Integrity Legal

In a recent article in the Bangkok Post it was reported that the current government in Thailand is taking measures to foster growth for small to medium sized enterprises (SMEs) in Thailand. It would appear that the present government is eager to provide encouragement for small and medium sized businesses in Thailand. Furthermore it seems as though Thai officials are attempting to position the country as a location of choice for small business start-ups within the greater framework of the Association of Southeast Asian Nations (ASEAN) and the ASEAN Economic Community (AEC). However, of particular interest to this blogger was the mention of possible rule changes with regard to Thai corporate regulations pertaining to Thai Company registration and the shareholdings thereof. To quote the aforementioned article directly:

Mr Pongpun said the authorities were improving regulations on the incorporation of private companies to allow the incorporation of a juristic person registered by only one person.

At present, corporations (also referred to as juristic persons) in Thailand must have a minimum of three (3) shareholders in order to incorporate under Thai law. It should be noted that prior to an amendment to Thai corporate law at approximately the turn of the century it was required that all companies registered in Thailand have a minimum of 7 shareholders in order to incorporate pursuant to Thai law. Many at the time felt that the 7 shareholders requirement was too cumbersome and for that reason the statutorily required number of shareholders was reduced to 3. Since then, there have been those who have noted their belief that allowing Thai corporate structures with only one shareholder would bring Thai corporate law more in line with similar bodies of law globally. For example, in many American jurisdictions Limited Liability Companies or LLCs are only required to have one member/shareholder, while similar Limited Company (Ltd.) structures are allowed in Britain and the Commonwealth nations and many European jurisdictions allow for similar corporate structures as well.

It remains to be seen whether Thai corporate law will be amended to allow for single shareholder corporations in Thailand. It is a good sign that such structures are being considered by Thai officials especially since such structures would be especially beneficial to small business owners in Thailand. Of special note to American readers, pursuant to the provisions of the US-Thai Treaty of Amity it is possible for American Citizens to own 100% of an Amity company registered in Thailand. Should the aforementioned changes take place it could result in Americans being able to own their small business singularly without any Thai shareholders.

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Posted in Amity Treaty, Thailand Business, Thailand company, Thailand Legal News | No Comments »

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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Posted in Thailand Business | No Comments »

A common method of land ownership in Thailand is through use of a Thai Limited Company. In many cases, a juristic person is incorporated to hold Thai property on behalf of the principal investors in the company.  Over the past three years the Thailand Real Estate market has been somewhat stagnant, but recently there seems to have been something of an upward trend in Real Estate transactions. This has resulted in the Ministry of the Interior raising the fees for land transactions, particularly with respect to land transactions executed on behalf of a corporation. To quote a Pattaya Times article promulgated on the website Thaivisa.com:

“‘A nationwide increase in land offices fees will go in effect on March 2,’ a spokeswoman for the Ministry of Interior announced in Bangkok. The fees for purchases and sales involving a Thai company limited which most foreigners use to buy land will go up from one percent to six and a half percent of appraised or contract value, whichever is higher. The head of the Chonburi Land Office, Director Vaiyavuth Surapruik, said, ‘In 2008 the fees were lowered to help the economy. This has stimulated the sale of properties. Since the fees were lowered almost two years ago there has been no slow-down in the number of transactions at the land office in Banglamung which services Pattaya so now fees will go back up in order to increase government revenues.’”

On the one hand, the recovery of the Thailand Property market is definitely a positive development, and hopefully a sign of an underlying upsurge in the overall Thai economy. This upswing in Thai property sales may also be indicative of an overall upward trend in the world wide economy. However, for those who are thinking of purchasing Thai property be it land or another form of Thai Real Estate such as a Thai Condo, this development will likely be viewed negatively as it will result in increased fees for the buyer or seller of Thai property.

This fee increase will also have an impact on individuals as the aforementioned article concluded:

“Property transfered between individuals will be charged three percent fees if owned for more than two years by the current owner. If owned less than two years the fee is higher, between five and six and a half percent.” [sic]

Property transfers between individual foreigners is probably as common, if not less common, than property transfer between corporations controlled by foreigners. That being said, under certain conditions a foreigner can own a Thai Condominium in freehold and therefore could be effected by these increased individual transfer fees.

For related information on this blog please see: Thailand Property Law.

Tags: Thai Company, Thai Condo, Thai Property, Thai Real Estate, Thai Real Estate Law, Thailand company, Thailand limited company, Thailand Property, Thailand Property Law, Thailand Real Estate
Posted in General Legal Information, Thailand Business, Thailand Property, Thailand Real Estate, Upcoming Legislation | No Comments »

Many people in Thailand, both foreign and Thai, choose to incorporate Thai businesses. Thailand is one of Southeast Asia’s major trading locales and as a result many individuals and business concerns need a corporate presence in the Kingdom of Thailand. In many cases, companies are incorporated with substantially similar articles of incorporation. That being said, some companies opt to incorporate with unique provisions regarding different types of shareholder rights in the corporate charter. These different types of rights can have a major impact upon the running of the business because these rights can have a collateral impact upon employee compensation, shareholder vote tabulation, and banking issues. Therefore, an understanding of share classification can be helpful to those who are thinking of incorporating a Thai company.

In the articles of association (also known as articles of incorporation) of a Thai limited company, one could denote the rights associated with different share classifications. Therefore, some shares could simply hold an equity interest in the company while not having any voting rights at shareholder meetings. Other types of shares could hold little or no equity in the company, but maintain voting rights regarding the Directors of the company. If a company owns Thai property, there could be specific shares that have certain rights in relation to the Thai property concerned. For example, a Thai company that owns Thai real estate could place special rights in the hands of certain shareholders with regard to said real estate. If a Thai company owns a Thai Condo, then share classification could be used to delineate the rights of individuals with regard to the Condo premises.

For those who are interested in Thai limited companies certified under the US-Thai Amity Treaty, these same principals could apply to an Amity Company. One shareholder could retain a sizable equity holding while another holds certain voting rights. The same could be said about a Thai limited company that has obtained a Foreign Business License. A company such as this could incorporate special shareholder rights in the provisions of the articles of association or incorporation.

These issues bleed into the realm of Thai Immigration because the shareholder in a Thai company could apply for a Thai business visa. The basis for such an application could be an impending shareholder’s meeting that the foreign national must attend. The approval of such an application would depend upon the Thai Embassy or Consulate concerned. If present in the Kingdom on another type of visa, an O visa, for example, it may be possible for the shareholder to attend a meeting in order to vote his or her shares.

Tags: Amity Treaty, Amity Treaty Company, Corporate Law, Limited Company Thailand, Shareholder Classification, Thai Company, Thai Limited Company, Thailand company, Thailand limited company, Treaty of Amity Company, US-Thai Amity Treaty, Voting Rights
Posted in Amity Treaty, Thailand Business, Thailand company, Thailand Condo, Thailand Embassy, Thailand Property, Thailand Real Estate, Thailand Visa | 22 Comments »

Thailand has become a major epicenter of trade in Southeast Asia. The Kingdom also remains one of the most important trading partners of the United States of America, the European Union, and the United Kingdom. Many businesspeople who do business in Thailand must deal with restrictions imposed upon foreigners under the Thai Foreign Business Act. American Citizens enjoy some benefits under the provisions of the US-Thai Amity Treaty. This Treaty was promulgated in the mid-60′s. In Thailand, Treaties are considered the “law of the land,” and are considered superior to locally drafted legislation (this notion is similar to many of the ideas codified in the American Constitution, specifically the Supremacy Clause).  As the Amity Treaty is the “law of the land,” it supersedes the Foreign Business Act.

A Thai Limited Company certified under the provisions of the Treaty of Amity is a good vehicle for conducting business in Thailand, but the Treaty does have caveats and Companies conducting certain types of business cannot obtain Treaty Certification. Most importantly for some, Amity Treaty Companies cannot own land. Even though an Amity Company is accorded “National Treatment,” the company is barred from holding property in the form of Thai Real Estate. Although, technically it may be possible for an Amity company to purchase a Condo in Thailand.

Aside from ownership of Thai property, there are other activities which an Amity Company cannot engage in, such as: Inland Transportation, Communications, Fiduciary Functions, and the Practice of Professions. Each of these types of activity are reserved to Thai nationals and/or Thai Companies. Even still, the Amity Treaty provides American Citizens with the opportunity to own virtually 100% of a Thai company. For many types of businesses the Amity Treaty is a perfect solution to the problems imposed upon foreigners by the Foreign Business Act.

Some have postulated regarding the possibility of using American Citizens as nominees in order to obtain Amity Treaty benefits. This is basically impossible as nominee shareholders are illegal under current Thai law. That being said, delineating whether or not an American Company is “American,” could be difficult. The relevant agencies of the Thai Ministry of Commerce adjudicate Amity Treaty Certification applications on a case by case basis and come to a decision based upon the makeup of the corporate shareholders in question.

An Amity Treaty Certificate is somewhat similar to a Foreign Business License. However, the two documents are issued based upon different legal foundations. There are some US Immigration benefits accorded to Thai nationals under the US-Thai Treaty of Amity in the form of E visas, but there is not a direct counterpart found under Thai Immigration law.

Tags: Amity Treaty, Amity Treaty Company, Thai Company, Thai Limited Company, Thailand company, Thailand limited company, Treaty of Amity, Treaty of Amity Company, US-Thai Amity Treaty, US-Thai Treaty of Amity
Posted in General Legal Information, Thailand Business, Thailand company, Thailand Condo, Thailand Property, Thailand Real Estate, US Visa and Immigration | 5 Comments »

The US-Thai Treaty of Amity is an agreement between the Kingdom of Thailand and the United States of America that provides benefits for Thai investors and businessmen in the USA and also provides economic benefits to Americans in Thailand. The most important benefit conferred by the Treaty of Amity is the right of Americans to form a Treaty of Amity Company. A Treaty of Amity Company is a corporate structure similar to a Thai limited company.

The major difference between a Thai limited company and an Amity Treaty company is the fact that an Amity Company can be one hundred percent owned by non-Thais provided the owners are American Citizens. Under Thai law there must be at least three shareholders, but one shareholder could virtually own the Amity Company outright by owning 99% of the shares in the company.  

The content written heretofore begs the question: why is American ownership such a big deal? For those unfamiliar with the Thai legal system, a statute known as the foreign business act stipulates that a Thai company must either be majority Thai owned or an application for a foreign business license will be necessary. Foreign business licenses are somewhat difficult to obtain. That being said, the Amity Treaty preceeds the Foreign Business act and its provisions supercede the foreign business act.

A major issue regarding the Treaty is the fact that it only applies to Americans. No other group of foreign nationals is accorded the same level of economic protection as that conferred upon Americans doing business in Thailand under the Thailand Treaty of Amity. As a result, many prospective business owners from nations other than the USA often ask if it is possible to utilize nominee American shareholders in a Thai company in order to meet the technical requirements of the US-Thai Treaty of Amity.

In theory, such a scenario was once possible. However, amendments to the foreign business act have made nominee shareholders expressly illegal. Also, the Foreign Business Office of Thailand has determined that only an American or a Thai is allowed to be the Managing Director of a company with protection under the US-Thai Amity Treaty.  The upshot of both of these rules is that, as a practical and legal matter, only Americans or Thais can own a majority position of a Thai company with Treaty benefits.

For more details about US-Thai Economic Relations please see: Amity Treaty Thailand

(Nothing herein is meant to act as in the place of competent legal advice from a licensed attorney. No Attorney-Client relationship shall be formed between the writer and any reader of this piece.)

Tags: Amity Company, Amity Treaty Company, Foreign Business Act, Foreign Business License, Thai LLC, Thailand limited company, US-Thai Treaty of Amity
Posted in Legal Opinion, Thailand Business | No Comments »

Thailand is a wonderful place to live and work. Each year many tourists turned entrepreneurs try their luck at setting up a small business in Thailand. Some Thai businesses succeed fabulously while other Thai companies take a while to get off the ground. Then there is the case of the Thai company that fails to survive past the first year. One of the biggest problems in getting a Thai venture going is taking care of the legalities.

Every year, many businessmen try to earn a living as a small business owner in Thailand. The ones who fail often take a “let’s wing it,” attitude towards Thai law. They will often fail to incorporate a duly formalized Thai company. In another effort to cut corners in a legal sense is the propensity of some small business owners of working in their business without a Thai work permit. This is a major problem because the authorities at the Thai Ministry of Labour and Royal Thai Immigration frown upon this practice. Under provisions of the Thai Immigration Act, if a non-Thai is in violation of his visa status or is caught working in Thailand without a proper work permit then the consequences could be dire. Foreigners who engage in this practice are often fined, deported, and even jailed for violated the laws of the Kingdom of Thailand.

There are many different types of Thai corporate structures. One could set up a:  Thai limited company, Thai Limited Partnership, a Regional Operating Headquarters, as well as many other types of structures, but limited liability may not be conferred on some entities. An option for Americans wishing to do business in Thailand is seeking certification under the US-Thai Treaty of Amity and owning and operating a Treaty of Amity Company under its provisions. Some people even utilize a Thai corporate structure in order to control Thai Real Estate that they would otherwise not be allowed to own under Thailand property law.

A competent lawyer in Bangkok can assist in both incorporating a Thai company and obtaining a proper Thai work permit and long term Thai business visa in order to remain in Thailand and run a business. It is imperative to make sure the regulations of Thailand are carried out to the letter and failure to do so could not only endanger ones business, but also lead to possible government penalties.

Note: Nothin in this article should be used as a substittute for advice from a competent licensed attorney in the jurisdiction in which one wishes to do business.

Tags: business setup thailand, company in Thailand, Thailand company registration, Thailand limited company
Posted in Thailand Business | No Comments »