Share Capital

[lingling]

I have a Co Ltd with a registered capital of B2M. I and the other shareholders have paid up B1.2M in cash, the remainder I was going to account for in goodwill, intellectual property, customer contacts etc (I heard that is perfectly acceptable in TH).

However, my accountant claims I can not do that and suggested that instead I should make a loan agreement with the company stating that all has been paid cash but I borrowed the cash from the co. I do not want to go down that route as I consider all other contributions as having more than the value of the remaining share capital.

Has anyone else here paid up part of the stock capital the way I was planning to, and what type of documentation is needed to back that up from an accounting perspective? (any links to any thai text that explains this in a way that my accountant might understand...?)

[~G~]

Has anyone else here paid up part of the stock capital the way I was planning to, and what type of documentation is needed to back that up from an accounting perspective? (any links to any thai text that explains this in a way that my accountant might understand...?)

The formal material is in Thai, I think you are the one that need English links to understand the law. Unless you have Registered Patents, Trade Marks or similar solid intellectual property, I don't see how you are going the register "ideas, concepts and contacts" as company capital.

[rishi]

Just a thought. Regardless of whether there is a loophole, it will make a lot of things easier, if the company account shows that the 2 m has been fully paid up in hard cash. Why not just "buy" the goodwill, etc... from yourself/partner for 800k - so that the account shows a transfer/withdrawal - and then pay back those 800k, yielding a recorded deposit.

I've no idea about the official regulations, but I'm sure the accountant would be satisfied.

[~G~]

Why not just "buy" the goodwill, etc... from yourself/partner for 800k - so that the account shows a transfer/withdrawal - and then pay back those 800k, yielding a recorded deposit.

Or buy a few pencils for 100,000 baht each and register them as assets? The value of the assets needs to realistic.

[lingling]

The formal material is in Thai, I think you are the one that need English links to understand the law. Unless you have Registered Patents, Trade Marks or similar solid intellectual property, I don't see how you are going the register "ideas, concepts and contacts" as company capital.

Ok, so if I misunderstood something then how is it normally dealt with when not all of the capital is paid up? It has been mentioned many times on this forum that only 25% need to be paid up cash but my accountant now claims that all need to be paid up [last year].

[~G~]

The formal material is in Thai, I think you are the one that need English links to understand the law. Unless you have Registered Patents, Trade Marks or similar solid intellectual property, I don't see how you are going the register "ideas, concepts and contacts" as company capital.

Ok, so if I misunderstood something then how is it normally dealt with when not all of the capital is paid up? It has been mentioned many times on this forum that only 25% need to be paid up cash but my accountant now claims that all need to be paid up [last year].

First of all, some of the capital can be just in cash that you, as a director, keeps and use to pay for company expenses. This will work if the amount is not too large. Otherwise you can follow your accountant's advice.

[steveromagnino]

The formal material is in Thai, I think you are the one that need English links to understand the law. Unless you have Registered Patents, Trade Marks or similar solid intellectual property, I don't see how you are going the register "ideas, concepts and contacts" as company capital.

Ok, so if I misunderstood something then how is it normally dealt with when not all of the capital is paid up? It has been mentioned many times on this forum that only 25% need to be paid up cash but my accountant now claims that all need to be paid up [last year].

First of all, some of the capital can be just in cash that you, as a director, keeps and use to pay for company expenses. This will work if the amount is not too large. Otherwise you can follow your accountant's advice.

Recalling my own knowledge of goodwill etc; until someone pays for it, it is valueless; it requires a mark to market through some sort of transaction, such as a purchase where goodwill is the difference between price paid and assets of the company.

Therefore, unless there is such a purchase, then you cannot just write your own value for these intangibles.

I suppose you could do a separate transaction and value each thing, then buy it as an asset, then create the loan back to the seller. It will need to be broken down and I do not see this as a loophole. It is indeed fair to buy say a customer list and hold it as an asset; however I do not think that you can just make up any value; it will posibly be checked.

[~G~]

The formal material is in Thai, I think you are the one that need English links to understand the law. Unless you have Registered Patents, Trade Marks or similar solid intellectual property, I don't see how you are going the register "ideas, concepts and contacts" as company capital.

Ok, so if I misunderstood something then how is it normally dealt with when not all of the capital is paid up? It has been mentioned many times on this forum that only 25% need to be paid up cash but my accountant now claims that all need to be paid up [last year].

First of all, some of the capital can be just in cash that you, as a director, keeps and use to pay for company expenses. This will work if the amount is not too large. Otherwise you can follow your accountant's advice.

Recalling my own knowledge of goodwill etc; until someone pays for it, it is valueless; it requires a mark to market through some sort of transaction, such as a purchase where goodwill is the difference between price paid and assets of the company.

Therefore, unless there is such a purchase, then you cannot just write your own value for these intangibles.

I suppose you could do a separate transaction and value each thing, then buy it as an asset, then create the loan back to the seller. It will need to be broken down and I do not see this as a loophole. It is indeed fair to buy say a customer list and hold it as an asset; however I do not think that you can just make up any value; it will posibly be checked.

The bottom line is how will the Auditor / Revenue Department view it.

Say I have a customers list. Let's assume I can add up all the purchases those customers did in the last year, deduct my costs to supply those products/services, and get the yearly profit from those customers. Than apply the thumb rule of 2.5 factor to this number (as in purchase of new businesses) and have a value for the customers list.

However, without any solid evidence regarding those intangible assets, I think exra creativity will be required in the explanations stage that might arrive...

[Carmine6]

The formal material is in Thai, I think you are the one that need English links to understand the law. Unless you have Registered Patents, Trade Marks or similar solid intellectual property, I don't see how you are going the register "ideas, concepts and contacts" as company capital.

Ok, so if I misunderstood something then how is it normally dealt with when not all of the capital is paid up? It has been mentioned many times on this forum that only 25% need to be paid up cash but my accountant now claims that all need to be paid up [last year].

First of all, some of the capital can be just in cash that you, as a director, keeps and use to pay for company expenses. This will work if the amount is not too large. Otherwise you can follow your accountant's advice.

Recalling my own knowledge of goodwill etc; until someone pays for it, it is valueless; it requires a mark to market through some sort of transaction, such as a purchase where goodwill is the difference between price paid and assets of the company.

Therefore, unless there is such a purchase, then you cannot just write your own value for these intangibles.

I suppose you could do a separate transaction and value each thing, then buy it as an asset, then create the loan back to the seller. It will need to be broken down and I do not see this as a loophole. It is indeed fair to buy say a customer list and hold it as an asset; however I do not think that you can just make up any value; it will posibly be checked.

The bottom line is how will the Auditor / Revenue Department view it.

Say I have a customers list. Let's assume I can add up all the purchases those customers did in the last year, deduct my costs to supply those products/services, and get the yearly profit from those customers. Than apply the thumb rule of 2.5 factor to this number (as in purchase of new businesses) and have a value for the customers list.

However, without any solid evidence regarding those intangible assets, I think exra creativity will be required in the explanations stage that might arrive...

Would this come up if as the OP suggests, there is paid up capital in cash, then afterwards, the company buys assets? Seems like it's the formation that's the issue. If the company then went and purchased assets, that's just a normal transaction that the business would be expected to do, like renting office space and buying office furniture.

The downside is, it would be income to the seller of the assets and taxable.