General
The most common form of business entity in Thailand is a
private limited liability company. Other forms of business entities include
public limited liability companies and various forms of registered and
unregistered partnerships. Foreign companies can also choose to have a direct
presence by way of a registered branch office.
Although there is no general Thai law requirement to adopt
any specific type of business entity in Thailand, through licensing and minimum
registered capital requirements, participation in certain business activities
requires a form of incorporated entity. The choice of business entity for
foreign investors will, generally, be driven by requirements on foreign
ownership and also by tax considerations. Specific advice should be sought in
each case.
Limited liability
companies
Thai incorporated limited liability companies have similar
features to those of western jurisdictions. Limited liability companies can be
either private or public. Private limited liability companies are governed by
the Thai Civil and Commercial Code (CCC) and public limited liability companies
are governed by the Public Limited Companies Act B.E. 2535 (1992) (PLCA).
Liabilities of the shareholders are limited to the unpaid capital held by the
shareholder. Thai private limited liability companies and public (unlisted)
limited liability companies are required to have at least three shareholders
and 15 shareholders, respectively.
The duties and liabilities of a director of a private
company and a public company are primarily contained in the CCC and the PLCA,
respectively.
The prescribed directors’ duties are both specific and
general. No director of a private or public company may operate a business or
act as a director of a company which is of the same nature and competes with
the business of the company without shareholders’ consent. There are
restrictions on a director’s use of company funds for his own purposes and
personal liability to third parties if a director exceeds the scope of his
authority. Directors are jointly responsible for certain duties such as fulfilling
a number of filing obligations with the Department of Business Development of
the Ministry of Commerce (DBD) and convening shareholders’ meetings within
fixed periods and ensuring minutes are recorded of such meetings and retained
at the company’s registered office.
There is personal liability for directors in the case of
specified forms of wrongdoing and also joint liability for certain actions.
Directors of a private company may be sued by the company for any breach of
their duties, or if the company fails to bring an action, any shareholder or
creditor (to the extent that their claims against the company remain
unsatisfied) can bring a claim against the directors. Shareholders holding a
minimum of 5 per cent of the shares of a public company may bring an action on
behalf of the company seeking damages and the removal of such directors from
office.
Partnerships
Thai partnerships have similar features to partnership in
western jurisdictions. Generally, partnerships are not a separate legal entity
from the partners and the partners (other than the limited liability partners
of a limited partnership) do not enjoy limited liability. Under the CCC, there
are three types of partnerships:
- unregistered ordinary partnerships
- registered ordinary partnerships
- limited partnerships.
Registered partnerships are separate legal entities.
However, partners in both an unregistered partnership and a registered
partnership are liable jointly for the debts of the partnership. Creditors of a
registered partnership must first look to the assets of the partnership to
satisfy his or her debt before making any claim against individual partners.
Creditors of an unregistered partnership can claim against the individual
partners without first claiming against the partnership assets. Limited partnerships
have two classes of partners: limited partners, whose liability is limited to
their contributions to the partnership, and general partners, who are jointly
liable for all the debts of the partnership. Limited partnerships are required
by law to have at least one general partner.
Other structures
Pursuant to Thai law, a foreign corporation can also
establish a presence in Thailand by way of:
a representative office
a regional office
a branch office.
Representative office
A representative office is similar to a branch office but is
restricted to “non-trading” activities. In particular, functions of the
representative office must be limited to liaison with the head office and a
representative office is only permitted to conduct the following activities:
- to procure sources of goods or services in Thailand for its
head office
- to monitor and control quality and quantity of goods its
head office buys or contract manufactures in Thailand
- to advise its head office in relation to distributors or
customers
- to distribute any information relating to new goods and
services of its head office
- to report on the business in Thailand to its head office.
The representative office is subject to the following
requirements:
- it must not generate income from its activities
- it must not receive purchase orders, offer to sell products
or negotiate transactions with any individual or business entity in Thailand
- its operational expenditures must be funded by its head
office.
As the representative office must not generate income, it is
not subject to corporate income tax under the Thai Revenue Code.
Regional office
A multinational corporation may have a regional office in
Thailand to liaise with its branches and affiliates in the Asia region. The
regional office need not be incorporated as a juristic person in Thailand.
The regional office’s functions are to provide its head
office’s branches and affiliated companies with the following services:
- coordination and supervision of the operation of the head office’s
branches or affiliates in the Asia region on behalf of the head office
- advisory and management services
- training and personnel development services
- financial management services
- marketing and sales promotion services
- product development
- research and development services.
The regional office is subject to the following
requirements:
- the head office must have branch offices or affiliates in
the Asia region
- it must not generate income from its activities
- it must not receive purchase orders, offer to sell products
or negotiate transactions with any individual or business entity in Thailand
- its operational expenditures must be funded by its head
office.
The regional office is not subject to corporate income tax
under the Thai Revenue Code.
Branch office
A foreign company incorporated overseas may establish a
branch office to conduct business in Thailand. The branch office is regarded as
the same legal entity as its head office and the actions of the branch office
will be viewed as the actions of the head office.
There is no specific law requiring a branch office of such
foreign company to be registered under Thai law in order to do business in
Thailand. However, in order for such foreign company to have a legal branch
office in Thailand, it is required to submit a set of its constitutional
documents and a power of attorney (appointing a branch manager to act for it in
Thailand) to the DBD. In addition, activities of the branch office are subject
to the Foreign Business Act B.E. 2542 (1999) (FBA) and laws relating to foreign
investment in Thailand. The branch office may be required to seek approval or license
to carry on certain types of business or may be prohibited from carrying on
certain types of business. Where the activity of the branch office is subject
to a license from the DBD, the branch office will be required to receive funds
from abroad for its operation in Thailand of at least THB2 million.
The income derived by the branch office will be subject to
corporate income tax under the Thai Revenue Code.