The most common form of business enterprise in Thailand is a private limited company, which is governed by the Civil and Commercial Code and the regulations of the Commercial Registration Department, the Ministry of Commerce (“MOC”). By holding shares in a company, shareholders are liable for the company to the extent of the par value of the shares they hold. Thus, the following information concerns the establishment of a private limited company.
General Thailand Company Formation Info:
1. How many shareholders do I need – You must have 7 shareholders to form a Limited company. You must also maintain 7 shareholders at all times.
2. Can a foreigner own 100% of the shares – Shares can be owned 100% by foreigners who can be individuals or entities, unless the intended business objectives are reserved for Thai nationals under the Foreign Business Act, which requires the company to apply for an Alien Business License prior to commencement of the business. If a company has one Thai shareholder holding 51% of the shares then this is not a foreign company under Thai law and does not fall under the Foreign Business Act.
3. What is a Nominee Shareholder – Nominee shareholders are Thai nationals who agree to hold shares on behalf of the true owner 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.
4. The Issue of Foreign Control – Depending on your Thai shareholder, some shareholders will allow the foreigners to maintain complete control over their 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 supermajority, and full control over all aspects of the company and investment. Under Thai law only if 50% or more of its shares are held by non-Thai’s (individuals or business entities) is the company considered foreign not if is controlled by a foreigner.
The Incorporation Procedure of a Privately Held Thai Limited Company
General Legal Characteristics:
(1) The capital is divided and represented by shares, each with equal par value (minimum par value of each share must not be less than Baht 5.00);
(2) The liability of each shareholder is limited to the amount, if any, unpaid on share(s) respectively held;
(3) It must be promoted by at least seven (7) natural persons called “promoters,” each of whom must subscribe to at least one (1) share;
(4) After being fully incorporated, the company must have at least seven (7) shareholders at all time, such shareholders may be individual or legal
(5) After being incorporated, the company acquires its own legal personality separate and distinct from the shareholders of whom it is composed;
(6) The company may not own its own share or take them in pledge. Thus, treasury stock is not allowed;
(7) The company is managed by a director or directors elected by general meeting of shareholders; and
(8) The company must be operated within the scope of objectives described in its Memorandum of Association and managed in accordance with its
Articles of Association.
Please note that all Thai limited companies will be investigated if the foreigner invests from 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.
The procedures for the incorporation of a private company can be summarized as follows:
STEP 1: General Agreements on Formation of a Company
This is pre-incorporation stage at which the followings must be identified.
(a) Name of the company;
(b) Major objectives or line of business;
(c) Capital and shares ; (Unlike companies in some jurisdictions where shares representing the entire registered (authorized) capital must be fully issued
at once. Under CCC, payment of shares value of not be less than 25% (twenty five percent) is initially required. The balance may be deferred
and called up at the discretion of the Board of Directors.)
(d) Place of business; and
STEP 2 : Corporate Name Reservation
Under the corporate registration rules, the intended corporate name must not be repetitive with or similar to the existing other corporate names. Thus, a promoter on behalf of others must seek to obtain advance clearance of the intended corporate name(s) with the Company Registrar. Application for such clearance (in other words known as “corporate name reservation”) could be filed with the result to be rendered within 1-2 days. Once one of the intended corporate name has been cleared and reserved, the promoters have thirty (30) days to file the Memorandum of Association; otherwise, such reserved corporate name shall become invalid.
STEP 3 : Preparation and Submission of the Memorandum of Association
A Memorandum of Association incorporating the points mentioned in Step 1 must be prepared, completed and signed by at least seven (7) individual promoters for further submission to the Company Registrar. The Memorandum of Association comes in standard forms. An official fee at the rate of 0.05% (minimum Baht: 500 / maximum Baht : 25,000) of the total registered capital is due and payable to the Company Registrar upon submission of the Memorandum of Association.
STEP 4 : Statutory Meeting
After filing the Memorandum of Association and the total shares to be issued being fully subscribed, the Promoters may call a Statutory Meeting of Shareholders at any time by giving a seven (7) days advance notice.
The following matters are to be resolved at the Statutory Meeting:
(a) Adoption of shareholders list containing information of those subscribed the issued shares;
(b) Ratification of actions committed on behalf of the Company by promoters, if any, and approval of pre-incorporation expenses (such as official
(c) Appointment of first Board of Directors;
(d) Appointment of Auditor;
(e) Adoption of the Articles of Association (“AOA”);
(f) Approval of remuneration to the promoters if promoters are expected to be remunerated; and
(g) Allocation of preference shares or ordinary shares to be paid in kind, if any.
STEP 5 : Incorporation Filing
Incorporation application package, including the Minutes of the Statutory Meeting, the Articles of Association so adopted, list of Directors so appointed, Shareholders List as well as other supportive documents, must be filed with the Company Registrar within three (3) months after the date of Statutory Meeting. Upon submission of these documents in good order, an official fee at the rate of 0.5% of the total registered capital (minimum Baht : 5,000/ maximum Baht : 250,000) is due and payable to the Company Registrar.
STEP 6 : Tax Identification Card and Value Added Tax (“VAT”) License
After completion of the aforesaid incorporation, additionally, Thai Co. needs to apply for the following tax documents in order to start its operation.
1. Application for Tax Identification Card within sixty (60) days after the incorporation.
2. Application for VAT license when Thai Co. shall engage in commercial transactions.
Provided that the aforesaid requested information and documents provided fully, it normally take 4-6 weeks to complete the incorporate of a limited company. This takes into account preparation of application packages, circular time for signing of all promoters, representative promoter and directors. However, if an application package needs to be couriered for signing of respective persons overseas, completion would take longer, as the case may be.
***Please note that Thailand’s rules and regulations are constantly changing and it is vital that you check with the Thai Authorities for updated information. Disclaimer: We do not take any responsibility for the accuracy and correctness of any information provided on Thaivest.com.