Advise Needed For Company Registration !

[Thaibelg]

Hi Folks,

I wanted to set up a Thai Company Limited with my wife (who has taken over my same surname, after marriage).

I know that a Thai Company Limited has to have a nominated Thai Director, with at least 51% shares in the company and any foreign partner involved not more then 49% of the total shares.

I also understands that there must be at least 3 shareholders involved… I do NOT want to work in the company or request a work permit. So, I was thinking at the following structure/set-up;

- 51% on my wife’s name (having my surname as me).

- 24,5% on my mother’s name (having a different surname then me)

- 24,5% on my mother in law’s name.

Some questions;

1. How does that works in case either one of the partners are related to each other by marriage and carrying both the same surname? Does it mean that we legally own each 50% of the majority of the shares? (E.g. 25,5 % on shares for each person)

2. Do you think there’s a problem, because we both have the same surname? Would you recommend to change the surname in this case?

3. Can I dedicate 24,5% on my mother’s name (non-Thai national, living and working abroad)? How does that works and what kind of documents does my mum needs to submit (passport ,…).

4. What if the company needs to be dissolved (in case of divorce)? Will 51% of the shares equally divided and paid into 25,5% of the total registered capital (including assets of the company) to both parties?

5. Any suggestions for a “waterproof” set-up to reduce minimal risk for losses (in case of divorce)?

6. What is cost for registering a Thai Company Limited and what is the minimum registered capital required? I heard that there’s no law saying that there should be a minimum of registered capital to start. Please advise.

Looking forward to hearing from you Guys!

Cheers,

TB

[richardt1808]

Hi,

The cost of registration is around 5,000 B. If you have a lawyer or agent do it for you, then you can expect to pay fees from 5-20,000 depending on how complicated the company structure is. Actually, the number of required shareholders for a public company limited is 7. Not all of the 7 need to have a significant percentage though, so if 3 people were to hold the vast majority of shares, then you could give the other 4 shareholders just a single share each.

So for example, if you were to create a company with a 100,000 Baht registered capital you would have a 100,000 shares each valued at one Baht. The 3 main shareholders would control 99,996 shares and the 4 minor shareholders would each have a single one Baht share.

The minimum registered capital for a company limited is 100,000 of which 30,000 must be actually paid up... ie cash in the bank. As the company grows, it will obviously accumulate assets, so over time, you can increase the registered capital so that it reflects the value of new assets. Should the company go insolvent, a judgement could then be made allowing creditors to attach the assets of the company in order to repay any debt. If the assets do not cover the amount of debt, then the remainder can then be claimed directly from the directors in proportion to their shares in the company. So where a start-up company with registered capital of 30K goes insolvent, the creditors then claim the remaining 70K from the directors.

Your proposed shareholding split between wife and mother-in-law would probably fall foul of the foreign business act since although you only own a quarter of the shares yourself, you actually control the others as well by virtue of your close relationship with the other shareholders. This is called 'Nominee Shareholding' and is illegal. If you have just a simple mom and pop business without owning any property in the name of the company, you probably won't need to worry about this, but if property is involved or your business is of a high-profile nature, then you would eventually find yourself in trouble in terms of the FBA.

Your question about how to divide up the company in the event of divorce is interesting. I would guess that you all still own your shares to the original value of the share certificates and you would still have the right to vote with them until such time as you sell to one of the other existing shareholders or to a new shareholder. This is just my best guess. But... if any part of your business is protected by any form of contract between you and your wife, one thing you should know, is that in terms of Thai Law, any contract entered into between husband and wife during the marriage can be unilatterally cancelled by either party in the event of divorce. Apparently the spirit of Thai law is intended to read that when a couple is divorced, everything should end! There is a whole thread on how this relates to land leases etc and you can do a search of this forum if you need more info on this point.

For the reasons listed above, I would be VERY careful of having a spouse as the co-owner of the company. But, in terms of waterproofing things among other non-related shareholders, you can certainly protect yourself very well. When the company is created, you are legally required to state the nature of business and proposed types of future business which you forsee. In the Articles of creation, you can basically specify rules for all scenarios, which can, for example, stipulate when and how shares can be sold, and to whom they can or cannot be sold to etc etc. You could specify how to dispose of assets in the event of the company closing and whatever else you deem appropriate, but, again, refer back to the fact that in a divorce all bets are off - so best get some sound legal advice on this before you sign off on anything.

[simon43]

Only need 3 shareholders now...

Simon

[Thaibelg]

Hi Simon / Richard,

Thanks Guys for your detailed explanation. Yes, correct as of now, there are only 3 shareholders required to form a Thai company limited.

I just checked with the Department of Business Development and they explained me that there’s no law that constitutes a minimum amount of capital to be registered. The minimum fee for application is 5000 THB.

Now back to the shareholders thing…

I understand from Richard’s explanation, that (In case of divorce), both partners will keep the amount of shares as per stated in the company registration act?

I heard that the vote and shares from husband and wife are counted as one vote or share? Is that correct?

If not, then I could divide the shares among the following nominee(s);

51% my wife (who is carrying my surname)

48% myself

1% my mum (A non-Thai national, who is living and working abroad)???

Questions;

1. Would the above suggested structure be possible?

2. Can a Non-Thai National (who is working and officially living abroad) be eligible to have shares in a Thai Company Limited?

3. Any suggestions for a “Waterproof” and low risk start-up?

Best Regards,

TB

[Sunbelt Asia]

Dear TB,

If you wish for your mother to be a shareholder in the company you would require a signed copy of her passport. There would also be various company set up documents that your mother would be required to sign. It would be more convenient for your mother to be in the country when you are setting up the company but it can be acomplished via post.

One option for the set up would be using a professional Joint Venture service, which would negate the need for your Thai wife to hold 51% of the shares in the company. Another point to mention is that the company must be set up with 2,000,000 Baht of registered capital. . Thai nationals are required to display an amount equal to the value of their shares in a bank account.

For a free consultation about the company set up process, please contact Sunbelt Asia on 02-642-0213.

Best regards,

Legal Advisor

Sunbelt Asia Co. Ltd

www.sunbeltasia.com

[email protected]

Edited February 13, 2010 by Sunbelt Asia