In order to set up a limited company, the following basic procedures must be followed:-
- Filing a Memorandum of Association with the Company Registrar at the Ministry of Commerce. This should contain the name and location of the company, its objectives, capitalisation, the number of shares and value per share, as well as personal details of the promoters, (at least seven) and the number of shares to which each subscribe. There is no minimum capital requirement. The Fee to register the memorandum is 50 baht per 100,000 baht of capitalisation, subject to a minimum fee of 500 baht, and a maximum of 25,000 baht.
- A Statutory Meeting is called after all shares to be paid for, have been subscribed. At least 25% of the value of each share must be paid up. The promoters are required to send to every subscriber a Notice of the Statutory Meeting together with a statutory report at least seven days before the date of the Statutory Meeting.
- Registration. After the Statutory Meeting, the promoters pass the business to the company and to the directors. The directors call for the payment of the shares payable in money in the amount determined at the Statutory Meeting. After the payment of shares and within 3 months after the Statutory Meeting, the directors must apply to register the establishment of the company. When the application is approved a registration fee of 500 baht per 100,000 baht of the company's capital is payable subject to minimum fee of 5,000 baht and a maximum of 250,000 baht. The promoters, who are often the lawyers forming the company, transfer any shares they hold to the subscribers after the statutory meeting.
The shares of the company can be issued as ordinary or as preferred shares only. The preferred shares have special rights attached to them as prescribed in the Articles of Association. If preferred shares have been issued, the preferential rights attributed to such shares cannot thereafter be altered. The shares of the company must be of par value. The amount of a share may not be less than five baht. The Company may issue shares at a higher price than the par value if so authorised in the Memorandum.
Shares are transferable without the consent of the company unless otherwise provided by the Articles of Association of the company. Both shares are transferred by delivery of the certificate. The transfer of shares entered in a named certificate must be in writing and executed both by the transferor and the transferee whose signatures shall be certified by at least one witness. The transferor shall be deemed to remain the holder of the shares until the particulars of the transferee and the shares transferred are recorded in the register of shareholders.
Dividends on shares can be paid to the shareholder if the company has made a profit. The company must appropriate to a reserve fund, at least one-twentieth of the profits until the reserve fund reaches one-tenth of the capital of the Company.
A Thai company is a company consisting of Thai shareholders holding shares of more than half of all issued shares, that is 51%. Foreigners therefore, can hold only 49%. A company must have at least seven shareholders whose names, addresses and shareholdings are filed in public records at the Ministry of Commerce. Shareholders can be natural persons or corporations of any nationality, and residence. The rights of Shareholders :
- To receive dividends
- To attend and vote at any General Shareholders' Meeting
- To request the summoning of an Extraordinary Shareholders' Meeting
- To control transactions of the company.
The business of the company is managed by a director or directors. The Civil & Commercial Code does not determine how many directors there should be in a company. Directors can be merely natural persons of any nationality and residence, providing that the number and the name of director(s) in a company must be fixed by a general meeting. The director(s) manages the company's business under the control of the general meeting and according to the regulations of the company. The company is not bound by any director's act which is done beyond the scope of their authority stated in its regulations. The Relationship between the directors, the company and third parties are governed by its provisions concerning Agency.
5. General Meetings
A general meeting of shareholders shall be held within 6 months of the date of registration of the company and general meetings shall subsequently be held at least once every 12 months. Such general meetings are called "Annual General Meetings", and all other general meetings are called "Extraordinary General Meetings". The Board of the Directors may summon General Meetings whenever they see fit.
The directors shall send a notice to all shareholders prior to every General Meeting. The notice shall specify the place, the day and the hour of the meeting and the nature of the business to be transacted. Decisions of the General Meeting shall be made by ordinary or special resolution which depend on the nature of the business to be considered. All ordinary resolutions shall require a majority vote of the shareholders attending the meeting. A special resolution is passed by two successive General Meetings, provided that they are in accordance with procedures prescribed in the Civil and Commercial Code.
6. Books and Accounts
The Thai Company Books and Accounts shall be kept in the registered office. The Board of Directors shall keep true and complete accounts of the sums received and expended by the Company. Its accounts must show the assets and liabilities of the Company and a Profit and Loss Account. The Board of Directors shall have the balance sheet and Profit and Loss Account examined by the Company's auditor and submitted to a General Meeting for consideration. Its accounts must be audited once every year and filed with Revenue Department and Commercial Registration.
Books and Accounts must be kept according to provisions on The Civil and Commercial Code, The Revenue Code and The Accounts Act. They may be kept in any language, but a Thai translation must be attached.
7. Minority Shareholders Protection in a Thai Company
Foreign investment in a Thai company is limited to 49% while the remaining 51% must be held by Thai Nationals. This provides for ownership of the majority of common stock by Thais however, there are a number of means available to provide minority shareholders with a degree of management control of a company. Thus for example, minority shareholders may be given the right to elect a percentage of the Board of Directors, or by including a stipulation that all shareholders' resolutions require a minimum passage of 80%, which ensures that minority approval is required. By these and other means it is possible to give a minority equity investor a degree of control over the activities of the company.
NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".