Setting a Business in Thailand
Company registration in Thailand is more complicated than in many other countries due to the restrictions on foreign ownership. There are ways to protect the foreign interest when setting up the company, and so you are best advised to consult with a law firm before setting up to make sure you are proceeding in a way that gives you security and provides the best structure going forward.
Company setup options in Thailand
Partnership is a very common juristic person, with a minimum of two persons. It can be registered with unlimited liability (ordinary partnership) or limited liability (limited partnership). This arrangement is not recommended to foreigners due to both the complexity and reluctance for officials to recognize it.
• Branch Office
A registered branch office of a foreign company can invoice. However, as it is a foreign owned trading business it does require specific licensing and approval – a process that is lengthy and costly. As a branch office has no shareholders, the head office becomes liable for all activities of the Thailand branch office.
• Amity Company
US persons (natural or juristic) can be majority shareholders in a Thai limited company. This requires additional procedures and documentation, slowing down the process, but licensing is granted provided the business is not restricted under foreign business law.
• Representative Office
A foreign company can consider opening a representative office (RO). This can save costs and legal ownership complications, as a Thai partner is not required. An RO can sponsor work permits for up to two foreign staff. The head office needs to send funds to Thailand to cover the RO’s expenses, e.g. rent, salaries, etc. The downside to an RO is that it cannot invoice. It can support the business activities of the head office, but the invoicing and payment must be handled by the head office.
• Foreign-owned limited company
This is the same as a Thai limited company but with a majority of shares foreign-owned. You can register this business, but you cannot trade until obtaining a Foreign Business License, which involves providing evidence that the company does not fall within the list of restricted activities and that it will provide benefit to Thai society and economy. The process can take 3-6 months, and the outcome is not guaranteed.
• Board of Investment (BOI) promoted company
The BOI allows Thai limited companies to be foreign-owned if the activities fall within the list of businesses it is willing to promote. BOI certification comes with a range of benefits in addition to foreign ownership, including tax relief and granting of multiple work permits and visas. The process is relatively complicated and involves one or more interviews with company directors. Contact us if you want to know whether your business falls within BOI promotion.
• Thai Limited Company
As explained above, this is the most common business type in Thailand for locals and foreigners. This type of business structure is reliable, secured, and easy. The Thai Limited Company is very similar to other business structures in your home country with shareholders, directors, and other considerations… A Thai Limited Company may need licenses to work in certain sectors.
Objectives of the Company
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 as preferred shares. The preferred shares have special rights attached to them as prescribed in the Articles of association. If preferred shares have been issued, the preferential rights attributed to such shares cannot thereafter be altered.
Normally, to protect the foreign shareholder, two types of shareholdings 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 the 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.
There must be a minimum of three promoters – these can be Thai or foreigners, in any mix, but must be natural persons. These promoters are often also the shareholders, but not necessarily so. While promoters must be natural persons, shareholders can be other companies, but there must also be a minimum of three. Generally 51% of the shares must be Thai-owned, but there are exceptions (below). Even if 51% of the shares are Thai owned, ATA Services can structure the company for you so that the foreign 49% maintains complete control of the company, its dividends and share transfers. Ask us to explain how this is done.
• 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 5 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.
The company must have at least 1 authorised director who will sign documents on behalf of the company. There can be more than one authorised director, and the signing conditions can require more than one signature – it is up to you. The authorised director(s) can be Thai or foreign, but some business licensing, for example Tourism Authority of Thailand (TAT), requires a Thai director. A foreign director signing on behalf of the company normally will require a work permit and visa.
• Authorized Directors
Under Thai law, it is required that authorized directors shall be appointed from any of the directors of the Company, to sign any document for an on behalf of the Company. Again there is no requirement regarding the number and nationality of the authorized directors.
• Minimum Capital
The company needs to register its capital when it is created, although this can be increased later for a small fee. You do not need to show the money as paid up at the time of company registration, but it will need to be included in your first annual report. You should capitalise the company according to how much it will cost you to get the company cash positive. What this amount is depends on your business plan, However, the minimum capital in order to sponsor a work permit for a foreigner is 2 million Baht per person, and this should be 100% paid up. If this is a hardship for your start up business in Thailand, talk to us about possible solutions.
• Business Objectives
You should advise your law firm of all your company objectives prior to registration. These objectives are in reality a statement of business activity, e.g. exporting of dried banana, and you should have a statement for each activity. Your law firm can then advise you accurately on any restrictions or licensing that may apply. ATA Services will give you this advice for free in an initial consultation.
• Registered office
The company will need a commercial (not residential) address when registering. ATA Services provides virtual office solutions and flexible physical offices at our two Bangkok business centers if you need a starting point. Once the company employs Thai nationals (a requirement for sponsoring a work permit), a suitable physical office is required to register them for Social Security – the office will be inspected! Some business activities requiring licenses need the registered office to meet additional requirements. Whatever office you require, the landowner must be willing to provide signed copies of ownership documentation if your company needs to register for VAT with the Revenue Dept. As we own our business centers, ATA Services readily makes available the necessary documentation.
You are strongly advised to consult with a commercial law firm, who is experienced at setting up all kinds of business, prior to registering the company to explain your needs. While things can be ‘fixed later’, it is important that you have a full understanding of the issues, requirements, costs and options from the outset. Foreigners particularly need advice on the structuring of their company in order to protect their investments. Take advantage of our free consultation.
• Registered Capital
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.
• Books and Accounts
The Company books and accounts must be kept in 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 have 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.
Process of a Company Registration in Thailand.
• Name reservation
All companies will have Company Limited / Co., Ltd. added to the English name – this is mandatory. We do not know if the name will be accepted by the DBD until we submit the application – it is a manual decision by a DBD officer, and the English name is sometimes rejected because of the way it appears in Thai transliteration.
The first step of the company registration process is name reservation. To reserve a name, the company can either;
(1) Submit a signed Name Reservation Form (one of the promoters is required to sign in such form) to the Department of Business Development of the MOC or;
(2) Fill in a Name Reservation Form and submit it through the Department of Business Development’s website (DBD)
The promoter is required to supply the requested company name together with two alternative names. The registrar will then examine the application in order to ensure that:
a. No similar company names have previously been reserved
b. The names do not violate any ministerial rules.
If the applicant’s intended name is in conflict with either of the above, that name will be rejected and the registrar will consider the alternative names submitted. This process can normally be completed within 2-3 working days. If all three names submitted are rejected, the applicant will be required to re-submit the form with three new names.
The registrar has considerable discretion with regard to the matter of company names. Many times, the first name or even the first two names are rejected due to the violation of one of the two rules stated above. Once the name is approved, the corporate name reservation is valid for 30 days, with no extensions. However, after the name has expired, the promoter can still re-apply for Name Reservation again and again if the name is still available.
• Submit the application
After the name reservation has been approved, the company must then submit its Memorandum of Association (MOA) to the Department of Business Development of the MOC. Must include the Company’s name (the same as the name reserved); the location of head office (located at which province); (3) objective of the company; registered capital must be divided into each share with the same value (each share’s value must be at least 5 Baht); the name, address, age, occupation and number of shares that persons who start up the company reserve to buy the shares); and the name, address, age of two witnesses. The capital information must include the number of shares and their par value. At the formation step, the authorized capital, although partly paid, must all be issued.
For a public limited company, the MOA must at least include the name of the company; the purpose of the company to offer shares for sale to the public; the objective of the company (which must specify clearly categories of business); the registered capital including the type, number and value of shares; the province where the company will be located; the names, dates of birth, nationalities, and addresses of the promoters and the number of shares for which each of them has subscribed.
1. A private limited company - The official registration fee 50 baht per 100,000 baht of registered capital. A fraction of 100,000 baht is regarded as 100,000 baht. The minimum fee is 500 baht and the maximum fee is 25,000 baht.
2. A public limited company - The official registration fee is 1,000 baht per 1,000,000 baht of registered capital. A fraction of 1,000,000 baht is regarded as 1,000,000 baht. The maximum fee is 25,000 baht. Although there are no minimum capital requirements, the amount of capital should be respectable and adequate for the intended business operation.
However, if the company falls under the definition of “foreign” under the FBA, before commencing its business, the following rules shall be applied:
- If the company engages in activities specified in the FBA, its minimum registered capital would be greater than 25% of the estimated average annual operating expenses of the operation, calculated over 3 years, but not less than 3 million baht.
- If the company does not engage in activities specified in the FBA, its minimum registered capital would be 2 million baht.
- If the company intends to employ foreigners, other minimum registered capital requirements may also be applied.
• Convening a Statutory Meeting
Once the share structure has been defined, a statutory meeting is called, during which the following are determined:
(1) The adoption of the regulations of the company, if any;
(2) The ratification of any contracts entered into and any expenses incurred by the promoters in promoting the company.
(3) The fixing of the amount, if any, to be paid to the promoters;
(4) The fixing of the number of preference shares, if any, to be issued, and the nature and extent of the preferential rights accruing to them;
(5) 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;
(6) The appointment of the first directors and auditors and the fixing of their respective powers;
Note: No resolutions of the statutory meeting are valid unless passed by a 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 to such subscribers.
After the statutory meeting is held, the promoters must hand over all businesses to the directors of the company.
Within 3 months of the date of the statutory meeting, the directors must submit the application to establish the company. If not registered within the specified period, the company’s statutory meeting shall be voided and if the company wishes to register again, the promoters shall arrange the meeting for persons who reserve to buy the shares again.
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.
1. A private limited company
- Registration fee 500 baht per 100,000 baht of registered capital. A fraction of 100,000 baht is regarded as 100,000 baht. The minimum fee is 5,000 baht and the maximum fee is 250,000 baht.
2. A public limited company
- Registration fee is 1,000 baht per 1,000,000 baht of registered capital. A fraction of 1,000,000 baht is regarded as 1,000,000 baht. The maximum fee is 250,000 baht.
3. A private limited company
- The directors shall then cause the promoters and subscribers to pay forthwith upon each share payable in money such amount not less than 25%, as provided by the prospectus, notice, advertisement, or invitation.
4. A public limited company
- Each promoter and subscriber must pay 100% of their subscribed shares.
* The company is then registered as a legal entity (or juristic person).
• Registering for Tax Documents
A company liable for corporate income tax must obtain a tax ID card and number from the Revenue Department within 60 days of its date of incorporation or, in the case of a foreign company, from the date it begins carrying on business in Thailand. Companies that have turnover in excess of 1.8 million baht must also register for VAT with the Revenue Department within 30 days of the date the annual turnover exceeded that threshold.
• Registering for Employer account under the Social Security Act
If the company has at least one employee, the company has a duty to register the Employer account under the Social Security Act with the Social Security Office within 30 days of the start of employment. The process for registration of the Employer account under the Social Security Act can normally be completed within 1 day provided that all required information and documents are fully submitted to the Social Security Office.
For more information please contact :
Tel: 063-779-9111 (English)
Line ID: ILSCM