Different Types of Legal Entities Available to New Investors in Thailand
There are several types of legal entities that are available to new investors in Thailand, each with its own requirements. In this article we shall examine a few of the main types available as well as some key factors which investors should be mindful of with respect to each.
A limited company is formed with the capital divided into shares, and the liability of the shareholders is limited to the amount (if any) which remains unpaid on the shares respectively held by the shareholders. In order to register a limited company in Thailand, several key requirements must be complied with these include:
a) Three or more natural persons (otherwise known as “Promoters”) must subscribe their names to a memorandum for the purpose of promoting and forming a limited company. According to the Civil & Commercial Code of Thailand (CCC) every promoter must subscribe to at least one share in the new company. The minimum amount per share must be not less than 5 Thai Baht (THB)
b) The new company will need at least 1 director but at DLO we advise that 2 or more directors would be more efficient and sensible in practice. New investors should also be aware that it is necessary to specify the signing authority of the appointed authorized directors of the new company. For example many companies specify two authorized directors signing together with the company seal affixed too but other approaches are possible provided that they comply with the law and are reasonably clear according to the Dept. of Business Development (DBD).
c) The new company will also need to appoint an auditor and will need to specify their fee, name and their audit license number.
d) The fiscal year of the new company will need to be specified on the company registration application, normally this runs from 1 January through until 31 December.
e) In relation to the paid up registered share capital, it must not be less than 25% of the registered share capital, however in certain cases it must be fully paid up. This money will be payable by the Promoters and subscribers of shares after the statutory meeting of the company. If the company will apply for US Treaty of Amity protection (see below for more details), then this requires a minimum of fully paid up capital of 2 million THB. However, if the new Company will apply for a Foreign Business License (FBL) under the Foreign Business Act (1999) (FBA) then each activity (under List 3 of the FBA) requires minimum registered capital of 3 million THB but it should be noted that it can be higher depending on the details contained in the FBL application.
f) The whole number of shares with which the company proposes to be registered must be subscribed before registration of the company at the DBD.
g) The Company will need memorandum and articles or association; these must comply with the provisions of Thai law, especially the CCC.
h) The company shall also be required to hold a Statutory Meeting which will need to cover several key matters including adopting the Articles of Association, the appointment of the first director(s) of the new company & the fixing of their powers. After this meeting is held the Promoters shall hand over the running of the company to the newly appointed director(s). It is also worth noting that registration of the company at the DBD must occur within 3 months of the Statutory Meeting otherwise all monies received from the subscribers of shares must be repaid to them in accordance with the CCC.
Following registration of the company there are a number of compliance requirements which the new company will need to comply with, including:
1. Keeping a register of shareholders (at the registered office of the company) containing certain details such as name, address and occupation of the shareholders, the date upon which the person was entered into the register as a shareholder and the date at which any person ceased to be a shareholder;
2. According to the CCC, a general meeting of shareholders (AGM) must be held within 6 months following registration and thereafter once at least every 12 months;
3. The CCC also stipulates that a balance sheet must be made at least once in every 12 months at the end of the financial year of the company. The balance sheet is required to contain a summary of the assets and liabilities of the company as well as a profit and loss statement. The balance sheet must be examined by an auditor and submitted for adoption at the AGM within 4 months of the end of the financial year of the company.
Visa & Work Permit Considerations:
If foreign staff shall be employed by a company limited and such staff will work in Thailand then they will need a non-immigrant B visa as well as a work permit. If the company does not have BOI privileges then it will need to have at least 2 million THB in fully paid up register capital per work permit. Moreover, it will need 4 Thai staff per 1 foreign staff member (required ratio). Once the foreigner arrives in Thailand on the non-immigrant B visa they should apply for a visa extension and work permit within 90 days of their arrival. There are also minimum salary levels depending on the nationality of the foreign applicant.
Pursuant to the FBA, to re-register a Branch Office (BO) of a foreign company/juristic person it is necessary to apply for and obtain a FBL in essentially the same manner and pursuant to essentially the same criteria as a limited company does.
The FBA permits foreign ownership and control of a BO registered in Thailand dependent upon the nature of the business activities of the BO. These business activities must be similar to those of the Head Office of the BO but cannot exceed those of the Head Office under which it is re-registered. The Ministry of Commerce (MOC) will want to evaluate the nature, amount and other aspects of the estimated expenses for the first three years of the anticipated operations of the BO as well as the transfer of technology of the BO to Thailand before it approves an application for a FBL.
The process to apply for a FBL for a BO consists of the translation and submission of the registration documents of the overseas Head Office of the BO; the preparation and submission of the application for approval of the issuance of a FBL and the issuance of the FBL (if the application is approved). The Head Office (based overseas) will also need to appoint a Branch Office Manager to be the legal representative of the Branch Office in Thailand, such appointment is made via a power of attorney.
Visa & Work Permit Considerations:
If a Branch Office wishes employs foreign nationals then in it must generally have a minimum of one Thai employee for each foreign national employed. In addition, the Branch will also need 3 million Baht in inward remittance per work permit. Documentary evidence of such remittances must be retained as evidence.
A Representative Office must be registered with the MOC, it is not a separate legal entity but rather it is a part of the Head Office and acts as its representative in Thailand. The permitted business activities of a Representative Office are as follows:
1) Sourcing of goods and/or services in Thailand which are purchased by its Head Office or affiliated company or the group company and then exported overseas outside of Thailand.
2) Checking and controlling the quality and quantity of goods/services which its Head Office or affiliated company or the group company purchased or contracted from Thailand;
3) If Head Office or affiliate is selling Goods in Thailand and then Thai customers or Thai distributors/agents have technical problems questions with such Products/ Goods, the RO can be set-up to provide technical advice only (not installation support and not after sales services) for such Goods. The RO can only provide advice and cannot charge the clients/agents for such advice. If a RO wishes to charge for such service then it should instead set up a branch office or a company limited and apply for a FBL (item 21 – services);
4) Distributing of information concerning new goods and/or services of its Head Office or affiliated company or the group company which will be sold in Thailand. These new products shouldn’t be a new model but should be an entirely new line of products. For example a car company releasing a new line of products relating to mobile phones.
5) Reporting on business trends/ economic situation in Thailand to its head office or affiliated company or the group company. Normally this should be a monthly or weekly report being provided to Head Office. This activity number 5 can go together with any of the above activities.
Investors should be aware that a Rep. Office must have the following general characteristics:
a) Non-revenue generating activities;
b) No authority to accept purchase orders or to make offers to sell or to negotiate for conducting business with persons and/or legal entities in the country in which it is established; and
c) Payments for all expenditures which are incurred by the Rep. Office must be made by the Head Office.
The Representative Office may not be involved in the planning and/or coordinating of business relationships with any legal entities on behalf of the Head Office of the Representative Office. This is a rather broadly worded prohibition, and as such it should be careful to comply with this condition. The Head Office of the Representative Office will also need to appoint a Representative Office Manager to be the legal representative of the entity in Thailand; such appointment is made via a power of attorney (PoA). If the Representative Office Manager leaves the entity then it is necessary to appoint a new person who shall need a PoA granted to them.
Visa & Work Permit Considerations:
All employees of the Rep. Office (aside from Rep. Office Manager appointed by PoA from Head Office who does not need a work permit) who are foreign nationals must obtain a work permit and a non-immigrant B visa (which must be extended within 90 days of their arrival into Thailand) in order to live and work in the Kingdom.
A Representative Office that employs foreign nationals must have a minimum of one Thai employee for each foreign national employed. Please note that for each work permit applied for, the Rep. Office will need inward foreign remittance of 3 million THB into its Thai bank account. Documentary evidence of such remittances must be retained as evidence.
Should you require any legal support relating to registering a company limited, branch office or a representative office 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 [at] dlo.co.th or chalapunj [at] dlo.co.th