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ResourcesCorporate and Tax AdvisoryThailand Corporate LawThe Possibility of Single Shareholder Companies in Thailand

The Possibility of Single Shareholder Companies in Thailand

Transcript of the above video:

In this video today, we're going to be doing an update on a prior video on this channel which discussed the so called single shareholder companies in Thailand. For those unaware, going back about 15 years actually even a little less than that, going back to about 2008. If you went back to 2008 and prior, a company formed in Thailand needed to have seven shareholders to set up a limited company structure here in the Kingdom. After about 2008, laws were promulgated and regulations changed and thus was born the so called three shareholder company regime.

So from 2008 to 2017, companies form formally registered in the Kingdom of Thailand need to have three shareholders. It has been proposed over the course of about the last 12 months, it's been proposed to create a regime that would allow limited companies to only have one shareholder. This would bring Thailand's corporate sort of legal structure or I should say, it would bring Thailand’s corporate jurisprudence sort of more into line with more international and sort of, common law notions or at least common law present notions of how limited liability structures are in fact structured. So things like LLCs in the United States which are discussed at length in another video on this channel, the so called limited liability companies or the “LLC” which are done through the United Kingdom, both of these types of structures provide a level of limited liability without the need to have a significant amount of formality and a significant number of people in order to maintain legal requirements.

To quote directly from a recent article in the Bangkok Post which was posted August 16th, 2017, the headline of this article is “State seeks a speedy one-person Company Act passage.” And to quote directly from the article, “The Commerce Ministry is accelerating the draft process of the one-person company act and expects the proposed law to help promote small businesses and boost the country's economy.” The director general of the Commerce Ministry’s Department of Business Development said the draft received cabinet approval earlier this year and is now being looked at by the council state.

To quote further, “The one-person company act would allow one person to create his or her own business compared with the existing law that stipulates that at least three people have to register as a juristic person a.k.a. a company or as the article says directly or a company. So when we say juristic person, we’re actually saying a company. It's sort of interchangeable in sort of lexicon of jurisprudence of Thai corporate law at least translated into the English language.

To quote further, “The proposed law will allow one person who has a small amount of capital to start a business under a legal framework. That would make it easier for the government to track small business and businesses and collect annual tax as well as lend support in the form of soft loans or other financial help to small companies which are mostly small, medium-sized enterprises SMEs.” So basically, it looks like Thailand is trying to facilitate more corporate registrations especially for smaller enterprises here in the Kingdom.

It should be noted that this may or may not have positive ramifications for foreign nationals because in prior discussion of this, as has been noted in the prior video on this channel before they came out said we're going to try for this one person company act. And then they came out and sort of amended or sort of revised the statements that surrounded the initial announcement about the one person company act and in those sort of revisionary statements, they noted that these provisions that will allow a single shareholder company do not necessarily apply where there's a foreigner involved.

So it would appear that at least it's very probable that if a foreign national is a party to a business in Thailand, that foreign national will need to go ahead and still have to abide by the three shareholder framework. That being said, most foreign nationals in Thailand will have to do that anyway or at least a two-person framework because pursuant to the provisions of the Foreign Business Act here in the Kingdom, it is required that there be a 49-51. In most cases, it's going to be required that there be a 49-51 percent split in the shares with respect to equitable ownership of the company of a limited company here in Thailand. Because the Foreign Business Act stipulates certain types of endeavors which are restricted to Thai nationals or predominantly Thai national owned businesses.

One thing to keep in mind with respect to that is the U.S. Thai Treaty of Amity the provisions of which allow an American citizen to own virtually 100 percent of a Thai company here in the Kingdom notwithstanding the provisions of the Foreign Business Act. Now there are some restrictions even under the treaty but that being said, American citizens do enjoy a significant sort of significantly increased benefits pursuant to the provisions of the treaty especially insofar as they don't have to deal with this sort of 49-51 percent framework. The 49 percent-51 percent framework would seem to apply again with respect to foreign nationals if for no other reason than the Foreign Business Act provisions are going to go ahead and apply or would presumably still apply under this new regime. But that being said, it remains to be seen exactly how this stuff is going to be implemented and if this comes to pass and actually is enacted and brought into law, we’ll go ahead and do another video to sort of provide an update as to how this is actually going to operate especially with respect to foreign nationals wishing to do business in the Kingdom.