In the current economic environment, many companies in Thailand are facing considerable challenges; in light of this, some companies may regrettably need to be dissolved and liquidated. This article will provide a basic overview of the dissolution and liquidation process including the main steps involved and key issues which shareholders and directors should be aware of before embarking on this course of action.
Dissolution of a Company Limited
In order for a company limited to be dissolved, it must have a suitable reason. Thailand’s Civil and Commercial Code (CCC or the ‘Code’) provides for various cases where a company may be dissolved, these are as follows:
1. If the company’s Articles of Association (AoA) provide for its dissolution in a certain case such as an event occurring;
2. If the company is established for a certain period of time then upon such period of time being reached;
3. If a company is established to achieve a particular objective then upon such objective being achieved.
4. If the shareholders of the company pass a special resolution to dissolve the company.
5. The Thai Courts can also order a company to be dissolved in the following cases:
a. If the company defaults in filing its statutory report or in holding the statutory meeting (this is first official meeting of the company where the promoters hand over the running of the company to the initial director(s));1
b. If the company does not commence business within one year from the date of registration or if it suspends its business for an entire year.
c. If the business of the company can only be carried on at a loss and there is no prospect of its fortunes, being retrieved.
d. If the number of the shareholders is reduced to be less than three.
Dissolving a company as a result of passing of a special resolution of the shareholders & important matters to be aware of
Before calling a shareholder meeting to dissolve a company limited, the shareholders of the company should not only consider the AoA and its requirements but should also review and any valid shareholder agreement in existence as it may also impose certain obligations on the shareholders should they wish to dissolve the company. Moreover, it should be noted that in order to pass a special resolution under Thai law it requires a minimum 75% affirmative vote from the shareholders in attendance at the duly called shareholder meeting. A properly called shareholders meeting (in this case) requires the following:
1. A minimum advance notice to shareholders of fourteen (14) days, whereby the invitation & meeting agenda must be sent to all shareholders by registered post and published at least once in a local newspaper (unless the AoA specifies a longer advance notice period);
2. The agenda in the shareholders invitation must mention the proposed resolution to dissolve the company;
3. The shareholders meeting must normally be called for by the directors at a duly called board of directors meeting;
4. The shareholder’s meeting needs to meet the required quorum, by law this requires shareholders representing at least 25% of the capital of the company however the AoA may stipulate a higher threshold.
If the shareholders pass the required special resolution to authorize the dissolution of the company then the shareholder’s shall also be required to pass a resolution:
• Appointing a Liquidator(s) to liquidate the company and fixing their remuneration;2 and
• Appointing an auditor(s) to audit the company and fixing their remuneration.3
After the above steps are taken then the company is required to register the dissolution together with the name(s) of the liquidator(s) with the Commercial Registration Department at the Ministry of Commerce within fourteen (14) days after the date of dissolution by the liquidators.
Summary of Steps Dissolving and Liquidating a Company Limited in Thailand
1. Issue an invitation to directors to attend a Board of Directors (BoD) meeting
2. Hold the BoD meeting to pass resolutions to:
2.1 Approve the dissolution of the Company and related matters;
2.2 Summon the 1st extraordinary meeting of shareholders (EGM).
3. Issue an invitation to the shareholders for the 1st EGM plus publish once in local newspaper.
4. Hold the 1st EGM of shareholders to:
4.1 Pass a special resolution (requires 75% affirmative vote) to approve the dissolution of the Company; and
4.2 Appoint the Liquidator and fixing their remuneration; and
4.3 Appoint the Auditor and fixing their remuneration.
5. Liquidators to issue a notice to the creditors, debtors of the Company (if any) and publish the dissolution notice at least once in a local newspaper.
6. Liquidators to file an application for registration of the dissolution with the Department of Business Development (DBD) within fourteen (14) days from the date of the passing of the special resolution to dissolve the company. If this application is accepted the MOC officer will issue a written confirmation affidavit (the “Affidavit”).
7. Filing a notice with the RD regarding the dissolution of the company and returning the original VAT registration certificate (form Phor.Phor.20) and the original SBT registration certificate (form Phor.Thor.20) and related documents to the Revenue Department (within 15 days from the date of dissolution).
8. Three (3) months after the date of the dissolution which is approved by the company, the Liquidators are required to file a report(form Lor.Chor.3) to the Company Registrar at the MOC providing feedback on the status of the liquidation. While the liquidation is in process this form must be submitted every three (3) months until the liquidation is completed.
9. Within 150 days of the date of the Affidavit, the liquidator(s) must file a final corporate tax return (Form Phor.Ngor.Dor.50) to the RD.
10. When liquidation is completed, the liquidators must summon a meeting of the shareholders (2nd EGM*) to approve the report on the outcome of the liquidation.
* Remark: If the liquidation remains unfinished for more than 1 year, then the Company must have a shareholder meeting on a yearly basis to pass resolutions to appoint a new Liquidator or reappoint the existing one & approve the report on the result of the liquidation etc. (i.e. not completed yet), whereupon further meetings of shareholders will need to be held (i.e. the 3rd or 4th or 5th EGM’s) until the liquidation is completed.
11. Hold 2nd EGM to have the shareholders resolve to approve the report on the result (completion) of the liquidation. Note that this can only occur after the Company receives the notification letter from the Director-General of the RD approving the striking-off of its name from the VAT register and/or SBT register.
12. Within fourteen (14) days of the 2nd EGM having resolved to approve the report on the result (completion) of the liquidation, the liquidators must file an application for registration of the completion of the liquidation process with the DBD.
1The Court is not obligated to dissolve a company limited in such case, rather it can decide to order the statutory report be filed or the statutory meeting be held as it thinks fit.
2Ordinarily the directors of the company are the liquidators unless the AoA provides otherwise or the cause of the dissolution is bankruptcy. However, if there are no persons to act as liquidator then the public prosecutor or an interested person (such as a shareholder) can submit an application to the court asking for an appointment to be made to fill this position.
3When choosing the auditor of the company, the shareholders should be careful to avoid parties which have a conflict of interest such as auditors which are linked with the accountants.
Dharmniti Law Office Co., Ltd.
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Tel: (66) 2680 9777 Fax: (66) 2680 9711
Email: ryan@dlo.co.th or chalapunj@dlo.co.th
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