The Basics
Generally, a limited Thai company must be “majority owned” by Thai nationals. This effectively means that no less than 51 percent of the shares in the Thai Company must be owned by Thai investors, leaving no more than 49 percent of the shares in the Thai Company available to foreign investors. In certain circumstances, the maximum foreign shareholding is reduced further, for example, to 30 percent (if the company acquires a boat for the purpose of commercial charter but retains a foreign shareholding). Your lawyer will advise you as to the maximum permitted foreign shareholding depending upon the nature of the business the company is involved in.

Shareholders
At the date of writing, a Thai company must comprise of a minimum of seven shareholders, of whom a majority in number must also be Thai investors. However, effective from the 1st July 2008, the minimum number of shareholders required to set up a limited Thai company will be reduced from seven to three. This change will be of considerable benefit to new companies as the reduction in the minimum number of shareholders will make the incorporation process smoother and quicker, particularly for foreign investors who must now only find two genuine Thai co-investors to assist with a joint venture or other form of business, rather than six. The new law will also be of assistance to existing Thai companies who will be able to re-structure the company to reduce the number of shareholders to at least three shareholders.

Directors
A Thai company must have a minimum of one director who may either be foreign or Thai. It is important to note, however, that if the foreign director does not have a work permit he/she will never be able to sign official documents on behalf of the Company.

The Incorporation Process
Under existing laws, the corporate name of the company must be reserved at the Ministry of Commerce and, no later than 30 days thereafter, the Memorandum and Articles of Association must be filed. The precise provisions of the Memorandum and Articles of Association should be discussed in detail with your legal advisors prior to submission to the Ministry of Commerce. The Memorandum and Articles of Association must include the business objectives of the company, registered capital and the names of seven promoters (reduced to three promoters from 1st July).

The amount of authorised capital of the company is an important consideration when setting up a Thai company. Your lawyer will advise you in relation to the optimum capitalisation of the company based upon the nature of the business that the company will conduct. Please note that you can capitalize a company at a value of less monies than you intend to use for your business, and loan additional monies into the company to avoid overcapitalization. All shares in the company must be issued shares.

In the event that a foreign investor is also to be appointed as a director or employee, the company must have at least two million Thai Baht in registered capital (in addition to other procedural requirements) in order for a work permit to be issued.
Once the Memorandum and Articles of Association have been filed with the Ministry of Commerce, a general meeting of shareholders (called a statutory meeting) must be convened. At least seven days before the statutory meeting is scheduled to be held, the promoters must circulate a Statutory Report to the shareholders containing all particulars of the business to be transacted at the statutory meeting. During the statutory meeting, the Memorandum and Articles of Association of the Company are approved, the Board of Directors is elected and an auditor is appointed by the shareholders. Within three months of the date of the statutory meeting, the director(s) of the company must register the Company with the Ministry of Commerce.

Under the existing laws, the requirement to file the Memorandum and Articles of Association prior to convening the Statutory Meeting means that a company cannot be incorporated in less than nine days. Underthe new laws, effective from 1st July 2008, the Memorandum and Articles of Association and the registration of the Company can be effected on the same day, providing that a Statutory Meeting, fully compliant with the laws of Thailand, has taken place in advance and all documentation is in order.

In summary, the new laws should streamline the incorporation and registration process to a certain extent. However, in order to benefit from the changes, legal advice must be sought at an early stage to ensure that the incorporation process runs smoothly and the long term strategy of the company and its investors are planned for at the outset so as to avoid costly and time-consuming re-structuring of the company in the future.

This article was co-written by Desmond Hughes (Partner) and Christian Glanville (Senior Associate) based in the Phuket office of Belmont Limcharoen International Law Firm. www.belmontlimcharoen.com.