Forms and types of business organizations


Thailand has the following organizational forms of business:

Joint stock company with limited liability is a company whose authorized capital is divided into shares and the liability of shareholders is limited to paid or unpaid shares, which belong to them.

Limited Partnership is a kind of partnership, in which there are:

- One or more partners whose liability is limited to the sum of the contribution to the partnership.

- One or more partners, which jointly have unlimited liability for all obligations of the partnership.

Ordinary Partnership is the kind of partnership in which all partners are jointly have unlimited liability for all obligations of the partnership. It may be registered as a legal entity. Otherwise it will not be a separate legal entity, but for the purposes of taxation on corporate income tax is regarded and pays tax as a legal entity.

Self-employed is a natural person registered in accordance with the law and engaged in entrepreneurial activities without forming a legal entity.

The most popular organizational form of business among foreign investors is a closed joint stock company with limited liability.

Closed joint stock company with limited liability is a company, the authorized capital of which is divided into shares and the liability of shareholders is limited to belong to them paid or unpaid shares.

The registration of a company

First of all, the name of the company must be approved by the Department of Business Development. After the approval of the name of company, founders (at least 3 people) sign a memorandum of the establishment of the company in copies. The memorandum shall contain the following items:

• the name (it should include «limited» ) and the anticipated legal address of the company. The name should be spelled using the Thai alphabet, translation or transliteration into European languages is possible.

• The legal address of the company.

• The activities of the company.

• The statement on shareholders' limited liability.

• The structure of the authorized capital of the company (number of shares and value of each share). Shares may not be issued at a lower price than their nominal value. The issue of shares at a price higher than their nominal value is allowed in case of entering this information in memorandum. In this case, the supplementary sum must be paid with the first payment. Despite the fact that the minimum authorized capital is not established by the law, the company's capital should be sufficient to ensure its activities and cannot be less than 1 million baht. Nominal value of one share may not be less than 5 Bath.

• Names, addresses and founder's occupation and the number of shares held by each of them (everyone should own at least one share).

If there are foreign citizens or legal entities among the founders of the company, the Department of Business Development checks the financial state of Thai founders. All Thai shareholders must provide information about the source of income that allowed them to purchase shares in the company, in the following cases:

- If the foreign founder owns 40% -50% of the shares, or invests 40% -50% of the capital,

- If the foreign founder owns less than 40% of the shares, but s/he is an authorized director (has the right of signature).

After the approval of the memorandum founders have a right to transfer their shares to third parties, however, the shares cannot be exposed for public auction. After the signing of the memorandum and the distribution of shares, the founders organize the meeting of shareholders and provide a report (the information about the date of the meeting shall be announced not later than seven days).

At the first meeting of shareholders, the participants develop internal rules of the company (the company's charter), appoint a director (directors) and the auditor as well as take other organizational decisions according to the Civil and Commercial Code of Thailand.

The director of the company is the person responsible for payment of the shares, which sends information to shareholders about the need to pay for the shares. After the payment of at least 25% of the shares, the director applies for the registration of the company. Shareholders are responsible for payment of the authorized capital up to the date of payment of 100% of the shares.

Company Registration must be completed within three months after the constituent assembly.

The meeting of shareholders

The notice on convening the meeting of the shareholders shall be published in the local newspaper, and also sent to the shareholders by registered mail to the postal address not less than 7 days before the meeting. If the meeting is supposed to deal with specific issues, the notice period is increased to 14 days.

Each shareholder or proxy of a shareholder has an equal right to vote, regardless of the number of owned or represented shares. In case if the company's charter provides that the voting rights have the shareholders with a certain number of shares only, then shareholders may join together to obtain the required number of shares and granting them the right to vote.

The responsibilities of the shareholders' meeting are the appointment of the director, the selection of the auditor, the approval of the balance sheet and the declaration of the payment of dividends.

Significant decisions for the company, such as changes in the charter of the company, the increase of authorized capital, the liquidation of the company or merger with another company, can be taken by the special resolution of the shareholders' meeting only, by the decision of not less than three-fourths of the votes of shareholders.

The director of company

A company director is appointed and dismissed by the decision of the shareholders' meeting.

The Director is responsible for:

1. The payment of the authorized capital by the shareholders.

2. The maintenance and storage of accounting documents, the statutory documents of the company, and other documents.

3. The timely payment of dividends and interest to shareholders.

4. The fulfillment of the decisions of meetings of shareholders.

Investment