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Posts Tagged ‘Thai Foreign Business Act’

11th July 2016

In a previous posting on this blog the issue of single person incorporation of Thai companies was discussed. Back in September of 2015 it was revealed that the officials with government offices such as the Ministry of Commerce and the Department of Business Development were reviewing the possibility of amending the existing corporate laws in Thailand so as to allow an incorporated entity such as a limited company to be owned by one individual person. This would be similar to legislation in countries such as the United States which allows individuals, acting alone, to set up structures such as limited liability companies on their own.

It recently came to this blogger’s attention that some new developments have taken place with regard to this topic. To quote directly from the website of The Nation Newspaper:

THE Business Development Department has reviewed a new draft law and added in the document that a foreign individual cannot register a business in the Kingdom. The move aims to prevent |foreign enterprises from competing against Thais in many businesses that should be preserved for Thais. The original draft, known as “one person, one company,” states only that a single person can register a business in Thailand.

As readers of this blog and website may be aware there are many provisions enshrined in Thai law designed to protect Thai enterprises from foreign competition in Thailand. Most notable is the Foreign Business Act which specifically designates the type of business activities which are restricted to foreign nationals. As the website of Coconuts Bangkok noted:

This addition to the draft is designed to keep foreign businesses from competing against Thai companies in the long list of industries that the government has deemed reserved for Thai nationals only.

The aforementioned list of industries is detailed in the provisions of the Foreign Business Act. Currently, Thai law requires that a limited company have at least 3 shareholders in order to be registered pursuant to Thai law. This proposed law would change those provisions. It appears that Thailand would be the third country in the Association of Southeast Asian Nations (ASEAN) to adopt this type of change while Malaysia is apparently reviewing similar legislation.

The final draft of this proposed law remains to be seen, but it seems logical to assume that easing of corporate regulation of Thai company structures will result in increased business activity.

It should be noted that pursuant to the terms of the US-Thai Treaty of Amity, it is possible for American citizens to own virtually 100% of their companies in Thailand notwithstanding the provisions of the Foreign Business Act. It remains to be seen how these changes to the law will impact the registration of so called Amity Treaty Companies.

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16th August 2013

Recently, the Foreign Minister of the Kingdom of Thailand visited the United States of America and was welcomed by the American Secretary of State. Some of the remarks made in a press conference may be notable to those interested in American foreign policy and the relationship between the United States and Thailand. To quote directly from remarks made by Secretary of State John Kerry in a recent State Department press release:

I want to thank our friends in Thailand, who represent the longest security relationship, the longest partner that we have in Asia – 180 years of a treaty relationship with Thailand. They are our partner in the largest multinational field exercise that takes place in the region.

The Treaty noted above is the Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the United States of America (sometimes colloquially referred to as the US-Thai Treaty of Amity). This Treaty could be viewed as an update of previous Treaty agreements made prior to the Amity Treaty’s ratification in 1966. The Treaty of Amity represents one of the best sources of legal protection for American Citizens and American Companies conducting business in Thailand as it provides “National Treatment” to American companies in Thailand. So long as American companies (or American owned Thai Companies) receive certification from the Thai Ministry of Commerce, they arre permitted to legally operate in Thailand notwithstanding the provisions of the Thai Foreign Business Act. There are some restrictions on the business activities which an Amity Company may undertake, but overall the Treaty is a significant boon to American businesses operating in Thailand.

The Treaty not only symbolizes strong Thai-American relations in the commercial sphere, it also is seen as a symbol of America’s long standing diplomatic and security relationship with the Kingdom of Thailand, as Secretary Kerry noted in the aforementioned quote. Thai Foreign Minister Dr. Surapong Tovichakchaikul also commented upon the close relationship between Thailand and the United States, citing a relatively recent visit to the Kingdom of Thailand by President Obama:

Last November, President Obama visited Thailand as his first stop in Southeast Asia after his reelection. His visit served to strengthen our strong partnership. My meeting with Secretary Kerry today will be a good chance to continue dialogue on our future partnership, especially as we mark 180 years of Thai-U.S. diplomatic relations this year.

Those wishing to read this press release in detail are encouraged to click HERE.

As the prospect of an integrated ASEAN Economic Community draws near, it stands to reason that the United States and Thailand will continue to maintain their close relations as Thailand will likely prove to be a significant participant in the pan-ASEAN economic bloc. This important role for Thailand within the ASEAN framework could also prove beneficial to American business in Thailand. Only time will tell.

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30th July 2013

In a previous posting on this blog regarding partnerships in Thailand, Thai Ordinary Partnerships and Thai Registered Ordinary Partnerships were discussed. There is another type of partnership structure in Thailand which may be more familiar to those from Western countries: the Thai Limited Partnership. Limited Partnerships have been a method of structuring an enterprise in jurisdictions such as the United States, the United Kingdom, and the Commonwealth nations for quite some time. Meanwhile, jurisdictions in the Eurpoean Union allow for similar structures. Thailand was a relatively late jurisdiction when it came to allowing for use of such structures, but now it may be possible for promoters of a business to form this type of partnership.

A Thailand limited partnership generally consists of, at a minimum, at least one Managing Partner who manages the business and at least one Limited Partner. Depending upon the unique circumstances of a given business enterprise there could be one or more managing partners and one or more limited partners. Although managing partners are personally liable for partnership debts, limited partners are not persoally liable for partnership debts and are only personally liable for the their capital contributions, especially if said contributions have been removed, in whole or in part, or if said contributions were never submitted. It should be noted that limited partners may lose some degree of their limited liability if the limited partner engages in the managment of the partnership or allows his or her name to be used in the Limited Partnership’s legal name. Limited Partnerships in Thailand must register their partnership agreement with the Ministry of Commerce in the same manner as a Registered Ordinary Partnership. As a general rule, Limited Partnerships are taxed in much the same manner as Registered Ordinary Partnerships.

Limited Partnerships which include a foreign national may be subject to the provisions stipulated in the Foreign Business Act. Therefore, where a foreign national owns a majority interest in a Thai Limited Partnership the Partnership may need to apply for a Thai Foreign Business License. However, American Citizens wishing to structure a limited partnership in Thailand may be eligible to obtain an Amity Treaty Certificate for the partnership pursuant to the terms of the US-Thai Treaty of Amity. If a foreign national owns simply a minority interest in a Thai limited partnership as a limited partner, then the partnership may not be required to obtain a foreign business license. However, the foreign national would not be able to manage the limited partnership.

Limited partnerships are able to be converted into limited companies so long as such conversion complies with relevant Thai corporate law.

For information regarding Thai Limited Companies please see: Company Registration Thailand.

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9th July 2013

Those researching business and corporate entities in Thailand (sometimes referred to as Thai juristic persons) often come upon information pertaining to Thai partnerships. Partnerships in the Kingdom of Thailand are different from Thai limited companies and Thai sole proprietorships for a number of reasons. For example, Thai limited companies provide the shareholders with limited liability. This means that liabilities incurred by a Thai limited company do not generally flow through to the individual shareholders (that said, under some circumstances, directors of Thai companies may have some legal liability to the company itself). Depending upon the type of Thai partnership, the partners may or may not have limited liability. Thai Partnerships differ from Thai Sole Proprietorships for a number of reasons, but the most obvious difference is that Thai Sole Proprietorships, as the name suggests, are operated by one natural person.

In the Kingdom of Thailand, there are different types of partnerships: Thai Ordinary Partnerships, Thai Registered Ordinary Partnerships, and Thai Limited Partnerships. In this posting only ordinary partnerships and registered ordinary partnerships will be discussed as Thai limited partnerships will be discussed in a later posting.

Thai Ordinary Partnerships

Thai ordinary partnerships are sometimes referred to as unregistered partnerships. The name “unregistered partnership” may stem from the fact that Thai ordinary partnerships are not required to have a written partnership agreement and even where a written partnership agreement exists it is not required that the aforementioned agreement be registered. That being stated, ordinary partnerships are still required to register their existence as a business entity with the Thai Ministry of Commerce. However, notwithstanding the fact that an ordinary partnership has registered with the Ministry of Commerce, this type of registration should not be construed to mean that the partnership is a Thai registered ordinary partnership. All partners in a Thai ordinary partnership have unlimited liability for the acts of any of the other partners which occur in the course of the partnership’s business. Creditors of an ordinary partnership may make claims against the property of any of the partners and do not need to first make a claim against the assets of the partnership.

Thai Registered Ordinary Partnerships

Thai Registered Ordinary Partnerships must be registered with the Ministry of Commerce in the Kingdom of Thailand. When registering this type of partnership a copy of the written partnership agreement, information regarding capital contributions as well as managerial duties of the partners, and objectives of the partnership must be included in the application for registration. In the eyes of Thai law, a registered ordinary partership is viewed as a distinct entity separate and apart from the partners. However, the legal distinction between the registered ordinary partnership and the partners as individuals should not be construed to mean that the partners have limited liability. That stated, if a claim is to be made by a creditor against a Registered Ordinary Parntership, then the creditor must first seek to make their claim against the assets of the Registered Ordinary Partnership before making a claim against either of the individual partner’s assets.

There are significant differences in the way in which registered ordinary partnerships and ordinary partnerships are taxed in the Kingdom of Thailand. Therefore, those interested in establishing either of these types of partnerships are encouraged to contact a legal professional in Thailand to ascertain whether either of these types of structures are suitable.

It should also be noted that foreign nationals wishing to set-up a Thai Registered Ordinary Partnership or a Thai Ordinary Partnership may be barred from doing so pursuant to the provisions of the Thai Foreign Business Act. In some cases, a Thai Foreign Business License may be obtained depending upon the type of business the foreign nationals wish to undertake through use of a Thai partnership. American citizens wishing to set-up a Thai partnership (either a registered ordinary partnership or simply an ordinary partnership) may obtain certification for their proposed partnership pursuant to the terms of the US-Thai Treaty of Amity, provided that the proposed business activity is not restricted under the terms of the Treaty; and, upon being approved for a Treaty certificate, operate their partnership notwithstanding the provisions of the Foreign Business Act.

For related information please see: Thailand Company Registration.

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10th January 2010

Work Permits are always an important issue for foreign nationals living in Thailand. Under Thai law, the right to work is bifurcated from the right to remain in the Kingdom. Therefore, many find that it can be easy to be lawfully admitted to Thailand on a validly issued Thai visa and remain for relatively long periods of time, but it can be difficult to obtain work authorization in the form of a Thai work permit. One of the reasons for this difficulty is that the Thai Foreign Business Act restricts the types of activities that foreign nationals are allowed to engage in while present in Thailand. In many ways, Thailand has maintained protectionist measures in order to insulate the Thai labor force from some of the detrimental side effects of globalization.

Recently, it was announced that the government would be easing some of the restrictions in the Thai Foreign Business Act. At the same time, the Thai government has also announced that the rules still on the books would become the subject of more stringent enforcement. This leads us back to the issue of work permits. It would appear that the government is preparing to allow foreign companies to engage in certain previously restricted activities, but the upshot of this is that the rules and regulations regarding activities that are still restricted will be enforced more diligently than before.  To quote a recent posting on Thaivisa.com from the British Chamber of Commerce in Thailand Magazine:

“Unfortunately, the Labour Department has revised Work Permit regulations and a new list of the types of work foreigners are allowed to conduct will be issued by February 2010 at the latest. According to the current draft of the Ministerial Regulation, the new rules and practice will impact on current work permits (when they are extended) and also new work permits. [...] Despite the position of all foreign Chambers that liberalisation and streamlining of visa and work permit regulations would be advantageous for attracting and retaining much needed foreign investment, certain ministries appear to have taken the opposite view.”

It would appear that the Thai Ministry of Labour is taking a rather tough stance with regard to the enforcement of work permit regulations.

Although it is quite common to see such attitudes in difficult economic times, this author cannot help but wonder if this is the best course of action for the overall Thai economy. Small and medium sized businesses owned or managed by foreign nationals will likely be the most adversely impacted by this new policy and there is strong evidence that such enterprises act as the driving force for the economy-at-large. In these tough economic times, attracting foreign skilled labour and investment may be better than promulgating rules that make working in Thailand more difficult.

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