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Thailand Corporate Law: Winding Down a Thai Company

Transcript of the above video:

In this video, we're going to briefly discuss winding down Thai companies, companies registered here in Thailand. This is a topic that's not really well understood in the mainstream among most lay people. Quite frankly, it's not really very well understood because it's quite complex and it's kind of my opinion that most people have a lot of mistaken assumptions about how this works. Moreover, they don't really understand the dynamics of this.

So to the point, what we're talking about here is a company that's been in existence in Thailand, individuals that are running it and own it have basically decided they don't want to do business anymore and they wish the base would close up shop. In the West, specifically in the United States the jurisdiction I'm licensed in, LLCs, INCs, limited companies as they say in the U.K., all these things are rather easy to sort of wind oneself up in the sense that, like in the LLC if you don't maintain or pay your license fees with respect to your LLC, it just lapses.

Okay now, your tax liability and what not does not just go away because your LLC just kind of ends. But it just lapses. With respect to corporate model in Thailand, Thailand has a much more formalistic system with respect to their corporate law and for that reason, the issue of winding a company down is extremely important and in my opinion, should be left only to professionals who have experience winding down Thai companies.

Essentially what happens in the wind down process is basically it's a massive audit and you're basically being audited by the Revenue Department to ascertain whether or not the company is going to be allowed to wind down without creating a new tax liability or any unforeseen tax liability and to make certain a company doesn't owe any creditors, things of this nature. It's not a particularly easy process. It's not a process that's going to happen overnight. Dealing with the Revenue Department is rather a difficult endeavor.

In most cases with respect to our clients, oftentimes what will happen is basically a firm like ours will take charge of a company and basically the individuals involved, especially with the smaller operation, it's not really possible with the bigger operation but with small companies, basically deal with it in such a way that we get our clients out of any obligations that they have and then deal with the wind down ourselves.

But it should be noted that this is not something that you can just easily walk away from because failure to maintain certain tax compliance documents such as audited financial statement filing which is a yearly requirement as well the VAT filing on a monthly basis, etcetera, failure to do this can lead to serious tax consequences. For instance, failure to file VAT (VAT is owed) that can lead to a lot of money being owed the Thai Revenue Department and the other thing to think about is failure to file an audited financial statement can lead to the issuance of a criminal warrant in Thailand and police action does happen in the context of Thai companies failing to file their audited financial statements. In the instances where it does happen, they've been known to show up in the premises of a given office, they've been known to track down directors who are responsible for making those filings. It can cause quite a bit of a headache to an individual who fails to keep their corporate compliance up and failure to wind the company down, to just sort of leaving them hanging out there as I said, can basically put their company and the directors and those involved in a position where they've got maybe even criminal liability associated with failure to comply with the relevant rules and regulations regarding wind down and filing relevant tax and compliance documents.