Government Enforcing Rule 102 Company Limited

[yamaharr1]

First let me say sorry if this has been covered already, as I have looked and I didn’t see anything up to date. My information below is of Oct 9th

I have just registered a Company Limited with 2 mill registered capital and the government is asking to see 6 months of bank statements to verify the 2 mill is in the bank.

How can I show them 6 months if I can not open a bank account?

And the Thai partners do not have the 2 mill in there bank accounts as I will be the person bringing in the funds from USA but it will not be in the amount of 2 mill.

The law they are trying to use is document number 102 in which states if a foreigner is going to own anywhere from 40 to 49% and have the right to sign documents such as company checks and so fourth then the Thai’s must at least be able to show 2 mill Baht on the books.

If I want to get around this rule they said I will have to lower my percent of shares to 39% and give up all of my rights to being able to sign any documents.

This means: say I make a deal in the US or the UK that would generate revenue of 5 million Baht I could not even right my own pay check to get to my own money.

Has anyone else had this problem? Because how could any government think that anyone would start a company and generate business but then give up all of there rights to the profits of the business? (Then again Welcome to Thailand)

[Cyberstar]

I have just registered a Company Limited with 2 mill registered capital and the government is asking to see 6 months of bank statements to verify the 2 mill is in the bank.

How can I show them 6 months if I can not open a bank account?

And the Thai partners do not have the 2 mill in there bank accounts as I will be the person bringing in the funds from USA but it will not be in the amount of 2 mill.

The law they are trying to use is document number 102 in which states if a foreigner is going to own anywhere from 40 to 49% and have the right to sign documents such as company checks and so fourth then the Thai’s must at least be able to show 2 mill Baht on the books.

If I want to get around this rule they said I will have to lower my percent of shares to 39% and give up all of my rights to being able to sign any documents.

Things seem a bit mixed up here. Ofcourse they're not asking to see 6 month of bank-statements for a yet non-existing company .... However, it does sound like they're inforcing the requirement that the Thai co-investors must be genuine ... If that's the case - then what they're asking for is 6 month bank-statement proving that those Thai co-investors really are good for 51% of the 2,000,000...

Couldn't that interpretation fit with your experience?

[yamaharr1]

I have no problem with the interpretation at all. I am not sure you can see the MANY different interpretations of this, one interpretation I get from this is the Thai government doesn’t want Thai’s to do business with foreigners unless the Thai’s have cash, so that means no start up companies and you can only do business with what is considered the upper class because the rest are not going to have the amount for the registered capital, plus start up expense, plus, plus, plus.

Couldn't that interpretation fit with your experience?

So I guess what I am after is what to do? Because the Thai's do not have that amount and from what I have read here the Thai’s where never asked to prove it before. As mentioned before I will be investing the money but it won’t be 2 million initially.

What if the Thai’s made a business deal with a foreigner and then they decided to open a company to continue this business, to have the foreigner in Thailand with a work permit they need to register a company with capital of 2 mill. So what the government is saying is they rather not have start up companies progressively grow. They only want Thai’s in companies who have the cash from the get go.

And why do the Thai’s have to show the full 2 mill isn’t it suppose to be only 51%? But the government is asking to see the full registered capital in the Thai’s bank account.

[Chang_paarp]

I think you will find that only 25% of the registered capital is needed in cash. The rest can be in intellectual property and other intangibles. In the first 60 days the total of 500K (25% of 2Mil has to be deposited to the company account.

The challenge your Thai partners are facing is to show how they are contributing their share of the registered capital. They have to show how they came to have 51% of 500K Baht (255K for 25% of registered capital or 51% of 2Mil Baht (1.02 Mil if all the registered capital is to be be cash. If the money is loaned to them it cannot be from a foreign source, nor mysteriously appear in their account, they have to show how they earned / saved/ borrowed it.

Your legal advisor should be explaining this to to you and your partners in simple understandable language and be helping you to prepare these documents for the registration. You should also have an independent advisor ensuring your interests are being correctly put in place as part of the company registration. This holds especially true if you are not fluent with Thai business and legal language and practices. You do not want to be stuck with all the company debts and none of the profit.

If you look in the last couple of pages of this forum company setup covered regularly, I think there is currently one thread on this page. I am sure Greg from Sunbelt has a boilerplate answer for this question for the number of times he has answered it.

This is not just doing business in Thailand, it is doing business. There is no consumer protection in the business world.

[Sunbelt Asia]

I think you will find that only 25% of the registered capital is needed in cash. The rest can be in intellectual property and other intangibles. In the first 60 days the total of 500K (25% of 2Mil has to be deposited to the company account.

The challenge your Thai partners are facing is to show how they are contributing their share of the registered capital. They have to show how they came to have 51% of 500K Baht (255K for 25% of registered capital or 51% of 2Mil Baht (1.02 Mil if all the registered capital is to be be cash. If the money is loaned to them it cannot be from a foreign source, nor mysteriously appear in their account, they have to show how they earned / saved/ borrowed it.

Your legal advisor should be explaining this to to you and your partners in simple understandable language and be helping you to prepare these documents for the registration. You should also have an independent advisor ensuring your interests are being correctly put in place as part of the company registration. This holds especially true if you are not fluent with Thai business and legal language and practices. You do not want to be stuck with all the company debts and none of the profit.

If you look in the last couple of pages of this forum company setup covered regularly, I think there is currently one thread on this page. I am sure Greg from Sunbelt has a boilerplate answer for this question for the number of times he has answered it.

This is not just doing business in Thailand, it is doing business. There is no consumer protection in the business world.

Well stated. I wonder who the Legal advisor is? They certainly have not done their job in helping their client.

You’ll be amazed how many foreigners are forming companies with themselves just holding 39% of the shares and they are not even a director.

www.sunbeltasiagroup.com