alternatively, in order to avoid the various restrictions imposed on the operations of an alien, or majority foreign owned company in Thailand, a company which is majority Thai owned could still be be established under present legislation. In this structure, a non-Thai may own up to 49% of the company, while the remaining 51% will be owned by one, or more individuals.
At the same time it is understood that the control of the company will be exercised by the non-Thai shareholders through the issue of shares with increased voting rights to this group. This structure will be governed by the company's Articles of Association, and we will work closely with you to draft a version that will address your specific requirements in this respect.
Our fee is for the drafting, preparation, and filing of all articles, resolutions, forms and supporting documents necessary for the formation and incorporation of a Thai company with limited liability along the structure described above, including the registration of the company with the revenue department and we can then assist with the establishment of a Corporate bank account.
Reservation of the Name
Firstly the proposed name is required to be reserved for use as the Company's name with the Ministry of Commerce, in order to ensure that the proposed Company name is not identical or similar to the name of any other registered Company.
Filing the Memorandum of Association of the Company
Once the Company's name has been approved by the registrar, during the validly period of 30 days, the promoters shall apply for the registration of the Memorandum of Association.
The Memorandum of Association must contain the following information:
- Name and the location of the Company.
- The objectives of the Company.
- Registered Capital, number of securities and par value.
- Name, address, occupation, nationality, age, and signature of each promoter and the number of shares subscribed to by each of the shareholders.
There is no minimum capital requirement.
Registration of Incorporation of the Company
Following the registration of the Memorandum of Association all shares must be subscribed to by shareholders and all promoters must hold at least 1 share. At least 25 % of the value of each share is required to by law to be paid up.
The promoters shall then hold a general meeting of all subscribers, which is called the Statutory Meeting.
The promoters are required to send to every subscriber a notice of the Statutory Meeting together with a statutory report at least 7 days before prior to the meeting-taking place. The notice of the Statutory Meeting shall contain the agenda of all business to be transacted. Normally the business to be transacted at the Statutory Meeting is as follows:
- Adoption of the Articles of Association of the Company.
- Ratification of the promoter's actions and expenses.
- Consideration of the amount to be paid to the promoters.
- Appointment of the directors and authorised directors.
- Establishment of preferred Shares.
- Consideration of the number of shares to be allotted as fully or partially paid up other than money and the initial paid up capital for the shares payable in money.
- Appointment of Auditors and the determination of their consideration.
Following the Statutory Meeting, the directors shall run the business of the Company. The directors shall call for the payment for the shares to be made in money in the amount determined at the Statutory Meeting.
After the payment for the shares have been made, the authorised director(s) must apply for the registration of the Articles of Association of the Company. In practice the Articles of Association can be submitted 10 days after the date of registration of the Memorandum of Association. It will normally take at least 3 - 5 days for the Registrar to consider the Articles of Association and the list of shareholders. (The promoters are required to hold at least one share each).
The completion of the incorporation of a Limited Company takes approximately 3 - 4 weeks.
The proposed company name is required to be reserved with the Ministry of Commerce. It takes one day to obtain the result of the name reservation and is valid for 30 days.
Thai law requires at least 7 people to be the promoters of the Company and in order to be considered a Thailand Limited Company at least 4 of the promoters must be Thai nationals.
Objectives of the Company
As the Company will have Thai nationality, the Company is therefore free to set its own objectives, which should not be contrary to public order or good morals.
In fact the Ministry of Commerce provides a standard form of objectives of the Company containing 40 clauses including to owning a land and house.
The shares of the Company must be or par value and the amount of a share may not be less than 5 baht. The shares of the company can be issued only as ordinary or preferred shares. The preferred shares have special rights attached to them as prescribed in the Articles of Association. Normally, to protect the foreign shareholder, two types of share holdings are suggested. The Thai shareholders hold preferred shares with limited privileges (i.e. less voting right, limited dividend, or limited right to asset surplus) whilst the foreign shareholders hold ordinary shares with better privileges.
Shares are transferable without the consent of the Company unless otherwise provided by the Articles of Association of the Company. Both types of shares are transferred by delivery of a certificate. A transfer of shares entered in the name certified must be in writing and executed both by the transferor and the transferee, whose signatures shall be certified by at least one witness. The transferor shall be deemed to remain the holder of the shares until the particulars of the transferee and the shares transferred are recorded in the register of shareholders.
No minimum capital is prescribed, however in order for a company to qualify for the application of a work permit for a foreign national, the minimum capital required by the department issuing work permits would be 2 Million THB for each application.
A Thai Company is a company in which Thai shareholders hold more than half of all issues shares, this is 51%. Foreigners therefore can hold only 49%. A company must have at least 7 shareholders whose names addresses and shareholdings are filed in public records at the Ministry of Commerce. Shareholders can be individuals or corporations of any nationality, and residence. The rights of shareholders are:
- To receive dividends.
- To attend and vote at any general Shareholder's Meeting.
- To request the summoning of an Extraordinary Shareholders' Meeting.
- To control the transactions of the company.
Under the Land Code and the Land Department Notifications, a Company in which more then 39 % of the shares are held by foreigners is required to be investigated by the Land officials regarding whether the Thai shareholders are nominees holding share on behalf of foreigners. This investigation can take 2 - 3 weeks if not longer.
In order to minimize any extra time or risk of investigation most law firms will suggest that in the first stage the buyer should structure the shareholding ration at 39% foreign and 61% Thai to avoid time being consumed by the government investing company shareholding structure. After the completion of the registration of the transfer of ownership of the land, the new company can be restructured so that the foreign holding is at the maximum percentage available.
The registered capital should not be less than the purchase price of the land. This is because the Land Department official has sole discretion regarding whether to investigate the Company if they consider that the Company has been established with Thai shareholders to hold the land on behalf of the foreigners.
Alternatively, it is suggested that the buyer sets the registered capital at nominal amount of 1 million baht. The difference between the purchase price and the registered capital can be made in the form of a loan to the company from a foreign director. In this case, evidence can be shown to the Land Department that the Company has a source of money to purchase the land. In additional if in the future the Company wishes to remit funds outside Thailand they may be able to do so under the premise that those funds are for payment of a loan from a foreign director.
There is no requirement for a local Thai director, and there are no restrictions on the number and nationality of the directors.
Under Thai law, there is no requirement of a minimum number of directors. It is therefore allowable to have all directors as foreigners. Please note that a director need not be a shareholder.
Under Thai law, it is required that authorised Directors shall be appointed from any of the directors of the Company, to sign any document for an on behalf of the Company. There are no restrictions regarding the number and nationality of the authorised directors.
The limited company will need a registered office address in Thailand. Establishing a registered business address must occur before the company can apply for a tax registration number, which is required in order to apply for a work permit, or open a bank account.
Books and Accounts
The Company books and accounts must be kept at the registered office and are to be a true and complete account of the sums received and expended by the Company. The accounts must show the assets and liabilities of the Company and its profit and loss account. The balance sheet and the profit and loss account has to be examined by the Company's auditor and submitted to the general meeting for consideration. Accounts must be audited once a year and filed with the Revenue Department and Commercial Registration.
The Foreign Business Act of 1999 prohibits foreign majority owned companies from pursuing certain activities in Thailand unless they first obtain an Alien Business License. This licence is required for all activities except manufacturing, sourcing Thai products for export, and hotel management services.
Minority Shareholders Protections in a Thai Company
Foreign investment in a Thai Company is limited to 49% while Thai nationals must hold the remaining 51 %. This provides for ownership of the majority shares by Thais, however, there are a number of means available to provide minority shareholders with a degree of management control of a company. Thus for example, minority shareholders may be given the sole right to elect a percentage of the Board of Directors, or the right to have more voting rights then the majority shareholders (i.e. a foreign shareholder who holds 49% ordinary shares has 1 vote per 1 share whilst a Thai shareholder who hold 51 % holds preferred shares and has 1 vote per 10 shares, or by including a stipulation that all shareholders resolutions require a minimum vote of 80% to be passed which ensures that minority approval is required. Thus, it is possible to give minority equity investors a degree of control over the activities of the company.
All provisions regarding the protection of the minority shareholders will be stipulated in the Company's Articles of Association, to be registered with the Ministry of Commerce.