Registered Capital Regulations

[Petropolis]

We are setting up a Thai limited company, with funding from a parent company abroad. In line with Thai regulations, the foreign sponsors hold less than 50% of the shares. We currently have THB 2 million paid-up capital, of which 25% is paid up. We now need to pay up to THB 2 million in order to get our first work permit. Our understanding is that we will have to pay up an additional THB 2 million baht when we want to hire our second expat early next year.

We cannot find a clear explanation or understanding of the guidelines for registered capital.

Our understanding is that we register the paid-up capital with the Ministry of Commerce by showing a list of shareholders, number of shares, and value, with the total paid-up amount, backed up by evidence of bank balance from a bank statement.

Is it possible to use a loan (in this case from the foreign affiliate, which is a minority shareholder in the Thai limited company) to "pay up" the capital? In this case, how would the loan value be allocated to existing shareholders?

Would it be possible for individual shareholders to get loans and then to use these loans to "pay in" their share values for their share of the company?

In this case, parent company is willing to put in the capital, but they would like to be able to have control of it. For example, if the capital is in a form of loan, they could later call the loan if necessary (thus reducing the registered capital).

Are there any clear guidelines about this -- registered capital in Thailand?

-- Petropolis

[Indo-Siam]

First of all, you do not need to pay-in capital to obtain work permits. If you have 2,000,000 baht REGISTERED capital, you can obtain several work permits - for company directors.

The paid-in capital is required to obtain long-term entry-permit extensions. So - thsi is an Immigration requirement, not a Labor Department requirement.

If you are comfortable making visa runs every 90 days (returung with a fresh 90 day non-immigrant entry permit before each 90 day work pernit expires, and then revalidating the work pernit for another 90 days) - then you never have to pay-in remaining capital.

You can pay-in capital from any source. It just needs to enter your bank account in a transaction that has no "income" implication - i.e. a transaction that has no taxation applied.

If your capital has a loan attached, and you declare this. then this loan becomes an outsanding liability on your balance sheet. This does not affect your level of paid-in capital - effectively, you are hoping to repay that loan from income earnings that the company will accrue.

At the end of your first year of operation, you will have to undergo a financial audit by a licensed auditor. If your balance sheet shows that your liabilities far exceed your assets, such that your working capital cannot beexpectedto keep your company operational, the evenue Department can require you to either register and pay-in additional capital, or they will revoke your tax registration.

In your case, your key to all this is whether you feel that you will be able to pay off the loan with retained earnings - after paying off all company expenses.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

[email protected]

www.thaistartup.com

[phormio]

Petropolis,

Thanks for asking this - i've been wondering about this issue myself.

[Sunbelt Asia]

Our understanding is that we will have to pay up an additional THB 2 million baht when we want to hire our second expat early next year.

Not required for the work permit more paid up capital( additional registered capital would be required if it was a second foreign director seeking a wp BUT not paid up) and certainly not for the extension of stay based on business either. It's 2 million baht paid up....unlimited extensions of stay visas. Of course you still have other conditions on the extension of stay visa based on business, such as 4 Thais per WP and mininimum salaries)

www.sunbeltasia.com