The by far most common form of business in Thailand are Limited Companies. This is mainly due to two reasons:
- In Limited Companies the liability of its subscribers is limited to the amount invested or guaranteed to the company,
- Limited Companies allow the separation between investors and management, since the management does not need to hold shares at the same time
Limited Companies capital is divided up into shares of equal nominal value. The Civil and Commercial Code prescribes 5 Thai Baht as minimum capitalization per share, different share classes might exist. However, every share needs to have voting rights.
Limited Companies are governed by a Board of Directors which is elected by the Shareholder General Assembly. The Shareholder Assembly represents the owners of a Limited Company and has the final word on most issues. The Board of Directors runs the company on an operational level. Thai legislation recognizes two types of Limited Companies, Private Limited Companies and Public Limited Companies:
Private and Public Limited Companies differ mainly with regards to the scope of their offering of shares, warrants and debentures (e.g. listing on the Stock Exchange of Thailand), the minimum number of Shareholders and Directors, disclosure duties and are governed by different laws.
Foreign Business Act
Both Private and Public Limited Companies are subject to the Foreign Business Act, which limits the participation of Non-Thai nationals in Limited Companies for many industries to 49 percent.
In the past it was common to use nominee Thai Shareholders to fulfill these requirements. Therefore, in 2006, the Commercial Registrar prescribed new rules for the registration of both public and private limited companies. Basically, Thai shareholders need to disclose the source of their investment, if:
- Non-Thai nationals hold between 40 and 50 percent of the shares of the company
- Non-Thai nationals hold less than 40 percent of the shares of the company, but a foreigner is a director of the company with the power to bind the company.
Following the change of registration rules in 2013, the application for the incorporation of a Limited Company must be accompanied by a letter of the Thai shareholder’s bank certifying the financial position of the shareholder (i.e. showing funds of not less than the intended investment amount).
For more details, please refer to our Investment in Thailand section.
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