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Forming a Company

 

1.     Procedures for Establishing a Company

 

1.1         Company Registration

 

1.1.1       Promoters

Company promoters are responsible for registering the company with the Ministry of Commerce (MOC). The promoters must be individuals (not juristic persons). They must be available to sign documentation during the registration process. There must be a minimum of 3 promoters for a private limited company and at least 15 promoters for a public limited company.

 

The promoters of a private limited company must be 12 years of age or older; for a public limited company, the promoters must be 20 years of age or older.

 

Each promoter of a private limited company is required to be among the company’s initial shareholders immediately after the company’s registration and is required to hold a minimum of one share upon the company's registration. They are generally free to transfer those shares to existing shareholders or third parties, thereafter, if they wish. It is not required for the individuals serving as promoters to reside in Thailand.

 

The promoters of a public limited company must also be among the company’s initial shareholders immediately after the company’s registration. All promoters must subscribe for shares, which must be paid up in an aggregate amount equal to not less than five percent of the registered capital. Said shares may not be transferred before the expiration of 2 years from the date of the company’s registration, unless specifically approved at a meeting of shareholders. Nevertheless, it is required that one-half of the individuals serving as promoters have their domicile in the Kingdom of Thailand.

 

Promoters' potential legal liability is generally limited to the par value of the shares they will hold after registration is completed. The promoters are also responsible for paying expenses associated with the company's registration. After registration, however, the company may choose to reimburse the promoters for those expenses.

 

1.1.2       Timing

For Private Limited Company

The registration of the company can be accomplished on the same day as the registration of the Memorandum of Association provided that:

(1)      All registered shares have been subscribed for;

(2)      A statutory meeting is held to transact the business with the presence of all promoters and subscribers, and all promoters and subscribers have approved the transacted business;

(3)      The promoters have handed over the business to the directors; and

(4)      The payment of at least 25% of the total shares has been paid by the shareholders.

 

The company can apply for and obtain the company’s tax ID card and register the Employer account under the Social Security Act with the MOC on the same day as the registration of the Company.

 

However, if the company does not wish to apply for the company’s tax ID card or register the Employer account under the Social Security Act with the MOC on the same day as the registration of the Company, it can apply for the company’s tax ID card and register the Employer account with the Revenue Department and the Social Security Office, respectively, later.

 

For Public Limited Company

A Public Company Limited is required to register its Memorandum of Association with the MOC first, and, thus the company’s registration cannot be done on the same day, as is the case for a private limited company. After the Memorandum of Association has been registered, the promoters must offer shares for sale to the public or to any person in accordance with the law on securities and stock exchange.

 

The promoters must submit to the Registrar a copy of the documents relating to the offer of shares for sale to the public, which shall be prepared and submitted to authorities under the law on securities and stock exchange, within 15 days of the date of submission to such authorities, in accordance with the rules, procedures and conditions prescribed by the Registrar.

 

The promoters shall convene the statutory meeting when the number of subscribed shares reaches the number specified in the prospectus or a public meeting, which must be not less than fifty percent of the number of shares specified in the Memorandum of Association, within 2 months of the date on which the number of subscribed shares reached the specified number but not later than 6 months from the date on which the Memorandum of Association was registered.

 

In the event it is impossible to call the statutory meeting within the specified time, if the promoters of the company wish to proceed further, they must apply for an extension of the period by providing the reason for the delay to the Registrar not less than 7 days in advance of the expiry date of such period. If the Registrar deems it expedient, an extension of between one and three months from the date ending such period may be granted.

 

If the statutory meeting could not be concluded within the period, the Memorandum of Association shall become invalid upon the lapse of such period and, within 14 days from the date on which the Memorandum of Association become invalid, the promoters shall return the payment for share subscription to the share subscribers.

 

After having received the payment on shares up to the number of all subscribed shares, the Board of Directors must apply to register the company within 3 months of the date of conclusion of the statutory meeting. The application must provide the following particulars:

(1)    The paid-up capital, the total amount of which must be specified;

(2)    The total number of shares sold;

(3)    The names, dates of birth, nationalities, and addresses of the directors;

(4)    The names and number of directors authorized to affix signatures on behalf of the company and any power limitations on directors that have been specified in the Articles of Association;

(5)    The location of the head office and branch offices (if any).

 

The company cannot apply for and obtain the company’s tax ID card and register the Employer account under the Social Security Act with the MOC like a private limited company.  Consequently, the company must apply for the company’s tax ID card with the Revenue Department and register the Employer account with the Social Security Office directly.

 

Note: If the registered company falls under the definition of “foreign” (as defined in the Foreign Business Act (FBA)), after registration of the company, it will normally be required to obtain Cabinet approval, a Foreign Business License, or a Foreign Business Certificate, as the case may be, prior to commencing operations.

 

1.1.3       Filings

For a private limited company, all documents associated with the company’s registration must be submitted to the Registrar of the Department of Business Development of the MOC; or, if the company’s location is to be situated outside of Bangkok, it must be submitted to the Office of Provincial Business Development in the province in which the company’s business will be situated. For a public limited company, all documents associated with the company’s registration must be submitted to the Registrar of the Department of Business Development of the MOC at the Central Registration office, Bangkok only, regardless of company’s location.

 

All documents associated with the registration of the company’s tax ID card (in cases where the company does not apply for the company’s tax ID card with the MOC when registering the Company) and VAT certificate must be submitted to the Filing Office of the Revenue Department in Bangkok; or, if the company’s location is to be situated outside of Bangkok, to the Provincial Revenue Office where the company’s location will be situated. However, the Company either locates in Bangkok or outside of Bangkok can also apply for the company’s tax ID card and VAT certificate through the website of the Revenue Department.

 

All documents associated with the registration of the Employer account under the Social Security Act (in cases where the company does not apply for the Employer account under the Social Security Act when registering the Company) must be submitted to the Filing Office of the Social Security Office in Bangkok; or, if the company’s office is to be located outside of Bangkok, to the Provincial Social Security Office in the province in which the company’s business will be situated.

 

1.2         Registration Process

1.2.1       Corporate Name Reservation

The first step of the company registration process is name reservation. To reserve a name, the company can either (1) submit a signed Name Reservation Form (one of the promoters is required to sign in such form) to the Department of Business Development of the MOC or (2) fill in a Name Reservation Form and submit it through the Department of Business Development’s website.

 

The promoter is required to supply the requested company name together with two alternative names. The registrar will then examine the application in order to ensure that:

a)      No similar company names have previously been reserved; and

b)     The names do not violate any ministerial rules.

 

If the applicant’s intended name is in conflict with either of the above, that name will be rejected and the registrar will consider the alternative names submitted. This process can normally be completed within 2 to 3 working days. If all three names submitted are rejected, the applicant will be required to re-submit the form with 3 new names.

 

The registrar has considerable discretion with regard to the matter of company names. Many times, the first name or even the first two names are rejected due to the violation of one of the two rules stated above. Once the name is approved, the corporate name reservation is valid for 30 days, with no extensions. However, after the name has expired, the promoter can still re-apply for Name Reservation again and again if the name is still available.

 

1.2.2       Filing a Memorandum of Association

After the name reservation has been approved, the company must then submit its Memorandum of Association (MOA) to the Department of Business Development of the MOC. For a private limited company, the MOA must include the name of the company, the province where the company will be located, the scope of the company’s business, the capital to be registered, and the names of the promoters. The capital information must include the number of shares and their par value. At the formation step, the authorized capital, although partly paid, must all be issued.

 

For a public limited company, the MOA must at least include the name of the company, the purpose of the company to offer shares for sale to the public, the objective of the company (which must specify clearly categories of business), the registered capital including the type, number and value of shares, the province where the company will be located and the names, dates of birth, nationalities, and addresses of the promoters and the number of shares for which each of them has subscribed.

 

The official fee for registration of the MOA for a private limited company is 50 baht per 100,000 baht of registered capital. A fraction of 100,000 baht is regarded as 100,000 baht. The minimum fee is 500 baht and the maximum fee is 25,000 baht. For a public limited company, the official registration fee is 1,000 baht per 1,000,000 baht of registered capital. A fraction of 1,000,000 baht is regarded as 1,000,000 baht. The maximum fee is 50,000 baht. Although there are no minimum capital requirements, the amount of capital should be respectable and adequate for the intended business operation.

 

However, if the company falls under the definition of “foreign” under the FBA, before commencing its business, the following rules shall be applied:

      If the company engages in activities specified in the FBA, its minimum registered capital would be greater than 25% of the estimated average annual operating expenses of the operation, calculated over 3 years, but not less than 3 million baht.

      If the company does not engage in activities specified in the FBA, its minimum registered capital would be 2 million baht.

 

If the company intends to employ foreigners, other minimum registered capital requirements may also be applied.

 

1.2.3       Convening a Statutory Meeting

Once the share structure has been defined, a statutory meeting is called, during which the following are determined:

·         Adoption of the Articles of Association (by-laws).

·         Ratification of any contracts entered into and any expenses incurred by the promoters in promoting the company.

·         Fixing the amount of remuneration, if any, to be paid to the promoters.

·         Fixing the number of preference shares, if any, to be issued, and the nature and extent of the preferential rights accruing to them.

·         Fixing 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.

·         Appointment of the initial director(s) and auditor(s) and determination of the respective powers of the directors.

 

After the statutory meeting is held, the promoters must hand over all businesses to the directors of the company.

 

1.2.4       Registration

Within 3 months of the date of the statutory meeting, the directors must submit the application to establish the company. If not registered within the specified period, the company’s statutory meeting shall be voided and if the company wishes to register again, the promoters shall arrange the meeting for persons who reserve to buy the shares again.

 

During the registration process, the promoters will be required to supply the name, license number, and remuneration of the auditor whom the company is planning to hire. The company registration fee for a private limited company is 500 baht per 100,000 baht of registered capital. A fraction of 100,000 baht is regarded as 100,000 baht. The minimum fee is 5,000 baht and the maximum fee is 250,000 baht. For a public limited company, the company registration fee is 1,000 baht per 1,000,000 baht of registered capital. A fraction of 1,000,000 baht is regarded as 1,000,000 baht. The maximum fee is 250,000 baht.

 

For a private limited company, the directors shall then cause the promoters and subscribers to pay forthwith upon each share payable in money such amount, not less than 25%, as provided by the prospectus, notice, advertisement, or invitation. For a public limited company, each promoter and subscriber must pay 100% of their subscribed shares.

 

The company is then registered as a legal entity (or juristic person).

 

1.2.5       Registering for Tax Documents

A company liable for corporate income tax must obtain a tax ID card and number from the Revenue Department within 60 days of its date of incorporation or, in the case of a foreign company, from the date it begins carrying on business in Thailand. Companies that have turnover in excess of 1.8 million baht must also register for VAT with the Revenue Department within 30 days of the date the annual turnover exceeded that threshold.

 

1.2.6       Registering for Employer account under the Social Security Act

If the company has at least one employee, the company has a duty to register the Employer account under the Social Security Act with the Social Security Office within 30 days of the start of employment. The process for registration of the Employer account under the Social Security Act can normally be completed within 1 day provided that all required information and documents are fully submitted to the Social Security Office.

 

Reviewed: November 2015

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