New Rules To Setup A Company: Some Money Must Be Shown

[ThaiLawOnline]

I believe there are new directives at the DBD (Department of Business Development) for setting up companies in Thailand. I was informed few weeks ago but today, it was the first time we applied them in Chonburi. Not sure if it was posted before on Thaivisa.

Basically, the capital registered is the money that shareholders put together when they setup a company. According to some accounting laws, 25% of that money had to be paid up, meaning should be available in cash or assets of the company. However, most law firms were setting up companies with less than 40% foreign shares at the beginning, to avoid the anti-nominee law checks, and no money had to be shown except for the government fees and the people you might pay to setup a company. Everything was on paper. The 25% was on paper, at your accountant!!!!

Since about 1 or 2 months, the DBD requires the THAI shareholders, not the foreigners, to show 25% of the value of their shares by a bank letter, when you register a company.

I will give you an example. Let's imagine a company with 3 shareholders, 1 is Thai, and 2 are foreigners.

The Thai has 61% and foreigners have 38% and 1% of shares. The company is 1 million baht capital registered. Foreigners do not ave to show anything. But the Thai person, having 61% of 1 million is like 610,000 baht in shares. You calculate 25% of that. It means this person needs a letter from a bank showing at least 152,500 baht in her/his bank account at the registration.

This was never asked before. We setup few companies in January without that. But since at least March, it is requested to our information. I can't say if all DBDs are doing the same, but we double checked in 3 different places and were told the same for 3 places (Bangkok, Chonburi and Nakhon Ratchasima).

Again, this applies only for Thai shareholders.

[lemoncake]

But its not really a big change, as law firms can simply deposit this money into Thai shareholder account, show it and withdraw it.

Also since most of the company's are set up through the law firm, law firm partners or staff are usually the shareholders, so again showing this money should not really be a problem

[ThaiLawOnline]

But its not really a big change, as law firms can simply deposit this money into Thai shareholder account, show it and withdraw it.

Also since most of the company's are set up through the law firm, law firm partners or staff are usually the shareholders, so again showing this money should not really be a problem

Law firms will not put money in another bank account to my knowledge.

And if law partners or staff are used as nominees, that would be illegal.

The difference is before it was not checked. Now, they are clearly enforcing the rules to prevent foreigners using nominees too easily. If you set up the company at 2 million baht and 61% Thai shares, you are at 305,000 baht in Thai bank accounts. For some people, that is a lot of money and a big difference when it was not asked before.

[lemoncake]

But its not really a big change, as law firms can simply deposit this money into Thai shareholder account, show it and withdraw it.

Also since most of the company's are set up through the law firm, law firm partners or staff are usually the shareholders, so again showing this money should not really be a problem

Law firms will not put money in another bank account to my knowledge.

And if law partners or staff are used as nominees, that would be illegal.

The difference is before it was not checked. Now, they are clearly enforcing the rules to prevent foreigners using nominees too easily. If you set up the company at 2 million baht and 61% Thai shares, you are at 305,000 baht in Thai bank accounts. For some people, that is a lot of money and a big difference when it was not asked before.

Totally agree the money is big, but i believe you are somewhat incorrect on the shareholders originality. Of course employees of law firm or accounting firm can be shareholders. It is not illegal and never has been.

Following your post, it would mean that no thai lawyer or any of its staff can be partners in any foreign owned business, which simply does not make any sense, especially when its a genuine partnership

[ThaiLawOnline]

I wrote "nominee". The Anti-nominee act of Thailand was adopted to prevent foreigners to circumventing Thai laws, by using people into their company that are not "real shareholders". In other words, they do not really invest but are "ghosts" into the company, having Thai shares, so the company is Thai and does not go against the foreign business act. Obviously, lawyers or staff can be shareholders but they can not be nominee, even if this is widely spread in Thailand.

recently spoke to a Thai lawyer about the yellow book or blue book. He was surprised we bothered about a blue book or yellow book because it has legally very little value and you can live without one. I would not bother about blue or yellow, but it looks nice having one, but that’s all Maybe it's practical in certain situations but not required.

You probably again spoke to a Thai lawyer....

Yes, 1105 is mentioning that 25% but no documents were asked before. Saying that it could always be requested it talking for saying nothing. The rules have changed. It was not requested and it is now. That's the purpose of this post, to inform people about it.

[hugocnx]

Thanks for sharing this OP

[CRUNCHER]

I wrote "nominee". The Anti-nominee act of Thailand was adopted to prevent foreigners to circumventing Thai laws, by using people into their company that are not "real shareholders". In other words, they do not really invest but are "ghosts" into the company, having Thai shares, so the company is Thai and does not go against the foreign business act. Obviously, lawyers or staff can be shareholders but they can not be nominee, even if this is widely spread in Thailand.

Anti-nominee act of Thailand? Is this a new law. Thought the use of nominees breached the Foreign Buisness Act and The Land Code.

The use of nominees to enable foreigners to own land, or even condos in the Thai quota, has always been ilegal. Seems the only thing that has changed is that rules (laws) are being more strictly enforced. I doubt the rules have changed.

[chaihot]

...

Also since most of the company's are set up through the law firm, law firm partners or staff are usually the shareholders, so again showing this money should not really be a problem

It is rumored that DBD has now begun running cross-checks BY shareholder name (Thai) and asking shareholders (Thai) to prove how they obtained the money to be a shareholder in the 20, 50, or 100 companies in which they are listed. That is the biggest fear for anyone who allowed their law office or company-setup firm to allow their employees to be a "ghost" shareholder.

[vijer]

So all the news we have heard over the last several months "Yinglak and company want to lure foreign investment" has only one goal, to have foreigners loan money to Thailand, not to actually invest.

[guavagirl]

My husband, who owns 70% of our company, had to prove that he could afford to have a foreigner on his payroll and invest in a company with a foreigner when we set up our company 5+ years ago. His parents put money into his bank account and he was interviewed by the labour board and had to present his university degree to prove he was educated. So I don't think this is new news but perhaps they never really implemented it that much before.

[2unique]

We set up a new Thai company last year and both my wife and her sister had to show their bank statements showing they had the required capital..

Sent from Android please excuse errors in type or judgement

[falang07]

Yes, Thailand and it's scams. All countries should introduce reciprocal measures to Thai citizens.

[mmail2you]

So do the Thai share holders have to show anything when the annual audit on the company is done ?

[2unique]

So do the Thai share holders have to show anything when the annual audit on the company is done ?

Presumably tax on any dividends

Sent from Android please excuse errors in type or judgement

[ivowatson]

Actually, 100% of the Thai shares have to be paid up now, not 25%. At least in Phuket since the beginning of this year.

So in the example of the OP, not 152,500 but 610,000 had to be shown in a bank account (for registering a new company at the Phuket DBD).

If only Thai shareholders, no money has to be shown. If Thai and foreign shareholders, only the Thai have to show money.

[mmail2you]

So do the Thai share holders have to show anything when the annual audit on the company is done ?

So any answers on the above question ? re annual audit

[ThaiLawOnline]

Actually, 100% of the Thai shares have to be paid up now, not 25%. At least in Phuket since the beginning of this year.

So in the example of the OP, not 152,500 but 610,000 had to be shown in a bank account (for registering a new company at the Phuket DBD).

If only Thai shareholders, no money has to be shown. If Thai and foreign shareholders, only the Thai have to show money.

That didn't apply in the last provinces we made companies, meaning maybe 4 to 6 provinces in the last 6 months.

It was actually ZERO, nothing checked, if you were putting 39% and less foreign shares. This 40% rule was I believe in the "Business Registration Rules" signed on 20 July 2006. But it is possible that Phuket applies other rules. This is Thailand and nothing surprises me anymore.

There are anti-nominees provisions in many laws, like the foreign business act (see section 36) , the land code (sections 96, 113), etc. I don't deal with these matters as we have Thai lawyers doing that. Also, I am not a specialist about companies. I was just told by our staff that there were modifications.

I am glad to read about the experience of other people in other areas of Thailand. I can see it differs from one to another.

[ThaiLawOnline]

So do the Thai share holders have to show anything when the annual audit on the company is done ?

So any answers on the above question ? re annual audit

We do accounting for about 12 companies for last 7 years.

Nothing is showed when the audit is done. Everything is on paper.

But you must give you bank account to your audit. That is for showing the incomes, expenses. Of course, you can add others. The capital or assets of the company don't need to be in the bank account.

That is my experience in Nakhon Ratchasima.

[thaiwanderer]

I wrote "nominee". The Anti-nominee act of Thailand was adopted to prevent foreigners to circumventing Thai laws, by using people into their company that are not "real shareholders". In other words, they do not really invest but are "ghosts" into the company, having Thai shares, so the company is Thai and does not go against the foreign business act. Obviously, lawyers or staff can be shareholders but they can not be nominee, even if this is widely spread in Thailand.

recently spoke to a Thai lawyer about the yellow book or blue book. He was surprised we bothered about a blue book or yellow book because it has legally very little value and you can live without one. I would not bother about blue or yellow, but it looks nice having one, but thats all Maybe it's practical in certain situations but not required.

You probably again spoke to a Thai lawyer....

Yes, 1105 is mentioning that 25% but no documents were asked before. Saying that it could always be requested it talking for saying nothing. The rules have changed. It was not requested and it is now. That's the purpose of this post, to inform people about it.

Actually, 100% of the Thai shares have to be paid up now, not 25%. At least in Phuket since the beginning of this year.

So in the example of the OP, not 152,500 but 610,000 had to be shown in a bank account (for registering a new company at the Phuket DBD).

If only Thai shareholders, no money has to be shown. If Thai and foreign shareholders, only the Thai have to show money.

That didn't apply in the last provinces we made companies, meaning maybe 4 to 6 provinces in the last 6 months.

It was actually ZERO, nothing checked, if you were putting 39% and less foreign shares. This 40% rule was I believe in the "Business Registration Rules" signed on 20 July 2006. But it is possible that Phuket applies other rules. This is Thailand and nothing surprises me anymore.

There are anti-nominees provisions in many laws, like the foreign business act (see section 36) , the land code (sections 96, 113), etc. I don't deal with these matters as we have Thai lawyers doing that. Also, I am not a specialist about companies. I was just told by our staff that there were modifications.

I am glad to read about the experience of other people in other areas of Thailand. I can see it differs from one to another.

how very strange. you write of the anti-nominee act being adopted, then in the same post throw in a perhaps disparaging comment about a thai lawyer...

...then in the further post draw back on the act you wrote of being adopted and fall back on your thai laywers

while you're here can I again point out #16 of http://www.thaivisa.com/forum/topic/508698-usufruct-on-land-title/