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As in most countries in the world, there are 3 kinds of business organizations in Thailand: Sole proprietorships, partnerships, and limited companies private and public (Private Limited Companies are governed by the Civil and Commercial Code while Public Limited Companies are governed by the Public Limited Company Act). Today we will focus on the most popular form of business organization among foreign investors: the private limited company (Private LC).
A private limited company (Private LC) require a minimum of three promoters. This kind of company is formed through a process that leads to the registration of a Memorandum of Association and Articles of Association as its constitutive documents. Then the process to follow is to convene a statutory meeting, register the company, and obtain a company income tax identity card, and also follow some legal accounting procedures specified in the Civil and Commercial code, the Revenue Code and the Accounts Act. A balance sheet must be issued once a year and filed with the Department of Revenue and Commercial Registration.
The shareholders enjoy limited liability, the directors, however, may be unlimited if stipulated as such in the company's MOA. The limited companies are managed by a board of directors.
All shares must be subscribed to, and at least 25% of the subscribed shares must be paid up. All shares must have voting rights. Thai law prohibits the issuance of shares with a par value of less than five baht. Treasury shares are prohibited.
A minimum of three shareholders is required at all times. Under certain conditions, a Private LC may be wholly owned by foreigners. However, in those activities reserved for Thai nationals under the Foreign Business Act, foreigner participation is generally allowed up to a maximum of 49% capital shares. This 49% capital can be exceeded or exempted if a Foreign Business License is granted.
For a private limited company, all documents associated with the company’s registration, registration of the company’s tax ID card and VAT certificate and registration of the Employer account under the Social Security Act, must be submitted to the Registrar of the Department of Business Development (DBD) of the MOC or to the Office of Provincial Business Development in the province in which the company’s business will be situated.
The registration fee for the MOA and establishing the company is 5,500 baht per million baht of registered capital.
Registration of the company can be accomplished on the same day as the registration of the Memorandum of Association. In addition, all registered shares must have been subscribed for; Statutory meeting must be held to transact the business with the presence of all promoters and subscribers; Promoters must have handed over the business to the directors; The payment of at least 25% of the total shares must have been paid by the shareholders.
The application for and obtaining of the company’s tax ID card and register the Employer account under the Social Security Act with the MOC on the same day as the registration of the Company. If the company does not wish to apply for the company’s tax ID card or register the Employer account under the Social Security Act with the MOC on the same day as the registration of the Company, it can apply for the company’s tax ID card and register the Employer account with the Revenue Department and the Social Security Office respectively later.
If you are applying for a BOI approval, you have to prepare your application. Paperwork, basic information, financial projection, estimations of numbers of employees… Providing evidences and filling forms in a certain way. The application process can take from 3 to 6 months.
Next step once the paperwork is submitted, will be an interview at the BOI Headquarters during which you will present your business plan and estimated turnover, and will have to answer different questions from the members of the BOI concerning your company.
In order to set up a Thai company, there are some specific requirements in regards to the company promoters. This use of promoters is a particularity of Thai law.
Promoters are responsible for registering the company with the Ministry of Commerce (MOC) and for paying expenses associated with the company’s registration.
A company must have at least 3 promoters. They must be individuals (not juristic persons) at least 20 years old (or older). They must be registered and available for signing documentation during the registration process. Promoters must be amongst the company’s initial shareholders and must hold a minimum of 1 share upon the company’s registration (they can transfer their share thereafter). Promoters are not required to live in Thailand.
The first step is to reserve a company name by submitting 3 different names to the Register of Partnerships and Companies, Business Development Department, Ministry of Commerce (the names suggested can be rejected if they don’t comply with requirements, are already in use, or are determined unsuitable for other reasons). To reserve a name, the company can either submit a signed Name Reservation Form (signed by one of the promoters) or fill in a Name Reservation Form and submit it through the Department of Business Development’s website (http://www.dbd.go.th/dbdweb_en). This process can normally be completed within 2-3 working days.
After the name reservation has been approved, the company have to submit a Memorandum of Association (MOA) to the Department of Business Development of the MOC. This document details the reserved name of the company, its location, its objectives, its registered capital, the number and value of shares, information and signatures of the shareholders and the number of shares subscribed by each one of them.
The MOA must include the following: Company name Location of the Head Office (Province where the company is located) Scope of the business of the company Objective of the company Capital to be registered (divided into each share with the same value (each share’s value must be at least 5 Baht) Names address, age, occupation and number of shares of the promoters who start up the company (plus name, address, age of two witnesses). Capital information including the number of shares and their par value Capital must all be issued (although paid partly)
The official fee for registration of the MOA for a Private LC is 50 baht per 100,000 baht of registered capital.
A statutory meeting must be organized with the shareholders to adopt the articles of association, ratify the shareholders’ contracts and expenses, establish preference shares and their rights, fix the number of shares to be fully or partially paid up, appoint the directors and authorized director and appoint auditors and agree on their remuneration. The directors have then to ensure the payment of the shares as agreed during the statutory meeting.
During the statutory meeting, the following are determined: The adoption of the regulations of the company. The ratification of any contracts entered into and any expenses incurred by the promoters in promoting the company. The fixing of the amount to be paid to the promoters (if any) The fixing of the number of preference shares to be issued (if any), and the nature and extent of the preferential rights accruing to them. 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 and auditors and the fixing of their respective powers.
No resolutions of the statutory meeting are valid unless passed by a majority. After the statutory meeting is held, the promoters must hand over all businesses to the directors of the company.
The company will be required to obtain a Foreign Business License (FBL) before beginning operations if it falls within the definition of a foreign company according to the Foreign Business Act.
Now the company must be registered. The application must be filed, signed and handed over along with the statutory meeting report and the articles of association. An official fee is to be paid at the registration and the certification document will be issued.
Within 3 months of the date of the statutory meeting, following registration of the MOA (and receiving BOI approval, if asked for), the directors must submit the application to register the company, along with the appropriate government fees, 25% of registered capital must be paid.
During the registration process, the promoters will be required to supply the name, license number, and remuneration of the auditor whom the company is planning to hire.
The company is then registered as a legal entity (or juristic person).
The company registration fee for a Private LC is 500 baht per 100,000 baht of registered capital.
Registering for Tax Documents: The company will be required to apply for and obtain a tax ID card and number from the Revenue Department within 60 days of incorporation or from the date it is starting to operate. If the company turnover excesses 1.8 million Baht, it is also required to register for VAT with the Revenue Department within 30 days of the date the annual turnover exceeded that threshold.
Registering for Employers Account under Social Security Act: If the company has at least one employee, the company must register the Employer Account under the Social Security Act with the Social Security Office within 30 days of the start of employment. This process can be completed within 1 day.
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