Introduction:

In this month’s article we shall examine the issue of company registration in Thailand and how the processes and procedures could be improved and streamlined in light of the coming advent of ASEAN Economic Community in 2015 when many foreign entities are likely to look at setting up new companies in the Kingdom. Thailand is often marketed to foreign businesses as a place where it is relatively easy to do business but after recently going through the process of registering a limited liability company with the Department of Business Development (DBD) that has foreign majority ownership, the writer is of a different opinion as in his view, the process contains a number of confusing and somewhat impractical requirements which make the required procedures unnecessarily complicated and time consuming. In this month’s article we shall examine a number of aspects of the company registration process in Thailand and outline various ways in which the process could be improved and streamlined in order to make it more user-friendly and efficient.

Lack of Clarity Regarding Required Documentation

After reviewing the English language section of the official DBD website: www.dbd.go.th/dbdweb_en/main.php?filename=index The writer failed to find clear and comprehensive details on several documents required for company registration such as the bank confirmation letter for Thai shareholders and the share payment confirmation letter confirming share capital had been paid by the share subscribers, we did find guidance on these documents in the Thai language section of the website but this needs to be reflected in the English page to in order to improve accessibility for foreigners . If Thailand is seeking to make it easier for foreigners to invest in the Kingdom then the writer suggests that this website needs an urgent upgrade whereby the requirements for company registration should be clearly and precisely spelled out with practical tips and examples otherwise the overall process will remain confusing and complex which in turn may discourage foreign companies and businessmen from investing capital in the Kingdom. The writer also recommends that the DBD create a step by step summary on its website in English which explains each stage of the registration process as well as what documents are needed at each point as well as signing requirements for each form or required document. It would also be useful if the English language section of the DBD webpage had hyperlinks to the required forms/ documents or samples of required documents so that people could easily understand what is required as well as practical advice on completing such documentation such as notarization and legalization requirements for documents signed outside of Thailand. The writer thinks that it would be a good idea if a checklist were provided on the website which explains the documents required by the DBD in order to register a company; perhaps such checklist could be linked with a company registration questionnaire which would help to ensure that the information regarding documentation were customized to the individual situation of the enquiring investor(s), this would be very relevant to foreign investors given that the documentary requirements for companies with foreign promoters, shareholder and directors are somewhat different to those with only Thai shareholders.

Paying Registered Capital Before the Company is Registered at DBD

Arguably one of the more significant hurdles that the writer sees when registering companies is how do foreign shareholders and promoters pay for their subscribed shares in a new company before such company is duly registered at the DBD. Most Thai banks will not allow an company to open a bank account before it is officially registered hence many foreign shareholders are often at a loss in relation to how they can legally and safely pay their share capital to the company. After reviewing the DBD website there is a lack of guidance on this matter hence I would suggest that practical problems like this be addressed in a Q&A section on the DBD website and in guides which could spell out the various options available to foreign investors, including:

  1. Transferring the funds by bank transfer to the bank account of a Promoter of the Company who will then transfer or deposit these funds to the Company’s bank account after it is set-up.
  2. Paying the funds in the form of cash to a Promoter of the Company who will then transfer or deposit these funds to the Company’s bank account after it is set-up.

Given that paying funds to an individual Promoter’s account or paying cash to such persons could potentially be risky, the writer recommends that the current rules be amended such that proof of payment not be required by the DBD until a specified time after registration (i.e. 30 days) as this time could enable a company to establish a Thai bank account and thereafter have the Promoters and other shareholders transfer their share capital to such account by direct deposit or telegraphic transfer. Thereafter the authorized directors could submit such evidence to the DBD to prove that payment has been made.

Government Forms and Language Considerations

Given that the AEC is coming in 2015 and this will likely result in thousands of foreign investors setting up new companies in Thailand, the writer recommends that all of the required documentation should be in both Thai and English as this could help to ensure foreigners understand the nature of documents which in turn would assist them to complete them accurately thus saving time and improving accessibility.

At present all forms must only be submitted in Thai language but the writer recommends that as the world becomes increasingly globalized perhaps this requirement should be relaxed as many ASEAN member countries now accept documentation in English. The writer feels that if documents were able to be submitted in English it would make compliance more straightforward and less complex. It would also likely improve Thailand’s global rankings in terms of ease of doing business which could be a major draw card in relation to attracting more investors to the Kingdom. However, the writer does note that if information were able to be submitted in English it would have its drawbacks as it may take DBD officials more time to process such information which in turn could slow down the registration process.

In addition, it would also be an idea to have company registration guides/ Q&A sheets, both in hard copy and online made in other key regional languages such as Indonesian, Mandarin, Vietnamese, Khmer etc as this will help to make the requirements easier to grasp for regional investors.

Unnecessary Duplication and Overlap

One of the key weaknesses of the Company Registration process is the fact that there are so many different official forms that need to be completed and submitted, these include form BorOrJor1, BorOrJor3, BorOrJor5, Company Registration Warranty and form SorSorChor1 etc. Many of these forms repeatedly ask the same information and in the writer’s opinion, this is not only unnecessary but also increases the likelihood that mistakes will be made in the paperwork. In the writer’s view, he thinks that the paperwork should ideally be streamlined as much as possible such that these forms are placed in a single application document which captures all of the necessary information from directors, shareholders and promoters without needing to repeatedly ask the same information about the proposed new company. The use of less forms would also be practical as it would require less signing by the promoters or authorized directors., If the documentation were streamlined then it could be far better if it incorporated a single signing section for each promoter, director and shareholder so that signing would be kept to a minimum. After going through the process, the writer was surprised at how many documents need to be signed.

In concluding, the writer would like to point out that while the process is not ideal, there are still many strong points in the current company registration regime, including the speed at which the DBD can register a company if the documents are submitted correctly, however as noted above there are still many ways in which the system can be improved to the benefit of both the Government and investors (both local and international).

Should you require any legal advice on Thai company law or registering a Company in Thailand then please contact us at Dharmniti Law Office Co., Ltd. 2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330  Tel: (66) 2680 9777 Fax: (66) 2680 9711 Email: ryan@dlo.co.th or info@dlo.co.th