Introduction to Private Company Limited
The Private Company Limited is the standard and most common company type in Thailand. The two basic characteristics of a Private Company Limited are that the Shareholder enjoy limited liability and that the Directors of the company can differ from its Shareholders (i.e. separation of ownership and management).
Shareholders, Board of Directors
The liability of Shareholders is limited to their capital contribution to the company and, if a certain proportion of the registered capital has not been paid up, to the remaining unpaid amount. The total capital of Private Limited Companies is composed by individual shares of equal value. The Civil and Commercial Code, by which Private Limited Companies are governed, prescribes a minimum amount of 5 Thai Baht per share. Different share classes are allowed, each share must, however, have voting rights. At the formation of the company, all shares must be subscribed and no less than 25 percent of the total capital must be paid-up. Treasury Shares are prohibited. The Civil and Commercial Code requires that at any given moment in time, there are no less than 3 shareholders. With regards to minimum capital requirements, Thai law does not formally foresee any, however, the capitalization of a company must be adequate for its business.
Private Limited Companies are managed by a Board of Directors, which is elected by the Shareholder Assembly. The Board of Directors is responsible for running the company and all of their actions must be in accordance with government laws, especially the Civil and Commercial Code, tax regulations and with the company’s Charter and By-Laws. The most basic duties of Directors are:
- Duty of honest action
- Duty of care
- Duty of sound accounting
- Duty to participate in shareholder meetings
The liability of the Directors might is governed by the Civil and Commercial Code, by the Penal code, the Accounting Act and the Act on Offence. If not otherwise governed by the Memorandum of Association, the liability is limited to failure to act and negligence and willful culpable negligence. This liability might exist against the company, its Shareholders, its suppliers, its customers, third parties as well as the government.
Since Private Limited Companies are Juristic Persons, they need to be registered with the Commercial Registrar. While such a registration took up to 6 weeks in the past, since 2008 it can be completed within just one day, given that all documents are submitted error-free. The basic registration process looks as follows:
The first step in the company formation procedure is the Name Registration. Companies must obtain a name that is unique and does not violate any law (e.g. certain terms like Investment are prohibited). It is advisable to check with the data base of the Department of Business Development online whether the planned name is available. Please note that the company name will be registered in Thai (with phonetic translation), even if the name is in English. If the name has been used previously by another company, the usage of this name must have been ceased for at least 2 years. Its important to note, that .co.th Domains can only be registered for the exact company name.
Once the name check is completed, there are two ways to register a company name:
- Online, on the Department of Business Development’s website for free
- In person at the Department of Business Develpment for a fee of 20 Thai Baht
The second step in the registration procedure is to file a Memorandum of Association. The Memorandum of Association governs the relationship between the company and the outside world. It must contain at least the following details:
- The name of the company (as per approved Name Registration)
- The province where the main office will be located
- The objectives of the company
- The liabilities of the shareholders (unpaid amount of capital)
- The amount of share capital, division hereof and fixed amount per share
- The name, address, occupation and signatures of the promoters and number of shares for each promoter
At least 3 Promoters are necessary for filing the Memorandum of Association. All promoters must be natural persons, they can be Thai or Non-Thai, but all of them must become initial Shareholders (shares can be transferred, no holding requirements). The signing of the Memorandum of Association must be witnessed by two witnesses who are natural persons. The registration of the Memorandum of Association with the Commercial Registrar costs 500 Thai Baht for every 100,000 Thai Baht of registered capital with a minimum fee of 500 Thai Baht and a maximum fee of 25,000 Thai Baht. As for most other steps, the Department of Business Development provides standard forms which can be found in our download section.
As a third step, the Promoters need to hold a Statutory Meeting (can take place on the same day as the actual filing of the Memorandum of Association). This meeting needs to cover the following agenda points:
- Acceptance of the Articles of Association (i.e. By-Laws), if the company intends to use such
- Ratification of any contracts and/or any expenses the Promoters might have closed/faced, if any
- Fixation of the amount to be paid to the Promoters as compensation for their efforts, if any
- Number of shares, nominal value of shares and allocation of these. If there are different share classes, the preferential rights need to be stated. If the capital contribution of one or more of the to be Shareholders is being paid-up other than in money (e.g. property, services), these contributions need to be valued
- Appointment of the first directors, determine their powers
- Appointment of the auditor (can be changed later)
As a final step, all documents need to be filed with the Commercial Registrar. Besides the fee for filing the Memorandum of Association, the Department of Business Development charges 500 Thai Bat of every 100,000 Thai Baht of registered capital for the registration of the Private Company Limited, with a minimum of 5,000 Thai Baht and a maximum of 250,000 Thai Baht. All forms needed for the registration of a Private Limited Company can be found in our download section. Please note that all documents must be filed in Thai.
Once the Department of Business Development has accepted the filing, the Private Limited Company formally speaking comes into existence, it constitutes a Juristic Person. After the successful establishment, the Private Limited Company might apply for other official registrations, mainly the Corporate Tax ID registration, the VAT registration and the Social Security registration.
Since the set-up procedure of a Public Company Limited does not substantially differ from the set-up procedure of a Private Company Limited except that there are usually more strict regulation with regards to the number of promoters, shareholders etc., we will not describe that procedure in details.