1StopConsultants
Your One Stop Solutions business partner in the SE Asia region!
   Home      TH-Types of Business entities
Types of Business entities
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.