Thailand's economy is one of the fastest-growing in the region, thanks to a growing middle class, rising consumer demand, and a thriving startup community. Among the top three investment destinations in ASEAN, Thailand offers promising opportunities for investors across a wide range of sectors. In this two-part article series, we introduce two of the most common types of business entities that you can establish in Thailand, namely Limited Company and Board of Investment Promotion. With their own characteristics, they provide foreign investors with different advantages and benefits when starting their ventures in the Land of Smiles.
Part One: Limited Company
What is a Limited Company?
One of the most common types of foreign-owned company structures used in Thailand is a Thai Limited Company. It receives such popularity from foreign investors due to its similarity to other entities, namely Limited Liability Company (LLC) in the United States and Private Limited (Pte. Ltd.) in Singapore. This type of company is formed with its registered capital divided into equal shares and the liability of each shareholder is limited to the amount unpaid on the shares held. At the time of incorporation, all shares must be subscribed to, but only 25% must be paid in full. The minimum share price is 5 THB. Although some shares may have preferred voting rights, each share must have at least one vote.
There are two types of Limited Company: Private and Public. The first is governed by the Civil and Commercial Code and the latter is governed by the Public Limited Company Act.
The company must be owned by at least three shareholders and managed by at least one director. There must also be a minimum of three promoters for a private limited company, and 15 for public companies. Each promoter must be among the company’s initial shareholders upon registration. In theory, there is no specific registered minimum capital required for both types of Limited Company.
If more than half of a company's shares are owned by non-Thai individuals, the company is considered foreign-owned, and investors should consult the Foreign Business Act (FBA), the main law dictating which sectors 'foreign' companies are allowed or forbidden to engage in.
Establishing a Limited Company
Companies in Thailand have to be registered with the Department of Business Development, Ministry of Commerce. A private company's registration takes about seven days, while a public company's registration can take up to 30 days.
Below are the steps to register a Thai Limited Company:
- Step 1: Register the Company Name.
- Step 2: Fill the Memorandum of Association.
- Step 3: Convene a Statutory Meeting.
- Step 4: Submit the Registration of the Company in Thailand.
- Step 5: Register for Value Added Tax (VAT) and Income Tax.
- Step 6: Open a Company Bank Account.
Considerations for Foreign Investors
A company may apply for multiple work permits to accommodate foreign executives and staff members based on the registered capital and other labor department criteria. So, despite having no minimum requirement on registered capital, the amount of the capital should be adequate and reasonable enough for the intended business operations. Moreover, a minimum capital of 2,000,000 THB is required per foreigner in order to get them a non-immigrant “B” Visa and a work permit to work in Thailand.
The Thai Company Limited must prepare its financial statements once a month and at least one auditor shall audit the statements every year. An ordinary shareholder's meeting must approve the financial statement within 4 months from the company's financial year-end, and submit the financial statement to the Department of Business Development (DBD) within 1 month from the date of the approval of the financial statements.
It’s important to once again clarify that a Thai Limited Company limits foreign business ownership to a maximum of 49%, meaning foreigners can hold no more than 49% of the shares. Inexperienced or misinformed investors may try to circumvent this barrier by hiring Thai nominee shareholders to hold a 51% stake in the company on their behalf, but this is against the FBA and should be avoided.
Despite the ownership drawback, Thai companies have a number of advantages over foreign-owned companies, such as no restrictions on the type of business they are engaged in, lower setup costs; the ability to buy and own land; and many others. Nonetheless, it is understandable that this structure may not suit all foreign investors, and those who want to possess greater control of their company can look at other alternatives. One of them is the Board of Investment Promotions, which will be introduced by Viettonkin in Part Two.
If you require any further information, feel free to contact us right away. Viettonkin is confident that we can provide you with accurate information as well as accompany and support you in every step of setting up a Limited Company in Thailand.
