[ESTABLISHING A BUSINESS ENTITY IN THAILAND] 480
o Checking and controlling the quality and quantity of goods purchased or manufactured under hire in Thailand for the head office; o Advising on various aspects concerning goods of the head office sold to agents or consumers in Thailand, o Propagation of information concerning new goods or services of the head office; and o Reporting on movements and trends of business in Thailand to the head office. Under the new rules, it is required to report the establishment of a Rep-Office with the Ministry of Commerce instead of obtaining a business license under the Foreign Business Operation Act. A Rep- Office is a “non -trading unit” and cannot earn any income or profit under its own independent activities as notified to the said Authority. It can only obtain financial support from the overseas head office for its office expenditures in Thailand. A Rep- Office is considered a “tax unit” and as such it is required to register itself under the Thai tax system with the Thailand Revenue Office and must comply with all tax filing requirements such as withholding income tax, corporate income tax, etc. A Private Limited Company (“PLC”) is the most common type of business incorporation in Thailand and its basic characteristics are similar to those of Western corporations. A private limited company is formed by way of registration of its constitutive documents (Memorandum and Articles of Association) as well as other related applications with the Partnerships and Companies Registration Office, Department of Business Development, Ministry
of Commerce. The ultra vires doctrine is still applicable in Thai law, so a company must specify in detail its objectives in its Memorandum of Association. Shareholders of a PLC enjoy limited liability up to the amount of the unpaid value of shares invested in the company. This means that a shareholder will not be liable for more than their investment in the company (subject to extreme situations of piercing the corporate veil). A PLC is managed by a board of directors according to the laws and the Company’s Articles of Association. Normally, the directors’ liability will be limited and indemnified by the company unless otherwise prescribed in the company’s Memorandum of Association or Articles of Association. Directors may be personally liable if they act beyond their powers as granted by laws or the Memorandum and Articles of Association or are in breach of their duty of loyalty and care towards the company and its shareholders. All shares must be subscribed to and at least 25% percent of the subscribed shares must be paid up on incorporation. Ordinary as well as preferred shares may be issued based upon the discretion of the shareholders’ resolution. All shares must carry voting rights which might vary between ordinary and preferred shares. The minimum par value of a private company’s shares is Baht 5 per share. Treasury shares for a private company are prohibited. A Private Limited Company needs to maintain a minimum of two shareholders at all times. In general, shareholders are entitled to attend any general meeting of shareholders and vote based upon the voting system of such entity. Minority shareholders have no absolute power to control the majority shareholders. However, the Thai Civil and Commercial Code sets some
ILN Corporate Group – Establishing a Business Entity Series
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