Integrity Legal

Posts Tagged ‘Registered Capital’

1st September 2013

Many people living in Thailand establish corporate entities in order to conduct business in the Kingdom. This is no different for foreign nationals wishing to do business in Thailand. In the past, it was relatively easy for foreign nationals to set-up a Thai company. However, over the years the rules regarding corporate formation have grown increasingly complex as the business environment has evolved. At the same time, Thai officials have implemented policies which foster foreign investment (most notably recent regulations which have decreased the Thai corporate tax rate from 23% to 20%). All of these issues gain a new complexion when one considers the fact that as Thai laws regarding corporations have developed so too have the agreements creating the infrastructure which underlies the Association of Southeast Asian Nations (ASEAN).

In the past, Thai authorities did not, in general, heavily scrutinize Thai companies with all Thai shareholders, even such entities having a foreign director. In fact, there was a time when simply maintaining a majority of Thai shareholders provided a degree of protection against substantial official examination. Thai partnerships (both limited and ordinary) were also somewhat immune from significant governmental oversight even where a foreign partner controlled a stake the firm. However, it should be noted that pursuant to the provisions of the Thai Foreign Business Act virtually all Thai business entities with a foreign majority ownership structure have been required to obtain either a Foreign Business License, a Treaty Certificate pursuant to the provisions of the US-Thai Treaty of Amity, or some other form of documentation showing either licensure from the Ministry of Commerce pursuant to Thai law or exemption based upon a Free Trade Agreement.

As of January 2013, a new policy regarding newly established Thai companies came into effect. Thai companies with any foreign directors must now prove that the registered capital has been paid into the company by the relevant shareholders. This is even the case where the company is wholly owned by Thai nationals. Furthermore, where a foreign national maintains 50% (or more) interest in a Thai partnership evidence must be provided showing paid up capital in the enterprise. Registered capital has always been an issue for Thai authorities, but it would now appear that the rules regarding registered capital will be applied more stringently especially where there is a foreign director or partner involved in the Thai company or partnership.

As the ASEAN Economic Community (AEC) is set to come into existence in 2015 and based upon the fact that Thailand has signed various international agreements pertaining to international trade and foreign direct investment there are some who argue that the time is quickly coming when Thai regulation of foreign run businesses will be liberalized. Until that time comes, the rules imposed upon foreigners setting up businesses in Thailand are likely to be more strictly enforced compared to times past.

For related information please see: Thailand Business Registration.

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