PART II - IMPORTANT CONSIDERTAIONS
The Proposed name of the Company is required to be reserved with the Ministry of Commerce. It takes one day to obtain the result of the name reservation. The name is valid for 30 days.
Thai law requires at least 7 people to be the promoters of the Company and in order to be considered a Thailand Limited Company at least 4 of the promoters must be Thai nationals.
As the Company will have Thai nationality, the Company is therefore free to set its own objectives, which should not be contrary to public order or good morals.
In fact the Ministry of Commerce provides a standard form of objectives of the Company containing 40 clauses including to owning a land and house.
The shares of the Company must be or par value and the amount of a share may not be less than 5 baht.
The shares of the company can be issued only as ordinary or as preferred shares. 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.
Normally, to protect the foreign shareholder, two types of share holdings are suggested. The Thai shareholders hold preferred shares with limited privileges (i.e. less voting right, limited dividend, or limited right to asset surplus) whilst the foreign shareholders hold ordinary shares with better privileges.
Shares are transferable without the consent of the Company unless otherwise provided by the Articles of Association of the Company. Both types of shares are transferred by delivery of a certificate. A transfer of shares entered in the name certified 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.
A Thai Company is a company in which Thai shareholders hold more than half of all issues shares, this is 51%. Foreigners therefore can hold only 49%. A company must have at least 7 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 are:
- To receive dividends;
- To attend and vote at any general Shareholder's Meeting;
- To request the summoning of an Extraordinary Shareholders' Meeting;
- To control the transactions of the company.
Under the Land Code and the Land Department Notifications, a Company in which more then 39 % of the shares are held by foreigners is required to be investigated by the Land officials regarding whether the Thai shareholders are nominees holding share on behalf of foreigners. This investigation can take 2 - 3 weeks if not longer.
In order to minimize any extra time or risk of investigation most law firms will suggest that in the first stage the buyer should structure the shareholding ration at 39 % foreign and 61% Thai to avoid time being consumed by the government investing company shareholding structure. After the completion of the registration of the transfer of ownership of the land, the new company can be restructured so that the foreign holding is at the maximum percentage available.
The registered capital should not be less than the purchase price of the land. This is because the Land Department official has sole discretion regarding whether to investigate the Company if they consider that the Company has been established with Thai shareholders to hold the land on behalf of the foreigners.
Alternatively, it is suggested that the buyer sets the registered capital at nominal amount of 1 million baht. The difference between the purchase price and the registered capital can be made in the form of a loan to the company from a foreign director. In this case, evidence can be shown to the Land Department that the Company has a source of money to purchase the land. In additional if in the future the Company wishes to remit funds outside Thailand they may be able to do so under the premise that those funds are for payment of a loan from a foreign director.
Under Thai law, there is no requirement of a minimum number and nationality of the directors. It is therefore allowable to have all directors as foreigners. Please note that a director need not be a shareholder.
Under Thai law, it is required that authorized directors shall be appointed from any of the directors of the Company, to sign any document for an on behalf of the Company. Again there is no requirement regarding the number and nationality of the authorized directors.
The Company books and accounts must be kept in the registered office and are to be a true and complete account of the sums received and expended by the Company. The accounts must show the assets and liabilities of the Company and its profit and loss account. The balance sheet and the profit and loss account has to be examined by the Company's auditor and submitted to the general meeting for consideration. Accounts must be audited once a year and filed with the Revenue Department and Commercial Registration.
Foreign investment in a Thai Company is limited to 49 % while Thai nationals must hold the remaining 51 %. This provides for ownership of the majority shares 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 sole right to elect a percentage of the Board of Directors. Minority shareholders can still be in majority relative to Thai shareholders by diluting the share base relavtive to the number of putstanding shares held by individual shareholders and dividend rights. (i.e. a foreign shareholder who holds a 40 % stake in total can allot 10 % stakes to 6 Thai individuals. Thus, making it possible to provide minority equity investors a degree of control over the activities of the company.
All provisions regarding the protection of the minority shareholders will be stipulated in the Company's Articles of Association, to be registered with the Ministry of Commerce.