The various legal types of business in Thailand

In Thailand, business organisations can be divided into two types: non-profit organisations and business organisations. Non-profit organisations have to register under the Civil and Commercial Code, and are divided into associations and foundations. Associations can conduct any activity that is ongoing and not conducted for the purpose of profit. Foundations consist of property allocated specially for public benefit, and also are not-for-profit. Business organisations can be divided into three types: partnerships, limited companies and joint ventures.

Partnerships

Partnerships are split into ordinary partnerships and limited partnerships. Ordinary partnerships may or may not register as a legal entity. Non-registered ordinary partnerships have no status as a legal entity and all partners have joint, unlimited liability for all the partnership’s obligations. Registered ordinary partnerships are legal entities, and their liability for obligations may be enforced first against the legal entity. Limited partnerships must be registered and have two kinds of liability: limited liability partnerships, whose liability is limited to their limited partners’ respective contributions, and unlimited liability partnerships, whose partners have joint, unlimited liability for the partnership’s obligations.

Limited Companies

There are two types of limited companies: private companies, governed by the Civil and Commercial Code, and public companies, governed by the Public Company Act. A private limited company’s capital is divided into equal shares. Three or more persons, the promoters, subscribe their names to a memorandum to form a limited company. The liability of the shareholders in such cases is limited to the amount, if any, of the unpaid share capital, and the liability of directors may be unlimited if indicated in the memorandum. All shares which the company proposes to be registered must be subscribed, and at least 25% of the subscribed shares must be paid up. Shares can be ordinary or preference shares, which carry voting rights. The value of a share must be not less than BT5 ($0.15).

Private limited companies must have at least three shareholders and cannot offer shares to the public or issue debentures. Under the Foreign Business Act, participation by foreigners in certain businesses is allowed up to a maximum of 49% of share capital, and 51% must be held by Thai nationals. However, under certain conditions, a private limited company may be 100% owned by foreigners.

A public limited company can offer shares, debentures and warrants to the public. To establish a public limited company, a minimum of 15 promoters are required, and the promoters must hold their shares for at least two years. Each share must have a value of at least BT5 ($0.15) and be fully paid up. The board of directors must have at least five members, with half of them Thai nationals. Restrictions on share transfers are unlawful, except to protect the rights and benefits of the company.

Joint Ventures

In Thailand, a joint venture is formed by a contractual arrangement among two or more people or legal entities. A joint venture must be registered at the Revenue Department and is considered a single entity for taxation purposes. A joint venture is normally used when large, independent foreign and Thai contractors come together to work or do business on large-scale construction projects.

Other Forms

Foreign firms may carry out certain businesses through a branch office, which is required to maintain accounts only relating to the branch in Thailand. A representative office is an office in Thailand by a foreign company engaged in international trading, but it cannot engage in any profit-making enterprise. The scope of activities of a representative office is limited to certain approved activities. A regional office is similar to a representative office. It must obtain a licence under the Foreign Business Act of 1999 and is limited in its permitted activities.

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The Report: Thailand 2016

Legal Framework chapter from The Report: Thailand 2016

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This article is from the Legal Framework chapter of The Report: Thailand 2016 . Explore other chapters from this report.