This article shall briefly set out the various pro and con points relating to setting up a new company limited in Thailand from various perspectives including Foreign Business Act, management and visa/ work permit considerations.
Registration & Management Considerations
| Pro | Con |
| A new company limited is a separate legal entity from a parent company or other companies in a corporate group, hence it can better limit liability when compared to a branch office or representative office.
Shareholder liability is limited to the unpaid portion of their respective shares (if any). |
Closing a company limited is usually more time consuming and complicated when compared to closing a branch or representative office given that a company requires dissolution and liquidation. If the company holds licenses/ permits they shall also need to be cancelled as part of the process. |
| Share capital requirements for a company limited are advantageous as shareholders are only required to pay up a minimum of 25% of the par value upon registration of the company. However, if the company will need a Foreign Business License (FBL) then the share capital (as required by the Ministry of Commerce) will need to be fully paid up. | A company limited cannot offer its shares to the public and it is prohibited from holding its own shares.
A company limited must have at least 3 shareholders at all times and at least 1 director. |
| Only one director is needed to manage a company limited. | Depending on the business activities of a company limited it may need to obtain various licenses or permits in Thailand such as an import/ export licenses etc. |
| A company limited can potentially have broader business activities when compared to a branch office or a representative office. | Directors of a company limited are under various legal obligations such as the following imposed by the Thai Civil & Commercial Code (CCC):
|
| Certain licenses/permits or terms of reference for Govt. contract bidding require a company limited rather than other types of juristic person. | Authorized director signing authority as stated in the Affidavit of Company Registration can be problematic if the scope of authorization is not sufficiently broad as third parties may not accept such person to sign on behalf of the company. In certain cases, only authorized directors may execute documents to legally bind a company and they may not delegate their power to a third person via a power of attorney. |
Foreign Business Act Considerations
| Pro | Con |
| A company limited is required to apply for Board of Investment (BOI) promotion privileges. A branch office or representative office cannot apply for BOI privileges. | If the new company shall be majority foreign (non-Thai) owned and it shall carry out business activities specified in List 3 of the Foreign Business Act (FBA) then it shall need permission from the Thai Government. Such permission can be obtained via various mechanisms such as:
i. Applying for a Foreign Business License (FBL) from the Ministry of Commerce; ii. Obtaining promotion privileges from the Board of Investment (BOI); iii. Obtaining protection under a Treaty to which Thailand is a party such as the US-Thailand Treaty of Amity. |
Ongoing Legal Compliance
| Pro | Con |
| A company limited must perform an annual audit of its financial statement (FS) and such audited FS must be approved at an annual general meeting (AGM) of the shareholders of the company within 4 months of the end of the financial year. | |
| If a company limited obtains an FBL then for the first three (3) years thereafter it must submit an annual company business operational report with a technology transfer plan report to the Ministry of Commerce to prove its compliance with such plan. |
Taxation Considerations
| Pro | Con |
A company limited is subject to:
|
If the company shall have revenue over 1.8 million baht per year then it must register for VAT. |
Visa & Work Permit Considerations
| Pro | Con |
| 2 million Baht in fully paid up capital per work permit, whereas for a branch and representative office, they instead require 3 million Baht inward remittance in foreign currency. | Requirements for foreign employee non-B visa extension are harder than a branch or representative office given that Thai: foreign staff ratio is 4:1 (not 1:1 as in the case of a branch or representative office). |
Writer: Ryan Crowley – Foreign Services Manager
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: info@dlo.co.th
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