Thai company is the favorite legal structure for foreigners in Thailand that apply to different purposes such as a business, an estate holding and or estate development etc. Frequently ask question is how can I have full control over my company?
Let’s go step by step, under section 1096 of Civil and Commercial Code of Thailand (C.C.C), Company Limited means a kind of company which is formed with a capital divided into equal shares, the liability of the shareholders being limited to the amount unpaid on the shares respectively held. The shareholder liability is limited by my responsibility is full that why I want to have a fully control my company. ‘the said of investors‘. Then my time to answer…
The 5 keys Below are the important steps to determine before setting up a new Thai company and take control a Thai Company.
1. Objective; you need to declare correctly your business Area/Product/Services wanted, to ensure that your Thai company’s objective meets the purposes aimed because the Company business will be limited with objectives registered. Specifically, when you set up Thai company for a business which requires a special license i.e. tour agency, real estate holding, real estate development or B.O.I. approval to avoid the rejection of your application.
2. Director (s); In general, Director quality involves responsibilities and duties, so it is important in case of multiple directors to know who can engage the company, i.e. 2 directors signed together or only one signature is needed. Each director is may limited her/his authority by the board of shareholders.
Director(s), could be any natural person aged not less than 20 years, Thai or Foreigner, may have civil and criminal responsibilities so better to correctly understand the scope of power provided by this quality. Section 76 paragraph 2 of C.C.C. stipulate that directors who act and engage the company beyond the objectives, power and duties of the company are jointly liable to make compensation.
In addition, section 74 stipulates that if the Company and its director(s) have a conflict of interest, the said director(s) lose the power to represent the Company. The important point to understand is that The Company is a juristic person independent to dissociate to their representative who are independent natural persons.
3. Shareholders and right of vote; at least 3 Shareholders are required and the repartition of shares shall be at minimum 51% Thai and this other 49% Foreigner or Thai, Natural person age not less than 12 years or Juristic person.
Control by right of vote is a primordial issue to determine since the beginning and issuance of preferred shares is more than advised. Minority of shares in amount but majority of voting right as 75% is possible by holding preferred shares, enough to have a full control board of shareholders. Without a doubt under law that 49% of shares in the company is legally possible have 75% voting rights. Shares in a Thai company is modifiable after the company setting up has done.
Sometimes, Minor as shareholder involved the authorization of the legal representative to use his right or duty as for example to give a proxy to others to represent him during shareholders meeting. In this case, the legal representative(s) need to bear their signature with the minor shareholder one on the form with their ID Card/Passport copies signed.
4. Articles and Associations; it will establish the rules of the company to ensure you totally control the business with full protection, it may control tax planning, voting rights, profit divide, sinking fund etc. If not articles of Association are issued by the promoters, a simple form, relating to the C.C.C. may be provided by the D.B.D., but this template should not be considered as enough to have full protection, and a specific one made by a lawyer is better to understand clearly and control the rules that will apply to your company.
5. Capital; Theoretical Minimum is 15 baht by combination of Section 1100 and 1117 (C.C.C) but in practice, no company is set up with this minimum amount, and in case of Work permit, for example, the minimum capital is 2,000,000THB. In other situations, if the capital is more than 5,000,000THB the Thai or Foreigners shareholders must provide Bank Statement certificates.
By setting up a Thai Company you compulsory need an accountant/auditor for tax and financial filing in accordance with the purpose of your Thai company. According to Section 1196 C.C.C. The yearly balance sheet shall under the responsibility of the director (Section 1206 C.C.C.) be true and accurate.
During the life of the company, many common mistakes are seen and we will describe to you in the next articles what they are, their consequences and how to avoid them.
Article by Nuansnit Chantawong
Master in Laws
Attorney at Law
Notary Services Attorney