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Posts Tagged ‘Thailand Limited Partnership’

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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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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