Corporate Incorporating a Thai Company Step by Step

Corporate: Incorporating a Thai Company Step by Step

January 26 2012 Categories: Thailand Business, Thailand Company Registration No comments yet

Why review the private limited company set-up?

The private limited company is the legal vehicle that is the most commonly used by foreign investors in Thailand that is why we will review hereinafter the formalities of registration of a private limited company.

First step, how to register your company name?

The first step is of course to register the company name.

The name you chose for your company must not be identical to/or nearly resemble the name of any existing registered partnership or company.

We recommend you to reserve three names ranked by priority to maximize the chances of success. Your company name will be registered in Thai Language, even if the name of your company is in English (the translation from the foreign name into Thai will be done in phonetic).

You may not use certain terms are prohibited. For example, you may not use the term “investment” in your company name but the term “capital” is ok.

Once approved, the corporate name is valid for 30 days. No extension is allowed. In other words, the next step of the registration of the company must be completed within 30 days from the registration of the name.

If you are French, have a Thai French speaker translate the name of your company for you because of translation issues.

Do not take a name that is too long to write. Do not forget that your clients will have to write it on your checks. So the more complicated the name the more mistakes your clients will make when drafting your checks.

Note that if you liquidate a company and set-up a new company there will be a waiting period of 2 years before you can use again the name of the first company.

Note that you can use the same name for several companies if you accompany the name of a different figurative word. For example RP Services, RP Estate, RP Properties, RP Capital…

Finally, the name of your business can be different from your company name.

Second step, how to file the Memorandum of Association?

The second step to register your company is to file the Memorandum of Association.

The Memorandum of Association is the agreement made by the three individuals that are the founders (promoters) of your company. The Memorandum of Association must contain:

(1) the name of the proposed company, which must always end with the word “limited”; [ you can actually use foreign denomination that means Limited. For example French people can actually use the SARL instead of Limited]

(2) the province of the Kingdom were the registered office of the company will be situated;

(3) the objects of the company;

(4) a declaration that the liability of the shareholders will be limited;

(5) the amount of share capital which the company proposes to be registered, and the divisions thereof into shares of a fixed amount;

(6) the names, addresses, occupations and signatures of the promoters [the promoters are individuals only], and

(7) the number of shares subscribed by each of them.

The memorandum must be made in one original copy at least and signed by the promoters, and the signatures of the promoters must be certified by two witnesses.

Third step, how to hold a statutory meeting?

The next step is to convene a statutory meeting of the promoters.

Before 1st July 2008, it was necessary to wait a minimum of 7 days from the date of registration of the Memorandum of Association before to convene the statutory meeting. Since the 1st July 2008, you may convene the statutory meeting the same day you register the Memorandum of Association.

The statutory meeting purpose is

(1) to adopt the regulations (Articles of Association) of the company,

(2) to ratify any contracts entered into by the promoters or any expenses incurred by the promoters in promoting the company;

(3) to fix any amount to be paid to the promoters;

(4) to fix the number of preference shares (if any) to be issued, and the nature and extent of the preferential rights accruing to them;

(5) to fix the number of ordinary shares or preference shares to be allotted as fully or partly paid up otherwise than in money, if any, and the amount up to which they shall be considered as paid up;

(6) to fix and determine the services or property in return for which such ordinary shares or preference shares shall be allotted as paid up otherwise than in cash and to appoint the first directors and auditors and the fixing of their respective powers.

Now while the statutory meeting is actually a very important step of the registration of a company I have never actually seen such meeting actually happening. It is most of the time regretabley a “paper meeting”.

Fourth Step, how to actually register the company?

Your company will be fully incorporated upon the registration of the application to establish the company at the Ministry of Commerce.

This formality may now be made on the same date than the registration of the Memorandum of Association, providing however that all other formalities (statutory meeting) have been completed.

To the latest, this formality must be made within 3 months of the date of the statutory meeting. You may register your company later (after 3 months) but you will have to provide a letter explaining the reason for the delay.

What are the particulars that need to be mentioned in the application to register the company?

The application must contain the following particulars;

(1) the total number of shares subscribed or allotted (distinguishing ordinary shares from preference shares if any);

(2) the number of ordinary shares or preference shares allotted as fully or partly paid-up otherwise than in money, and in the latter case, the extent to which they are paid-up;

(3) the amount already paid in money on each share; the total amount of money received in respect of shares;

(4) the names, occupations and addresses of the directors and if the directors have, power to act separately, their respective powers and the number or names of the directors whose signature is binding on the company.

(5) The application must also contain the period for which the company is registered, if any has been fixed;

(6) the address of the principal business office and of all branch offices and any other particulars, which the directors may deem expedient to make known to the public.

Note also that it is at this step of the registration process that the Thai shareholders of your company will be compelled to disclose the source of their investment (if applicable).

If you register a company for the purpose of purchasing land, you must also take into account that your Thai shareholders shall also be subjected to disclosure of their investment by the Land Department.

The scrutiny exercised by the Land Department is more in depth so do not forget to tell your advisor if you intent to purchase land.

It is also at this step that you will need if you are the director of the company to sign the receipt attesting that each shareholder has paid his/her shares subscription. The receipt must be signed by the director and mention, the name of the shareholder, the amount paid, the amount of shares purchased, the value per share and that the money is collected for payment of the capital. Note that all shareholders that will be on the first shareholder list of the company will have to sign a receipt as well. Shareholders that enter at a later stage do not need to sign anything but for the share transfer documents.

What are the post incorporation formalities?

Once your company has been registered you will also need to apply and obtain a company corporate tax I.D. card and number from the Revenue Department within 60 days of incorporation or the start of operations.

Note that this formality can now be completed online. Note also that you will need to register the company Tax I.D. in order to open a corporate bank account. Banks do not open corporate account to companies that have no tax I.D. card.

Speaking of opening the company account; if a foreign director of a company does not have a work permit, the bank will generally request that the application documents for the opening of the company corporate account be co-signed by a Thai director.

Finally be reminded that companies having a turnover of more than 1,800,000 baht per annum must register for VAT.

Note that if you wishes to obtain a work permit you will need to register your company to the VAT immediately

Are they incorporation duties and fees to be paid?

Yes, of course they are registration fees. The registration fee for the registration of a memorandum of association is 50 baht per 100,000 baht of registered capital.

The minimum fee is 500 baht; the maximum fee is 25,000 baht.

The registration fee for a private limited company is 5,500 baht per million baht of capital. It is paid at the time of the company incorporation. Once you have paid the incorporation fees there is no need to pay yearly government fees like in other jurisdictions.

Note that they are services providers that advertise in newspaper that they will register your company for 2,500 THB only. You are welcome to try their services but don’t expect to pay 2,500 THB for a fully operational company that include ID card, VAT, bank account and an English translation of all the corporate documents.

How much should you involve yourself in the registration formalities of your company?

There is a lot to say about the fact that investors do not get enough involved in the actual formalities of registration of their companies.

I mean besides signing papers without reading them or understanding them, investors are often more concerned by the substance of their investment than by the practicality of it. This is a mistake in my opinion.

When you do an investment, you should concern you of all the formalities that you and your company will have to fulfilled to be able to operate your business.

To set-up, a company is a no brainer but they are many problems that can occur along the way. The most common problem we encounter is with the leased premises of the company. Foreign investors will often rent offices prior to register their company. They will sign the agreement with the premise owner as an individual without checking that the owner agrees to assign the lease to the company later on or without checking if the owner agrees that a company be registered on the leased premises.

While you don’t need the formal written permission of the owner of a leased premise to register a company on a building you will need the owner express written permission to register your company to the VAT on this building address.

Now if you cannot get the owner permission to register your company to the VAT, you will not be able to apply for a work permit (you need VAT registration) or to apply later on for a one year visa. They are many other formalities that cannot be accomplished without the permission of the owner of the leased premises. Also, be careful that your Lessor is indeed the owner of the leased premises. If you sign a sub-lease verify that, the contract between the owner of the premises and your Lessor authorize the sub-lease without the written permission of the owner (in general Thai lease form never authorized sub-leasing). So when you talk to your advisor do not only ask him how long it take to set-up your company ask him to give you a details of all the formalities you will have to accomplish in order to get started with your business and how long time will be requested for each formalities and what documents you will need to provide at each step.

Note: This post is an excerpt of Rene Philippe Dubout next book: “How to Invest Safely Into Thailand” to be published in January 2010

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

Originally posted 2009-07-24 11:17:21.

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