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ResourcesCorporate and Tax AdvisoryThailand Corporate LawDue Diligence Issues with Respect to Shareholder ID on Thai Companies

Due Diligence Issues with Respect to Shareholder ID on Thai Companies

Transcript of the above video:

In this video, we're going to discuss identity documents pertaining to shareholders on a Thai company. As is discussed at length in another video on this channel, recent changes to Thai law have and specifically Thai regulations pertaining to shareholders on Thai companies have changed and now, there's a requirement that Thai passport or I should say, there's a requirement that the relevant identity document for the shareholders in a given company, that the identity document number be provided in the shareholder sheet.

In the past, this may not have been the case and actually it wasn't the case. It's only been up until about this year that this has been a requirement, that these identity documents, these identity document numbers be placed on file with the Revenue Department, with not the revenue department, I should say, with the Ministry of Commerce with respect to the shareholder sheets pertaining to a given company.

So this is a new rule. Why is it important from a due diligence perspective? Well, one sort of implication of this rule is that the Thai Revenue Department now will no longer accept audited financial statements, yearly audited financial statements. More information on that topic specifically, please check out our video on this channel with respect to yearly audited financial statements.

But leaving that aside, the Revenue Department is now requiring that these shareholders sheets be updated to also reflect the ID numbers associated with the shareholders. Why is this problematic? Well in most closely held corporations here in Thailand, you're going to know your shareholders but there are certain circumstances especially you know, old companies that were set up by a law firm 15 years ago under an entirely different foreign business act and legal rules pertaining to the Ministry of Commerce. One rule I can give specifically that has changed as it used to be required that there be seven shareholders on a given side company. It's now required that there be three shareholders on a given tight company. That's changed in the past ten years and little more than that though past 12 years

So in the past, you have these seven shareholders and you probably have four, maybe five of them that were on the company which is like one share than in many cases were just added to that shareholder sheet as a formality. Well now that the Revenue Department is requiring that shareholder sheets be updated to reflect the ID numbers of the shareholders. It may be required to go back and find these shareholders, figure out who they are, figure out their ID number and go ahead and get that information put onto a new shareholder sheet. And then that shareholder sheet be used to file the audited financial statement. Failure to find this information probably will result in the Revenue Department not accepting the early audited financial statement. Failure to maintaining the early audited financial statements have significant ramifications with respect to fines and fees and penalties associated with the Revenue Department. Moreover, there are actually criminal penalties that can be associated with prolonged failure to file audited financial statements which can lead to criminal penalties, fines as well as the possibility of administrative closure and dissolution of the entity.

So this can have pretty significant ramifications and for that reason, it's probably a good idea to retain legal professionals who can assist in ascertaining through due diligence the various numbers necessary in order to amend the shareholders sheet and get everything up to date with respect to the audited financial statement.