What is the main source of law authorising this entity form?
Thai Civil and Commercial Code
Give a brief summary of the entity form:
Does the entity possess separate legal personality?
After registration, a private limited company (hereinafter simply referred to as a company) constitutes a juristic person separate from the shareholders
(Maximum) period of existence
Indefinite period, unless:
- otherwise fixed the company’s articles of association;
- the company is formed for a fixed period of time;
- the company is formed for a single undertaking which is then completed;
- the shareholders agree to dissolve; or
- the company becomes bankrupt.
Various registration documents are required, including a memorandum of association containing the company’s business objectives, and articles of association which are the regulations of the company agreed by the shareholders. After the registration documents are approved by the Registrar (“Nai Tabien”), they will issue a certificate of incorporation to the company.
Liability of incorporators / shareholders
The liability of the shareholders is limited to the amount unpaid, if any, on the shares respectively held by them.
The company is managed by one or more directors under the control of the general meeting of shareholders and according to the articles of association.
Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?
Can this type of entity be publicly listed or held?
No. A private limited company cannot be listed or offer shares to the public. The company must be converted to a public limited company before it can be listed or offer shares to the public.
Can this type of entity be used for a non-profit or charitable organization?
No. The company must conduct business with a view to sharing the profits.
Give a brief summary of the process of incorporation, formation, or organization, including:
(1) Main documents required; (2) Involvement of notary, company register, governmental authorities; (3) Timing (estimate); (4) Main costs, including registration and similar fees (excluding legal fees); (5) Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?
The steps required for incorporating a company are as follows:-
Reserving a name
This can be done online, and it can usually be done in one day.
Filing a memorandum of association (“Nangsue Borikonsonthi”)
The memorandum of association must list, among other things, the business of the company. A registration fee of THB 500 is incurred for filing the memorandum of association.
Holding a statutory meeting (“Prachoom Gortung Borisat”)
When all the shares to be paid-up in money have been subscribed, the promoters must hold a general meeting of subscribers, called the “statutory meeting,” without delay. During the statutory meeting, among other things, the articles of association (“Kor Bangkub Khorng Borisat”) must be adopted, auditors appointed, directors (“Gummagarn”) elected, and binding signatory of the directors fixed. Additionally, any pre-incorporation contracts entered into by the company’s promoters must be ratified, expenses incurred by promoters paid, preference shares (if any) established, and ordinary shares and preference shares allotted to shareholders at par value (or at a higher price if specified by the memorandum of association).
Registration of incorporation of the company
After the statutory meeting is held, the promoters shall hand over the business to the directors. The directors shall then cause the promoters and subscribers to make payment for each share at not less than 25% of the par value. After the directors have received all the share payments, the directors must apply to register the incorporation of the company. A registration fee is fixed at THB 5,000 regardless of the amount of registered capital, plus certification fees and stamp duty of approximately THB 1,000. In addition, there will be a 50% discount on those fees until December 31, 2023, if registration is performed using the electronic system of the Department of Business Development (DBD) (“Grom Patthanadhurakijgarnkar”).
If all of the above steps can be fully taken on the same day on which the promoters complete the memorandum of association, and the necessary documents are complete and duly signed by all promoters, directors, shareholders, and witnesses, the directors may apply to register the memorandum of association and the incorporation of the company on the same day.
The process of preparing documents for forming a company generally takes about one to two weeks, after the complete information has been provided.
- If a director signs the registration documents outside Thailand, his/her signature must be notarized.
- A company must register its business objectives in its memorandum of association and can have as many registered objectives as the promoters and directors wish. The company is not required to conduct all lines of businesses registered in its objectives, but they are not allowed to conduct any business that is not included.
Minimum number of incorporators / shareholders and residency requirements
A minimum of three promoters (“Pu-Rermgorgarn”) are required to register the memorandum of association. Only natural persons are allowed to be promoters.
A minimum of three shareholders (“Pu-Thuehoon”) is required at all times. Shareholders can be natural persons or legal entities.
Promoters and shareholders can be non-Thai nationals. However, if the company’s business objectives are reserved for Thai citizens under the Foreign Business Act (FBA), or under other local laws, Thai shareholders must own majority number of the shares. Under the FBA, if 50% or more of the issued shares in the company are held by foreign nationals, the company will be deemed as a foreign entity and must apply for a foreign business license or foreign business certificate from a competent authority before it can commence certain types of business that are restricted for foreign entities under the FBA in Thailand.
Minimum number of directors (or other applicable officers) and residency requirements
One or more directors can manage the company. The number of directors shall be fixed by a general meeting of the shareholders. The directors may delegate any of their powers to managers or to a committee comprised of the directors. Every manager or committee shall, in the exercise of the power so delegated, conform to any order or regulations that maybe imposed on them by the directors.
There is no general restriction on the nationality of directors, but any foreign directors working in Thailand will be subject to work permit and immigration regulations.
Minimum share capital, or equivalent, and payment requirements (including opening a bank account)
There are generally no minimum capital requirements for a Thai-owned company, unless the company wishes to employ foreign employees requiring work permits. In that case, a minimum of THB 2 million of fully paid-up and registered capital is required for every foreign employee. Minimum registered and fully paid-up capital of THB 2 million is required for a company with more than 50% foreign shareholders. If a company is foreign owned and subject to a foreign business license under the FBA, a minimum of THB 3 million fully paid-up and registered capital is required.
Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?
Not strictly speaking, although in practice it is more convenient to have at least one director with signature authority resident in Thailand in order to file the necessary documents with government authorities. The authorized director(s) with binding signatory power must be designated and registered with the DBD.
Is a tax identification number, or equivalent, required? If so, how is it obtained?
Once the company incorporation has been registered, the company’s registration number is used as its taxpayer identification number in dealing with Thai tax authorities.
What is the title of the applicable company registry?
Department of Business Development (DBD), Ministry of Commerce
What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:
The documents include, among others:
- Memorandum of association
- Articles of association
- Date of incorporation
- Name and address of the company, including principal and all branch offices
- Registered capital
- List of shareholders, including their nationalities and other particulars
- Names and addresses of the directors
- Details of the directors with binding signatory authority
- Details of the auditor
- Annual financial statements
What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?
The board of directors represents the company and must operate within the scope of its objectives, and in accordance with its articles of association and shareholders' resolutions, for the best interests of itself and its shareholders.
How are the members of the executive body appointed, dismissed and replaced?
In general, directors can only be appointed or dismissed by the shareholders in a general meeting. However, the board can appoint a replacement if a director resigns or is unable to hold his office before the expiry of his term.
Is it possible to appoint corporate directors or must all directors be natural persons?
No. Only natural persons are permitted to be directors.
Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?
The concept of non-executive directors is not customarily used in Thai companies.
What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?
A general meeting of the shareholders is the main decision-making body of the owners, with all the rights and responsibilities provided to it by law and the articles of association. The shareholders have the rights to consider and approve or reject important matters reserved for the shareholders by law, such as increasing or reducing capital, amending the memorandum of association, amending the articles of associations, declaring dividends, appointing or removing directors and considering their remuneration, amalgamation, dissolution and liquidation, etc..
An annual ordinary general meeting of the shareholders (AGM) (“Garnprachoom Samun Puthuehoon”) must be held within four months after the end of each fiscal year, to consider, among other things, the audited financial statement, rotation of the directors, and appointment of an auditor. Other general meetings of the shareholders are called extraordinary general meetings of the shareholders (“Garnprachoom Visamun Puthuehoon”) and may be convened to consider other matters.
What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?
Thai law provides that the quorum for a shareholders' meeting is at least one-fourth of the company's capital, unless a higher quorum is fixed in the articles of association.
General shareholders resolutions are decided by a simple majority of shareholders attending the meeting and eligible to cast a vote. Special resolutions require a majority of at least three-fourths of the total votes of shareholders attending the meeting and eligible to cast the votes. Higher voting requirements can be fixed in the articles of association.
If the vote is equally split, whether on a show of hands or on poll, the chairman of the meeting shall be entitled to a second or casting vote, unless fixed otherwise in the articles of association.
Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?
What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?
A financial statement must be made at least once every full fiscal year. The directors thereafter submit an approved financial statement to the DBD no later than one month from the date of the AGM (i.e. the date on which the financial statement is adopted).
Is the entity permitted to determine its own financial year?
Yes. The company determines its own financial year on incorporation. If the company wishes to change, it must obtain approval from the Director General of the Revenue Department. (“Atibadhi Grom Sunparkorn”)
Is the entity subject to any statutory (external) auditor obligations?
Financial statements must be audited by a qualified Certified Public Accountants (“CPA”) in Thailand.
Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?
The company must appoint an independent, licensed CPA and an auditor, who must audit the company’s balance sheet and profit and loss account for each financial year and issue a report to the company's shareholders. The auditor is first appointed by the shareholders at statutory meeting to incorporate the company, and is thereafter appointed at each AGM. The shareholders determine the auditor’s remuneration.
What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?
Are different classes of ownership interests possible? If so, what are some examples of different classes?
Different classes of shares are possible including ordinary and preference shares.
Shareholders may agree on different dividend rights and voting rights for preference shares at their discretion.
Ordinary shares must have one vote, and the right to receive dividends must be proportionately distributed between ordinary shareholders.
What documentation is required for the transfer of ownership interests?
A share transfer document is required, which must be made in writing and signed by the transferor, the transferee, and a witness, before being entered into the company’s shareholders register. A transfer is only valid and enforceable after entry in the register of shareholders.
Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?
Shares may be transferred without the consent of the company, other shareholders, or directors, unless otherwise provided by the articles of association. All transfers and the name and office of the transferee must be recorded in the register of shareholders.
Are there any applicable stamp duties imposed when transferring ownership interests?
Yes. A share transfer document is subject to stamp duty at the rate of THB 1 for every THB 1,000, of the paid-up value or the sale price, whichever is higher. Unless otherwise agreed by the parties, the transferor is liable to pay the stamp duty.
How are shares issued? (including information on payment obligations, registration requirements)
Directors must issue a share certificate to each shareholder for their shares, signed by a director, and containing:
- the name of the company;
- the number of the shares to which it applies;
- the amount of each share;
- If the shares are not fully paid-up, the amount paid-up on each share; and
- the name of the shareholder (or a statement that the certificate belongs to the bearer).
Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?
In principle, non-cash share payments or in-kind contributions are acceptable if approved by the shareholders at the statutory meeting or other shareholders meetings. It is also possible to issue the shares at a premium if allowed in the memorandum of association.
Any requirements with respect to share cancellation, share repurchase and other capital reductions
A company cannot own its own shares or take them in pledge.
A company may only reduce its capital by special resolution at a general shareholders meeting that must be registered by the company within fourteen days after being passed.
Capital can be reduced by either lowering the amount or par value of each share or by reducing the number of shares. Capital cannot be reduced to less than one-fourth of the company’s total registered capital.
Notice of a proposed capital reduction must be published at least once in a local newspaper, and must be sent to all creditors by registered mail. Creditors may object to a proposed reduction within 30 days of publication.
Any requirements with respect to distributions to shareholders?
Under Thai law, dividends must not be paid other than out of profits.
Generally, no dividends may be declared unless agreed by resolution of a general meeting. That said, the law provides an exception whereby the directors may, from time to time, pay the shareholders such interim dividends as appear to the directors to be justified by the profits of the company.
When dividends are distributed, a company must appropriate one-twentieth of the profits into a reserve fund until the reserve fund is at least one-tenth of the capital of the company or a higher amount as stipulated by the company. The reserve cannot be distributed until liquidation.
Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?
Yes, but the agreement must not be contrary to public order and the good morals of the people.
Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?
The costs of maintaining the existence and legal good standing of a company vary. In our experience, it should be between THB 80,000 to THB 250,000, depending on the size and business of the company.
What are the general corporate tax rates? (Specify if there is a national versus local distinction).
A domestic corporation is subject to tax on worldwide income, while a foreign corporation is subject to tax on income generated in Thailand. The current income tax rate for most companies is 20% of net profits.
However, the tax rates may also vary depending on the type of taxpayer. For example, small and medium enterprises (SMEs) are subject to a 15% tax rate on net profits from 300,000 to 3,000,000 baht. Any profits above this threshold will be subject to the 20% standard corporate income tax rate.
Summary of any specific matters, e.g. recent or prospective major legal developments
In 2020, a bill regarding single shareholder companies, whereby a private limited company is allowed to have only one shareholder, was approved by the Council of the State. The draft is currently under further consideration.