Incorporation of a Thai Private Limited Company under the Laws of the Kingdom of Thailand
Laws governing formation and incorporation of types of Thai business entity can be found in the Civil and Commercial Code of Thailand, title 12 ‘partnerships and companies’. A private limited company is formed through a process which leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws), as its constitutive documents.
The first step is the reservation of a company name. Usually 3 names are given, ranked by preference, and approval of the name will usually take 1-3 days depending on the government officer’s discretion. Certain names associated with the royal family, names of ministries and other governmental units, names with Thailand, names close to that of other companies, names against public moral, names that are misleading, are not allowed.
The promoters are responsible for registering the incorporation of the company with the Department of Business Development, Ministry of Commerce (Registrar of companies). The promoters must be individual persons (not juristic entities). There must be a minimum of 3 promoters for a private limited company. The promoters can be foreigners and/or Thai nationals. However, each promoter is required to be among the company’s initial shareholders immediately after the company’s registration and is required to hold a minimum of one share upon the company’s registration. They are generally free to transfer those shares to existing shareholders or third parties, thereafter, if they wish.
The Memorandum of Association of the company has to be filed with the Department of Business Development, Ministry of Commerce (Registrar of companies) and must include the name of the company that has been successfully reserved, the physical address where the company will be located in Thailand, its business objectives, the capital to be registered, and the names of the promoters.
There minimum capital requirements for a limited company in Thailand is THB 1 Million. In general, the registered amount of the capital should be respectable enough and adequate for the intended business operation. All shares must be subscribed to, and at least 25% of the subscribed shares must be paid up. The par value of each share must not be less than THB 5. If the company intends to employ foreigners, the minimum registered capital requirements for work permit may also be applied. The company must have a registered capital of not less than THB 2 Million with fully paid-up for each 1 foreigner, or THB 4 Million share capital for 2 foreigners, or THB 6 Million for 3 foreigners.
A company is required to have at least 3 shareholders, whether person or juristic entity. Thai companies with foreign participation and control in Thailand are often set up as majority Thai owned companies to be classified as Thai companies and not to be restricted by foreign ownership or foreign business restrictions. Foreigner can be held the shares in a limited company not more than 49%, otherwise it is considered as a foreigner or foreign company which is required to comply with the Thailand Foreign Business Act that imposes restrictions on foreigners engaging in business activities in Thailand. Pursuant to Thai law, a foreign majority owned company is restricted from engaging in any business activities in Thailand, unless prior approval is granted from the Ministry of Commerce and obtain a foreign business license prior to commencing operations.
A company shall be managed by at least one director under the control of the General Meeting of shareholders. There are currently no general restrictions on the nationality of directors who control a Thai private limited company in Thailand. Therefore a foreigner can be a sole director of the company.
A company must prepare the balance sheet and financial statement, which is audited by at least 1 auditor, at least once a year and submit to the Ministry of Commerce, even the company has not operated or temporary ceased, otherwise, the company shall be liable to a fine to not more than Fifty Thousand Baht which shall be deemed as a criminal action. In addition, if a company fails to submit the balance sheet to the Ministry of Commerce for 3 consecutive years, the registrar may has its reasonable ground to believe that the said company has no longer carried on any business or no business has been operated, therefore, the registrar may remove or strike off the said company from the register which the status of the said company shall come to an end.
I hope that the above information will make you understand with the fundamental of Thailand corporate law. It will take approximately 3-4 weeks to complete the incorporation of a new Thai private limited company.
Should you have any questions regarding the above, please do not hesitate to contact us.
Laws governing formation and incorporation of types of Thai business entity can be found in the Civil and Commercial Code of Thailand, title 12 'partnerships and companies'.