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Home » Reader question » Reader question: Setting up a company in Thailand?
Reader question: Setting up a company in Thailand?
Dear readers,
It is known from Thai law that if you want to set up a company in Thailand, 51% of the registered capital must be owned by people with Thai nationality. I wondered whether the conditions also apply to a branch of a multinational. Should the registered capital of a branch of a multinational be owned for at least 51% in Thailand?
It's hard for me to imagine a company like Bombardier or Western Digital setting up a branch and leaving 51% of the share capital to Thai investors. That is different from opening a bar by a farang. Those large companies are much more powerful and financially powerful and can create a lot of jobs for Thai people, so I can imagine that the condition of that 51% must not be met. As if a CEO of a company with a multi-billion dollar turnover is going to take the risk that Thai people are the bosses of their branch in Rayong or Bangkok and maybe walk away with their investment/patents/know-how/personnel.
Regards,
Eight
The Foreign Business Act determines whether a firm registered in Thailand is a Thai or foreign firm. The standard rule is more or less than 50% of the shares. 50% plus 1 share is also possible.
Furthermore, this act contains 3 lists of activities that are reserved for Thai companies, ie companies with at least 50% plus 1 share owned by Thais. There are exceptions to 2 of these 3 lists. If an activity is not in 1 of these 3 lists, 100% foreign participation is allowed. This applies, among other things, to the production and export of cars and electronics.
Then there is the Board of Investment, which can make exceptions. In addition, there is also the Industrial Estate Authority, which can grant similar exemptions for investors within 1 of their sites.
Above a certain investment amount, it is also possible to maintain 100% foreign shareholding.
There are also exceptions,
am an American citizen, this is equated with the Thai one.
and you can start a business like this.
Large companies usually do business with Thailand via America.
Petervz comes with very good information.
I can also say that the 51% rule is not that absurd, it does not have to mean that you give all your money as a gift to a Thai. Namely, if you can lease in your own name and not that of the business, and you also have all bank accounts in your own name, then it does not matter if the Thai shareholder(s) decide to secretly take over everything, then they have just the title of your company. You just set up a company under a new name with other Thais and continue with your business.
Those majority Thai shareholders can vote out the foreign directors in a shareholders' meeting, appoint their own directors, and then simply gain access to the bank accounts.
You are actually referring to the Thai nominee status. Many lawyers will advise this way, but that status is punishable for both the Thai and the foreigner who allows it. This almost always goes wrong in a conflict.
I just read it yes. I had no idea that nominee status was officially illegal, only heard it often went that way. it is/was probably so common that the Thai government is not quick to prosecute if such a structure has been set up, but officially it is therefore illegal.
https://www.thailandlawonline.com/article-older-archive/foreign-business-nominee-company-shareholder
But even though it's illegal, and you can be fined, I don't think that means they can steal the capital in your business. After all, you have everything under your own name and not that of the business.
Moreover, such a nominee has no voting rights and cannot decide at all to vote others out.
It is not unusual for a company to be sold or hypothecated behind its back, and the foreigner is left stripped bare.
Ahold, Pepsi Cola, Carlsberg, Delhaize, Kinepolis, are just a few examples of multinationals that have been sidelined in Thailand, in fact thrown out of their own company, by their Thai partners. So setting up companies in Thailand by Western multinationals remains a difficult matter. Slightly easier for American companies due to the Amiety treaty. That gives Americans the same rights as Thais have in America
Apart from Piet, most of the answers are misleading and given on the basis that the posters are misinformed or just want to post something
Piet refers to the Amity treaty whereby a US national can set up a company with a majority share, which is why many service offices here (lawyers, accountants) are American
Furthermore, the amount of capital and the like have no influence at all.
Everything has to do with…. location.. On an industrial site under IEAT, a mulitnational can normally claim its 100% shares. At special locations in these areas, the free zone, a mulitantional can also own land and buildings, making the company completely foreign-owned. Outside the sites it is also possible under special permission from the BOI, but then the special benefits in tax and import that a company can get on a site often lapse.
Petervz also reports something that normally seems possible but is always (and everywhere) limited by so-called preference shares, so that the minority has actual control in a company.
So in short a multinational always has the majority of the shares, they would be crazy to give that away right?
I referred to the so-called Thai nominee, where 1 or more Thais acquire more than 50% of the shares without paying for it. This setup is often used, but is already punishable from the start (fine 100-1000k and/or 3 years in prison).
Due to this illegality, the so-called preference status of shares has no value whatsoever.
A multinational certainly does not always have the majority of the shares. ING is an example of this, but so are the service parts of car manufacturers.
Have a company with an export to 21 countries mainly in Europe. with a head office in the Netherlands
Have a factory in India, an Office in Hong Kong and a joint venture in China
At the time I also tried to do business in Thailand with a possible branch.
Short and sweet ……..don't start it.only opposition.and given our current
We do not give up status quickly. But in Thailand…………nooooooooo thank you.
Good luck.
According to
Simply operating under an American title, no problem at all as a large company. Americans have been exempt from this rule since the Vietnam War.