Winding Up A Business

[Briggsy]

A friend of mine has worked for 3 years in the construction business in Thailand. His employer would not organise a work permit.

He decided about 2 years ago to go legal and he set up his own company in order to have a work permit. He has to pay accountant's fees, lawyer's fees, work permit fees, VAT, income tax and social security for his ghost employees and his own income tax. All up this comes to between 100,000 and 120,000 Baht per year. His gross annual income is between 400,000 and 500,000 Baht. He basically lives hand to mouth.

He plans to work in the Middle East soon (maybe next month, maybe later this year). He plans to stop paying all of the above this month. He is aware that he has 7 days following cancellation of the WP to leave the country. He seems to be fatalistic about the whole thing and left his Thai job last week.

My question is what happens if one simply stops paying the bills in this situation. It would be a shame if he just walked into trouble.

[bangkokrick]

I opened a company around 4 years ago for the same reason and all was fine until my accountant asked me to put 2 million baht in a Thai bank account. He did not tell me this right until the last hurdle so it was quite a shock. I told him that i would not do this and for him to cancel the company registration. last year I got a letter from the fraud office asking me to go there and explain why i had not paid taxes etc for me and ghost staff. To cut a long story short i was fined 10000 baht and it cost me a further 30000 baht to close the company. I recommend that he closes the company if he plans to return here in the future or he could get the same surprise as me.

[Briggsy]

Thank you for the reply.

I can see your situations differ a little. Whether they differ sufficiently to effect the outcome is not clear.

He already has an up-and-running registered company. If the company registration is not cancelled then I can envisage a situation and fine similar to yours occurring. I think the key consideration for him is the cost of winding up the company. As I said he lives hand to mouth, so he doesn't want to pay money for nothing.

He seems confident never to go for a Thai non-imm visa again but tourist visas are very likely.

[Prakanong]

Thank you for the reply.

I can see your situations differ a little. Whether they differ sufficiently to effect the outcome is not clear.

He already has an up-and-running registered company. If the company registration is not cancelled then I can envisage a situation and fine similar to yours occurring. I think the key consideration for him is the cost of winding up the company. As I said he lives hand to mouth, so he doesn't want to pay money for nothing.

He seems confident never to go for a Thai non-imm visa again but tourist visas are very likely.

There is a cost to closing down a business but can not remember anything about it.

There had def been threads on this before - maybe in the Jobs and Economy section

[bangkokrick]

Hi Briggsy i just found an old thread and Sunbelt asia charge around 25K to close a company.

[oooooo]

among the companies i owned and presently own i had two non performing ones, both with a number of product specific licenses attached. sold both properties to different parties without ever cancelling anything at all. nobody has bothered me in the 5 years since.

[IvanLaw]

among the companies i owned and presently own i had two non performing ones, both with a number of product specific licenses attached. sold both properties to different parties without ever cancelling anything at all. nobody has bothered me in the 5 years since.

Similar to my thoughts

Is it not possible to sell as a “Going Concern” ?

I am not sure but surly worth investigating.

[oooooo]

I opened a company around 4 years ago for the same reason and all was fine until my accountant asked me to put 2 million baht in a Thai bank account. He did not tell me this right until the last hurdle so it was quite a shock. I told him that i would not do this and for him to cancel the company registration. last year I got a letter from the fraud office asking me to go there and explain why i had not paid taxes etc for me and ghost staff. To cut a long story short i was fined 10000 baht and it cost me a further 30000 baht to close the company. I recommend that he closes the company if he plans to return here in the future or he could get the same surprise as me.

where is the fraud office? i never heard of it.

[Briggsy]

Thank you for your replies.

Hi Briggsy i just found an old thread and Sunbelt asia charge around 25K to close a company.

This 25K presumably would be a combination of govt fees and lawyer's fees. I'll pass this info on to my mate.

among the companies i owned and presently own i had two non performing ones, both with a number of product specific licenses attached. sold both properties to different parties without ever cancelling anything at all. nobody has bothered me in the 5 years since.

As you sold the businesses rather than just stopped paying the taxes/social security due, I am doubtful if the situations are the same. Surely the obligations would pass over to the party who bought the business.

Is it not possible to sell as a “Going Concern” ?

I am not sure but surly worth investigating.

There's nothing to sell really, no assets. Work permits are non-transferrable.

Thanks again, everybody.

Edited February 27, 2007 by Briggsy

[wolfmanjack]

My wife had a business for a few years and then quit. The revenue department came 2 years later and wanted back taxes since she never officially closed the business. We had to pay to close the business and pay some back taxes even though she did not operate for the 2 years she had to pay for.

He may be able to sell his company if it is less than what it cost to set up a new one. hel_l even giving it away is better than paying 25K to close it.

[Briggsy]

My wife had a business for a few years and then quit. The revenue department came 2 years later and wanted back taxes since she never officially closed the business. We had to pay to close the business and pay some back taxes even though she did not operate for the 2 years she had to pay for.

He may be able to sell his company if it is less than what it cost to set up a new one. hel_l even giving it away is better than paying 25K to close it.

Excellent point.

Nobody has yet addressed the issue of what the revenue/"fraud office" would do in the case of a foreign national who only ever returned to Thailand on visa exemptions or tourist visas. This is part of his rationale. Save 25K on business closing costs and just stay away from Thai officialdom/non-imm visas.

[Prakanong]

My wife had a business for a few years and then quit. The revenue department came 2 years later and wanted back taxes since she never officially closed the business. We had to pay to close the business and pay some back taxes even though she did not operate for the 2 years she had to pay for.

He may be able to sell his company if it is less than what it cost to set up a new one. hel_l even giving it away is better than paying 25K to close it.

Excellent point.

Nobody has yet addressed the issue of what the revenue/"fraud office" would do in the case of a foreign national who only ever returned to Thailand on visa exemptions or tourist visas. This is part of his rationale. Save 25K on business closing costs and just stay away from Thai officialdom/non-imm visas.

I can only say what I was told "Off the record" in 2000 by one of these Busines Set Up companies located in Sukhumvit.

It would cost to close but if you were never going to open another business in Thailand and were not there ie such as only on VV nothing would come of it.

That is totally off the record though and as far as I know the guy concerned still visits Thailand regularly and has don since 2000 - it may have changed now or the person may have been lucky.

[bangkokrick]

I opened a company around 4 years ago for the same reason and all was fine until my accountant asked me to put 2 million baht in a Thai bank account. He did not tell me this right until the last hurdle so it was quite a shock. I told him that i would not do this and for him to cancel the company registration. last year I got a letter from the fraud office asking me to go there and explain why i had not paid taxes etc for me and ghost staff. To cut a long story short i was fined 10000 baht and it cost me a further 30000 baht to close the company. I recommend that he closes the company if he plans to return here in the future or he could get the same surprise as me.

where is the fraud office? i never heard of it.

Sathorn Road.

Rick

[Briggsy]

Nobody has yet addressed the issue of what the revenue/"fraud office" would do in the case of a foreign national who only ever returned to Thailand on visa exemptions or tourist visas. This is part of his rationale. Save 25K on business closing costs and just stay away from Thai officialdom/non-imm visas.

I can only say what I was told "Off the record" in 2000 by one of these Busines Set Up companies located in Sukhumvit.

It would cost to close but if you were never going to open another business in Thailand and were not there ie such as only on VV nothing would come of it.

That is totally off the record though and as far as I know the guy concerned still visits Thailand regularly and has don since 2000 - it may have changed now or the person may have been lucky.

I strongly suspect this is the case. Thai governmental agencies are notoriously feudal and the chances that the Revenue would share information about unpaid taxes with Immigration and that Immigration would reciprocate by apprehending the person involved particularly when the amount involved is relatively little are very low.

[Cyberstar]

To minimize the number of "unpaid bills" and such ... Officially fire the staff (thus no withholding tax or social security to be paid) .. Tell the accountant and lawyer service is no more needed (thus no more legal claims from those guys) ... As for VAT filings - I've recently learned from reliable source that no filing will only be a problem if the same business starts up (or rather continue) on the very same address (In that case the company will be fined 500 Baht for every month not filed - but no penalty if the very same company continues business on a different adress.

[mark lamai]

i guess work permits and companies are kinda seperated as far as immigration goes.

once had a work permit as a teacher.

i left the job, never cancelled the permit,

and for 3 years now come and go on tourist visas without a problem.

[cleggit]

A couple of years ago a friend (Swedish) of ours had a problem re-entering LOS on a tourist visa after failing to close his company.

His company hadn't worked out so he just left LOS. A couple of years later he returned as a tourist and was not permitted entry. Another friend (Thai) had to go and sort the problem with immigration. I do not know how they sorted it but i imagine a financial donation to little Somchai's college fund was involved Eventually he was granted entry.

As this was a couple of years ago my memory of what happened exactly is a bit sketchy but it definately could be a problem if your mate doesn't close things down properly.

[Geppis72]

Only my 2 cents...

Why take all this "risks" and having headache for 25.000 bath only ?

I mean I'm not saying that are peanuts but still...

Just close it regularly and sleep well whenever you will have a bed.

In case, after some years you want to come to LOS again, no problems.

or do you prefer take the risk to be refuse to entry in the apt. after paid

an air ticket that alone will be more expensive then closing up ?

Cheers

[Briggsy]

Update

Having insufficient funds to legally close it, he simply walked away from the business. I had to lend him the plane fare to the Middle East. He got a re-entry permit on leaving though. It'll be interesting to see what happens when he tries to use it a few months in the future. No problems is my guess.

[jeffrosner]

I opened a company around 4 years ago for the same reason and all was fine until my accountant asked me to put 2 million baht in a Thai bank account. He did not tell me this right until the last hurdle so it was quite a shock. I told him that i would not do this and for him to cancel the company registration. last year I got a letter from the fraud office asking me to go there and explain why i had not paid taxes etc for me and ghost staff. To cut a long story short i was fined 10000 baht and it cost me a further 30000 baht to close the company. I recommend that he closes the company if he plans to return here in the future or he could get the same surprise as me.

where is the fraud office? i never heard of it.

That's the silliest question I've seen on this board. The fraud office is everywhere! Go to any office staffed by Thai's and the fraud will be rampant. They get schooled in fraud prior to taking their first job.

JR

[Martin_F]

The interesting thing with a Thai comapny is that there are six other shareholders some where and maybe some directors hiding under the carpet.

But most importantly it is important to get resignation letters from the ghost employees and himself.

He also needs to then settle the current years tax for the year ending 31.12.07 for himeself settle the any dues.

It is best to get it done properly and close the co down as it maybe ok now but he may want to come back in a few years and he would have a record.

[jeffrosner]

I'm confused about something, if the director or officer of the business is not the business, then is not the business liable? If you own a corporation, the reason to have a corporation is to put the business more than an "arm's length" from yourself.

XYZ, Inc. is not Jeff Rosner. Jeff Rosner is not XYZ, Inc.

Jeff Rosner, Inc. is not Jeff Rosner - you get it ... right?

So why would the non-majority shareholder have any repercussions in the first place? They can go after the company, but the company is not the human being.

Car 54 where are you ................ Sunbelt?

[Sunbelt Asia]

I'm confused about something, if the director or officer of the business is not the business, then is not the business liable? If you own a corporation, the reason to have a corporation is to put the business more than an "arm's length" from yourself.

XYZ, Inc. is not Jeff Rosner. Jeff Rosner is not XYZ, Inc.

Jeff Rosner, Inc. is not Jeff Rosner - you get it ... right?

So why would the non-majority shareholder have any repercussions in the first place? They can go after the company, but the company is not the human being.

Car 54 where are you ................ Sunbelt?

Liability of Registered Partnerships, Limited Partnerships, Limited Companies, Associations and Foundations B.E. 2499 (A.D. 1956) and The Civil Commercial Code state the directors personal liability may be limited if noted as such on the memorandum of association. However such personal liability does not extend to fraud or failure to file an annual audit.

Section 28 Director of any company performs any actions as follows:-

1) Does not submit the balance sheets pursuant to the Section 1199 Paragraph 2 of the Civil and Commercial Code of Thailand, or

2) Does not arrange to have the account pursuant to the Section 1206 of the Civil and Commercial Code of Thailand, or

3) Does not arrange to have the bookkeeping or maintain the account pursuant to the Section 1207 of the Civil and Commercial Code of Thailand,

Such Director shall be fined not over 50,000 Baht.

Even a shareholder may have more liability than the paid up capital for a limited Liability company. Example, a director calls a shareholder meeting and says to the shareholders " We are in deep trouble financially. Lets go in a different direction and order equipment for this direction. We'll just "sign" for it, as we don't have the funds to pay for it. If the shareholders know this, they are personally liable for the debt. If no shareholders meeting was called, the director himself can be liable for the debt.

www.sunbeltasiagroup.com

[junkofdavid2]

As for VAT filings - I've recently learned from reliable source that no filing will only be a problem if the same business starts up (or rather continue) on the very same address (In that case the company will be fined 500 Baht for every month not filed - but no penalty if the very same company continues business on a different adress.

I don't know what particular situations this applies in. A friend of mine moved address (and to a new Revenue District even!) and tried to re-file for VAT at the new address after he had a problem with VAT at his old address.

(Something like he was terminated from the VAT system at the old address and then his accountant filed an objection of the termination but then didn't follow up and resolve such objection)

About a month after he filed for VAT at his new address, Revenue Department called him up and said they can't process his new Vat filing at the new address because the computer wouldn't allow it because of his prior VAT problem at his old address.

He then was asked to appear at the Revenue office of his old address' area and resolve the issue before the former revenue office allowed the new revenue office to process his VAT filing.

Take note that this wasn't harassment by the Revenue officer... it was eventually resolved properly without any "gifts" being payed to the Revenue officer; it was resolved just by a meeting with explanation of the problem.

Edited March 22, 2007 by junkofdavid2

[Briggsy]

Update

The chap mentioned in the thread just returned to LOS for a holiday after 5 months' working in the Middle East. He came in on his re-entry permit tied to his yearly extension. No problems. He was granted a stay up to the end of the yearly extension as normal. He still has a few months left.

He even, stupidly in my opinion, went to a restaurant owned by friends of his lawyer who told him that somebody had been round looking for him as he hadn't paid his pragan sangkhom for his ghost employees, tax etc. This restaurant is also the registered address of the business.

Any way, he got another re-entry permit at the airport on the way out, no problems. He is confident he won't work in LOS again. He considers closing down the business a waste of money.