What is Limited Company in Thailand?
Limited Company in Thailand, particularly a Private Limited Company, is the most popular type of business registration in Thailand. Its key features are:
- The liability of the shareholders is limited to any amount left unpaid on their shares.
- There is a separation between owners and management.
Section 1096 of the Thai CCC (Civil and Commercial Code) indicated that “A Limited Company in Thailand is that kind of which is formed with a capital divided into equal shares, and the liability of the shareholders is limited to the amount, if any, unpaid on the shares respectively held by them.”
The incorporation of Limited Company in Thailand requires:
- A minimum of three promoters
- At least one director
- An auditor
- A memorandum of association
- A statutory meeting
- Registration of the incorporation papers
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Why is Limited Company in Thailand popular for foreigners?
Limited Company in Thailand is the preferred type of business registration in Thailand because the criteria are quite same as the business organization in other developed nations. Therefore, the process will be familiar to foreign investors even if they have no experience of business settlement in Thailand. The elements of limited companies contain of directors, shareholders (both Thai and foreign in many cases), promoters, and limited liability.
Nowadays, Thailand opens the door widely for foreign investors according to the changes of government policy such as only 3 mandatory shareholders are required for new Limited Company in Thailand, which much easier for foreigners to set up the business. However, setting up a Thai Limited Company in Thailand has not been so easy for foreign investors due to many factors related, which may take time for development. Anyway, these improvements come with an unprecedented government drive to encourage foreign business in Thailand.
How important of the registration of Limited Company in Thailand?
Generally, business registration is a legal obligation to ensure that a business is operating under the lawful obligations of its control. If the business owner does not process business registration, their company cannot be legally considered and will not be protected under any grievance procedures. In addition, it will not be protected by the jurisdiction from any economic, legal, or social instability.
The benefit of the Limited Company in Thailand is the rights and obligations of all parties are set down by written to ensure that everyone has a clear comprehension and same point of view of their legal position within a company. All legal entitlements and responsibilities are clearly stated and available for reference when required for Limited Company in Thailand.
Furthermore, Limited Company in Thailand has the responsibilities to follow accounting procedures specified in the Civil and Commercial code, the Revenue Code, and the Accounts Act. A balance sheet must be prepared once a year and filed with the Department of Revenue and Commercial Registration. In addition, companies are required to withholding income tax from the salary of all regular employees. Therefore, Limited Company in Thailand will be fully protected by the jurisdiction.
How to Set Up Limited Company in Thailand?
The process of setting up Limited Company in Thailand can be divided into two parts:
- Basic requirements to set up a company; and
- The registration process and the registration process.
1. Basics requirement to set up Limited Company in Thailand
1.1 The Promoters
There must be at least 3 promoters for Limited Company in Thailand with the Ministry of Commerce. The promoters must be individuals (not juristic persons) who hold a minimum of one share in the company and can be foreigners who are able to process about company documentation. Once the company registration completed, the promoters are able to transfer their shares.
The promoters are jointly and unlimitedly liable for paying all expenses associated with setting up the company and can get the reimbursement later if it has been approved at the Statutory Meeting.
The process to incorporate a company runs quicker by allowing to fill the Memorandum of Association and to register the Company on the same day when:
- All shares to be registered have been subscribed;
- The statutory meeting has been held according to Section 8 of the CCC;
- Promoters have handed over the business to the director; and
- Future shareholders have paid at least 25% of the registered capital
Generally, the company setting usually takes around 2 – 6 weeks depending on the diligence of the promoters and the type of business.
All documents for Limited Company in Thailand must be submitted to the registrar of the Department of Business Development of the Ministry of Commerce or the filing office of each province where the head office of the company will be located.
2. The Registration Process
2.1 Reservation of the Corporate Name
The first step is to reserve a name for the company at the Department of Business Development of the MOC. Promoters should offer 3 alternative names in order to save the time to resubmit the name if the first name is rejected. Once the name is approved, the corporate name reservation is valid for 30 days with no extensions to process Limited Company in Thailand.
2.2 Filing a Memorandum of Association
2.2.1 Content of the Memorandum of the Association
The second step is to file the Memorandum of Association (MOA). The MOA is the agreement made by the founders of the company and must contain the following information.
- The name of Limited Company;
- The location in Thailand where the registered office will be located;
- The objective of the company;
- A declaration stating the liability of shareholders shall be limited;
- The amount of share capital and the fixed amount sharing division;
- The names, addresses, occupations, and signatures of 3 promoters, and the number of shares subscribed to.
The promoters must issue 2 original copies of MOA with 2 witnesses signed together. The promoters must pay an official fee calculated on the basis of the registered capital with the filing of the MOA.
2.2.2 Minimum Capital
There is no minimum capital requirement to register a company in Thailand. The CCC only states that the minimum value of a share should not be less than 5 baht with a least 3 shareholders. Moreover, only 25% of the registered capital has to be released to incorporate a company.
Foreign owned companies have to comply with the requirements of the FBA, which sets up a minimum capital requirement to start any business activity.
Minimum Capital Requirement for Foreign Owned Companies
Minimum Capital Requirement (in Baht)
Business Activity that is not restricted by any laws
Business Activity controlled by List 2 or 3 of the FBA
The greater of 3 million; or
25% of the company’s average per year expenses for its first three years of operation
Foreign US owned companies registered under the Treaty of Amity
2.3 Convening a Statutory Meeting
When all shares have been subscribed, promoters must hold the statutory meeting respectively.
The statutory meeting is a major component of the registration process because the shareholders will make the decision of the governing rules of the company.
The promoters must raise the following points to the statutory meeting:
- The adoption of the Articles of Association (if any);
- The ratification of any contracts entered into and any expenses by the promoters during setting the company;
- Fixing the amount (if any) to be paid to the promoters;
- Fixing the number of preference shares, and the nature and extent of the preferential rights;
- Fixing the number of ordinary shares or preferred shares as fully or partially paid-up other than in money (if any) and the amount they shall be considered as paid-up;
- Appointing the initial director(s) and auditor(s) and determining the respective powers of the directors.
The resolution of the statutory meeting must be passed by a double majority including at least one half of the total number of subscribers entitled to vote, and representing at least one half of the total number of shares of such subscribers.
After the statutory meeting, promoters and subscribers shall hand over the business to the directors. When 25% of the capital has been paid, the directors must apply for the registration of the company.
Directors must submit the registration application of Limited Company in Thailand in 3 months after the date of the statutory meeting with no extension.
The application must contain the following elements:
- The total number of shares;
- The number of ordinary shares or preferences shares allotted;
- The paid amount in money on each share;
- The total amount of money received in respect of shared;
- The names, occupations, and addresses of the directors;
- If the directors have power to act separately, their respective powers and the number or names of the directors whose signature is binding on the company;
- The period of the company has been fixed (if any);
- The addresses of the principal of business office and all branches.
The application must be submitted with the copy of the Articles of Association, if any, and of the proceedings of the statutory meeting. Both must be certified by the signature of at least one director.
At this stage of the registration, Thai shareholders involved in a company that counts foreign shareholders may be required to disclose their source of investments.
After all steps are completed, the Ministry of Commerce delivers a certificate of incorporation, attesting the birth of a new legal entity.
The difficulties for foreigners to set up Limited Company in Thailand are the restrictions on foreign ownership by Thai law imposed in numerous business activities. Moreover, special legislations, such as the Foreign Business Act, prohibit or limit foreign owned companies to carry out certain business activities. Also, additional requirements for foreigners such as the Foreign Business License or minimum capital may apply to foreign owned companies. Therefore, SME Baas is your best choice to facilitate you with all these Limited Company in Thailand with legal concerned.
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