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As in most countries, there are three kinds of business organizations in Thailand: sole proprietorships, partnerships and limited companies.

Partnership

Thai and Western concepts of partnership are broadly similar. There are three types of partnerships:

  • unregistered ordinary partnership, in which all partners are jointly and wholly liable for all obligations of the partnership;
  • registered ordinary partnership, which upon registration, the partnership becomes a legal entity, separate and distinct from the individual partners limited partnerships; and
  • limited partnership, in which there are one or more partners whose individual liabilities are limited to their respective contributions, and one or more partners jointly liable without any limitation on all the obligations of the partnership. A limited partnership must be registered.

Limited Companies

There are two types of limited companies, i.e. private companies and public companies. The first is governed by the Civil and Commercial Code, the second by the Public Company Act.

  • A Private Limited Company in Thailand has the general characteristics of a limited company under Western legal systems. It is a legal entity, separate and distinct from those who own and/or run it. It is capable of suing and being sued in its own name.

    A private limited company is formed through a process which leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws), as its constitutive documents. Currently only Three (3) promoters are required to register the Memorandum of Association.

    Shareholders enjoy limited liability i.e. limited to the remaining unpaid amount, if any, of the par values of their shares. The liability of the directors, however, may be unlimited if so provided in the company's Memorandum of Association. The company is managed by a director / board of directors.

    All shares must be subscribed to, and at least 25 percent of the subscribed shares must be paid up. Both ordinary and preferential shares may be issued, but all shares must have voting rights. Thai law prohibits the issuance of shares with no par value. It also stipulates that only shares with par value of Five (5) Thai Baht or above may be issued. There is no limit on maximum par value. Treasury shares are prohibited.

    Currently a minimum of Three (3) shareholders is required at all times.

    There must be a minimum of One (1) director. Thai law does not prohibit a foreigner from being a director.

    In general, there are no restrictions on the minimum paid up capital of a company. The capital must be sufficient for normal business operations.

    In practice, it takes around One (1) week to register a private limited company provided the company name has been reserved. It is not local practice to have shelf companies available for acquisition.
  • A Public Limited Company registered in Thailand may, subject to compliance with the prospectus, approval, and other requirements, offer shares, debentures and warrants to the public and may apply to have its securities listed on the Stock Exchange of Thailand ("SET").

    A minimum of Fifteen (15) promoters is required for the formation and registration of the Memorandum of Association of a public limited company, and the promoters must hold their shares for a minimum of two years before they can be transferred. The Board of Directors of a public limited company must have a minimum of Five (5) members, at least half of whom must be domiciled in Thailand. Shares must have a face value of at least Five (5) Thai Baht each and be fully paid up. Restrictions on share transfers are unlawful except those protecting the rights and benefits of the company allowed by law, and those maintaining a Thai/foreigner shareholder ratio. Debentures may only be issued with the approval of three quarters of the voting shareholders.

A foreigner's choice of the kind of business organization depends on what they intend to do in Thailand. The foreign ownership restrictions imposed under the Foreign Business Act as well as taxation considerations will have to be taken into account.

 
     
   
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