How to Establish a Private Limited Company in Thailand
Establishing a private limited company is the preferred structure for foreign investors looking to set up in Thailand. Foreign investors are generally limited to only 49 percent ownership of a private limited company, depending on the sector. For 100 percent ownership of a private limited company, foreign players will need to obtain a Foreign Business License, be eligible for promotion from the Board of Investment, or register through the Treaty of Amity (for US citizens only).
Establishing a private limited company is the preferred structure for foreign investors looking to have a legal presence in the country.
The government recognizes two types of limited companies; private limited companies and public limited companies. The first is governed by the Civil and Commercial Code and the latter is governed by the Public Limited Company Act.In Thailand, a company is considered to be foreign-owned if more than half of its shares are owned by non-Thai individuals. Investors should then refer to the Foreign Business Act (FBA), the main law which dictates the sectors ‘foreign’ companies are allowed or forbidden to engage with.
Investors should seek the advice of registered local advisors who can ensure their application process is accurate and complete.
Private limited companies
The FBA governs private limited companies, and as such, foreign investors can only own 49 percent of the company. For foreign investors to achieve 100 percent ownership, they need to obtain:
- A Foreign Business License;
- Obtain promotion from the Board of Investment (BOI); or
- Register through the Treaty of Amity (for US citizens only).
How to establish a private limited company in Thailand?
All limited companies are required to have shareholders, directors, and promoters. Company promoters are responsible for registering the company with the Ministry of Commerce (MOC) and are the ones that sign documentation during the registration process.
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.
The process for company registration can be completed within one business day. Initially, a promoter will need to register a company name to the Department of Business Development (DBD). The name should not be identical or resemble the name of a pre-existing company. The promoter should provide the company name with two alternative names, and once approved, the name is reserved for 30 days.
Further, a foreign-owned company not subject to a foreign business license requirement must have a minimum capital of 2 million baht (US$55,154). For foreign-owned companies that are subject to a foreign business license, the minimum capital requirement is 25 percent of the estimated average expenses for three years of operation or 3 million baht (US$82,777).
Registering the Memorandum of Association
After registering a name, the company will need to submit its Memorandum of Association (MOA) to the DBD. The MOA must contain:
- Name of the proposed company;
- The company’s proposed objectives;
- The declaration that the liability of the shareholders will be limited; and
- The number of shares prescribed by each promoter.
Convene a statutory meeting
The statutory meeting is called to:
- Adopt the Articles of Association of the company;
- Appointment of directors and auditors;
- Ratification of the business activities; and
- Establishment of shares.
Once the company is registered, it must register for a corporate tax ID card from the Revenue Department within 60 days of incorporation. Businesses that have an annual turnover of 1.8 million baht (US$58,000), must register for VAT within 30 days after reaching the 1.8-million-baht ceiling.
Why foreign investors should seek BOI promotion?
Foreign investors can have 100 percent ownership of a Thai company if the businesses are promoted by the BOI.
In order to be promoted by the BOI, the business must engage in one of the following industries:
- Agriculture and agricultural products;
- Chemicals, paper, and plastics;
- Services and public utilities;
- Light industry;
- Technology and development;
- Metal products, machinery, and transport equipment; and
- Mining, ceramics, and basic metals.
Companies that are promoted by the BOI are eligible for a variety of fiscal and no fiscal incentives. These include exemptions and reductions of taxes, reduction in the import duties of machinery, permission to bring skilled foreign workers, and the ability to remit money abroad in foreign currency, among others.
Additionally, businesses are allowed to own land for industrial projects.
Upon submission of the relevant forms pertaining to the business category, the company will also need to submit the following information:
- The total amount of registered capital and where will the company leverage the investment;
- Details of the company’s project(s);
- Information on the management team and their skills;
- The estimated earnings and expenses of the company for the first three years; and
- Employee details including the number of foreign and local employees.
The BOI will evaluate the company’s application and there will typically be two rounds of interviews between the business owners and a BOI officer.
BOI approval and rejection
The BOI will normally inform the company of their approval or rejection between 40 and 90 days of receiving the application. This time period is usually determined by the amount of investment the company intends to invest.
- An investment of less than 200 million baht (US$5.5 million) is considered within 40 days from the date of submission.
- An investment of more than 200 million baht (US$5.5 million) but less than 2 billion baht (US$55 million) is considered within 60 days from the date of submission.
- An investment exceeding 2 billion baht (US$55 million) is considered within 90 days from the date of submission.
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