Thanakrit Porntanasawat (left) is one of Siam Legal's senior corporate lawyers. He enjoys the broad diversity of his work, in which he manages legal aspects of the business world ranging from setting up companies, drafting company by-laws and resolutions, and applying for Foreign Business Licenses and Treaty of Amity.
Thanakrit's career as in-house corporate lawyer started after obtaining his Bachelor of Law from Chulalongkorn University. In 2009, Thanakrit received his Masters of Law from Ramkhamhaeng University. He has practiced for more than 5 years in the area of Corporate Law.
Corporate law requires him to consult and meet with different clients, both local and foreign, all the while managing the actual legal work of corporate law.
Setting up a company in Thailand
What is the most popular and easiest business structure to set up?
The most popular Thai legal entity would be the Thai Limited Company, or a Private Thai Limited Company, to be exact. Thailand has a lot of foreign investment restrictions. The Private Thai Limited Company is flexible because it allows for 51% Thai ownership, while still allowing the foreign investors to manage and control the company. According to Section 1096 of the Thai Civil and Commercial Code, a limited company requires minimum of 3 shareholders (promoters) and shares are privately owned. The personal liability of the shareholders are limited to the amount unpaid on their shares. As mentioned, the Thai limited company also allows separation between the owners and management.
If 51% of the company is foreign-owned- it would be restricted by Foreign Business Act and would require 3 million baht capitalization (authorized capital requirement) for each restricted business activity. And in order to sponsor one Work Permit for a foreign employee - it requires at least 2 million baht capitalization to be fully paid-up.
What are the deciding factors when choosing a business structure?
If we disregarded the foreign business restrictions, this would largely depend on one's management style and preference since Thai corporate taxes are uniform across all types of business structures. For example, if you are registering a bar or restaurant, then a Limited Partnership would be suitable since it allows the managers have more flexibility than in a limited company structure. For a larger-scale business such as an international trading or manufacturing business, the Thai Limited Company may be a more appropriate structure because there would be more formalities in the business' decision-making process. For example, a hotel would be a type of business where a Limited Company may be more suitable since there are likely to be several investors and they may want a more formal decision-making process. For a type of business such as a transit system or global franchise business, the Thailand Public Limited Company would have to be used because it offers it shares publicly on the stock market. A public limited would require at least 15 promoters; the Board of Directors must have a minimum of five members, at least half of whom must be resident in Thailand.
Ultimately if we take into consideration the Foreign Business Act, most foreign investors should choose the Private Limited Company since it allows the most flexibility in complying with Thai foreign business restrictions. For example, the Limited Partnership allows very little flexibility since if the managing partner is foreign, the entire entity will be considered foreign.
If I am a foreigner who would like to invest in Thailand, how should I start?
Basic steps in setting up business in Thailand includes: 1.) find local Thai partner to do business with if your business is restricted; 2.) find an address or headquarters. You can begin by renting an office.
You can set up your business in a number of ways. Foreigners normally invest in the following business entities: Thai Company Limited (Thai majority own); Foreign Business License (foreign majority owned); By foreign majority own with an exception of Foreign Business License, for example, BOI or US-Thailand Treaty of Amity. Considerations in choosing the best structure would be the local business opportunities, tax advantages, type of business- you may check first if your business is not restricted, then go ahead and process the registration of the company.
For foreign investors, if the business is restricted under Foreign Business Act, your options are: Get a Foreign Business License; Find 51% Thai directors, 49% foreigners. If you take the first option and opted to apply for a Foreign Business License – you have to prove that you have your business technology transfer plan.
Are there any ways that foreigners can do business in Thailand without having to rely on Thai co-investors?
It may be possible to invest without Thai co-investors. There are a few legal ways in which foreign investors can do business in restricted industries, other than a 51% Thai-owned company, such as by applying for a Foreign Business License (i.e. approval from the Thai government) or through a legal exemption, such as the Thai-U.S. Treaty of Amity.
However, applying for a Foreign Business License can be a time-consuming and uncertain process. The application requires that the foreign investor demonstrate that his or her business will be beneficial to the Thai society and economy; this requirement involves indicating the details of a technology transfer plan whereby the foreign investors must share new skills or technology with either their Thai staff or business partners.