The basics of business organization in thailand

There are many kinds of business organization for person who would like to do business in Thailand. However, the basic and most favorable are as followings:

1. Sole Proprietorship :

The Sole Proprietorship is an unincorporated business owned by one person. All the proprietor’s assets, both business and personal, are subject to attachment or other legal action which may be brought with respect to the business.

2. Partnership :

According to Thai law, there are three different types of partnership. They are (1) unregistered ordinary partnership, (2) registered ordinary partnership, and (3) limited partnership. A joint venture or consortium is deemed as kind of unregistered ordinary partnership but may be treated differently under the Revenue Code.

(A) Unregistered Ordinary Partnership
An unregistered ordinary partnership is one in which all partners are, without limit, jointly liable for all the obligations and debts of the partnership. The partnership cannot be regarded as a juristic entity separate from each partner, who must make a contribution in the form of money, properties or services.

(B) Registered Ordinary Partnership
If an ordinary partnership is registered, it becomes a separate juristic entity from each partner, who thereby gains the following advantages:
(1)The assets of the partnership have to be examined before creditors can claim debt payment from the partners. This is unlike an unregistered ordinary partnership, in which each partner is directly liable for debts incurred by the partnership.
(2)The liability of a partner for debts incurred is limited to two years from the date he ceased to be a member.

(C) Limited Partnership
(1) A limited partnership consists of two types of partner:
(a) one whose liability is limited to the specific amount which he has contributed to the partnership, and
(b) one whose has unlimited liability for all debts incurred by the partnership.
(2) A limited partnership must be registered and is regarded as a separate entity.
(3) It should only be managed by a partner who has unlimited liability.
(4) If the business of the partnership is managed by a partner whose liability is limited, that partner will become unlimitedly liable for all debts incurred by the partnership.
(5) Partners with limited liability are entitled to carry on business of the same nature as that of the partnership and are free to transfer their shares without prior consent of the other partners.
(6) Creditors of the partnership are not entitled to sue partners with limited liability unless the partnership is dissolved. Even then, creditor can claim only the following amounts:
(i) part of the undelivered contribution,
(ii) part of the contribution which has been withdrawn,
(iii) divined or interest received in bad faith or contrary to the law.
(7) New partners cannot be introduced into the partnership without the consent of all other partners. A new partner is liable for any of the partnership’s debts from time of his becoming a partner. Similarly, an ex-partner is liable for debts incurred by the partnership up to the termination of his right as a partner.

An agreement on how the profits and losses of the partnership are to be divided should be made between the partners of the partnership. In the event that no such agreement has been made, each partner’s share in the profits and losses will be calculated in accordance with the proportion of his contribution.

3. Limited Company :

Under Thai law, there are two types of limited companies, private company and public company. In this brief shall mention to private company only.

Limited company is a company which is formed with a capital divided into equal shares. The advantage of conducting business in the form of a limited company is that people can participate in large-scale business activities with their liability being limited to the amount unpaid on the shares held by them.

Management of the Company’s Business :
The company’s business is to be managed by the directors of the company as appointed at the meeting of the shareholders. The first group of directors is appointed at the statutory meeting and thereafter at the ordinary meetings. The directors have to manage the company’s business in accordance with the regulations passed at the first general meeting of shareholders. The regulations will usually specify which director(s) are to conduct transactions with outsiders. However, if other directors have an agency relationship with the company, they may conduct transactions which bind the company to outsiders. In this case, these directors will also be responsible to the company and the shareholders.

Although the directors have the authority to conduct all types of legitimate business on behalf of the company, there are some things for which they must obtain the approval of the shareholders at the shareholder’s meeting. These are :
(1) appointment and removal of directors(s),
(2) appointment of auditor(s),
(3) declaration regarding distribution of dividends,
(4) conducting business involving capital, fully or partly paid up in any form other than money,
(5) dissolution of the company,
(6) amalgamation with other company(ies),
(7) other matters recorded in the regulations of the Company.

4. Joint Venture :

A contractual unincorporated joint venture or consortium is not recognized as a unique legal entity under the Civil and Commercial Code, except, perhaps as a form of partnership, but these forms of organization are recognized under the Revenue Code.

5. Branches of Foreign Company :

There is no special requirement for foreign company to register its branch in order to do business in Thailand. However, most businesses fall within the scope of one or more laws or regulations which require a registration, either before or after commencement of activities and foreign business must follow the generally applicable procedures.

6. Representative Office :

By a regulation of the Prime Minister’s Office, special procedures were establishes for those companies that wish to establish branches in Thailand to engage in limited “non-trading” activities. These procedures are optional but may be beneficial in certain circumstances. If the business activities of a foreign company are limited to the search for Thai products to be exported to other organs of the company or to do quality control work associated with such purchase or to engage in market survey activities, it is recommended to register as representative office. If a company is accepted for this representative office, expedited visas and wok permits for up to two foreigners to work in the branch are available.

Company Registration Process in Thailand

In case you decide to set up limited company in Thailand, what would you need to know?

(1) 3 promoters.
These 3 promoters, must be 12 years of age, can be Thai or foreigner. However, these promoters are required to be natural person, not juristic person. Every promoter must subscribe at least 1 share. These promoters are responsible for registering the company with the Department of Business Development, under Ministry of Commerce. The promoters are needed to be available to sign any document during the registration process.The promoters of the company are jointly and unlimitedly liable for all obligations and disbursements not approved by the statutory meeting; even if approved they remain so liable until the completion of registration of the company.

(2) Name Reservation
Before registration, either 1 of 3 promoters must reserve the company name. The name must not be the same or close to that of other companies. Certain names are not allowed and therefore the name reservation guidelines of the Department of Business Development should be observed. The approved corporate name is valid for 30 days.

(3) Memorandum of Association
The promoters of the company must file a memorandum of association. The official in charge of company registration will review the memorandum of association, especially the company objectives, to determine whether it is (a) against the law, or (b) detrimental to public morals. Once satisfied, registration will be granted.

(4) Share Subscription
The company promoters will try to have all shares subscribed to. A private company is not permit to invite the public to subscribe to the shares. Each promoter is required to subscribe at least 1 share after the company’s registration.

(5) Timing
Currently the registration of the company can be accomplished on the same day as the registration of the Memorandum of Association provided that:
(1) All registered shares have been subscribed for;
(2) A statutory meeting is held to transact the business with the presence of all promoters and subscribers, and all promoters and subscribers have approved the transacted business;
(3) The promoters have handed over the business to the directors; and
(4) The payment of at least 25% of the total shares has been paid by the shareholders.
If the registration does not take place within 3 months after the statutory meeting, the company is not formed, and all the money received from the share subscribers must be repaid without deduction. If any such money has not been so repaid within 3 months after the statutory meeting, the directors of the company are jointly liable to repay that money with interest from the expiration of the 3 months.

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