The foreign company license allows foreign business ownership companies to operate in Thailand without majority Thai shareholders. This license allows for foreign business ownership of the shares of a Thai company. However, some business activities are not open to foreign capital, so the FBL license cannot be applied for, and a Thai majority shareholder holding at least 51% will be required. In any case, any company wishing to apply for an FBL must first check the provisions of the Foreign Business Act and the Thai regulations to ensure that the company is eligible to obtain this license. The application for the license should be made directly to the Ministry of Commerce in Thailand.
Let’s assume that you want to set up a foreign company in Thailand that will be controlled and owned entirely by foreigners. In this case, it is essential to first conduct a preliminary analysis of your business to determine with your lawyer or advisor the following legal aspects:
|➤ The type of company that you wish to establish in Thailand|
|➤ Check if your activity is eligible to obtain a FBL or a BOI|
|➤ Check with the Thai agent the requirements and documents requested|
Thai law allows certain businesses or companies to be 100% foreign owned. Themis Partner has prepared for you below your different possibilities to create a foreign company in Thailand:
Thai companies that obtain approval from the Board of Investment (BOI) may be majority owned by foreign shareholders. However, these companies must apply for a BOI license in advance. If you would like more information about a BOI company in Thailand, please contact us.
In general, the foreigner can hold a maximum of 49% of the company’s shares. However, by applying for a FBL, a foreigner can hold the shares of the company after obtaining the required license. Under the Foreign Enterprise Act, foreign investors must obtain a license to conduct business under Thai law for all business activities generally reserved for Thai nationals. To obtain a foreign business license (FBL) in Thailand, a company must first apply to the Ministry of Commerce for permission. A foreign business license is a specific document authorizing the business to be 100% foreign-owned generally limited to 49% foreign and 51% Thai nationals. Before applying for a foreign business license, it is necessary to check the Thai law to make sure that your business activity allows foreigners to own a Thai company, letting the foreigner own more than 49%. We recommend that you contact us so that we can put you in touch with a competent lawyer to analyze your request.
U.S. citizens can hold the shares of a company in Thailand by registering their company under the U.S. Treaty of Amity. If you wish to establish a Thai company and you are a US citizen or a US company, we invite you to contact our business lawyers.
It exists for business activities in which foreigners can hold the ownership of shares in a company and which are:
As these business activities are not restricted to foreign investors in the Foreign Business Act, foreigners can hold foreign business ownership of shares in these types of companies without any license.
When setting up a foreign company, it is essential to follow a 7 steps registration process to incorporate your company. Here are the different steps to keep in mind when you want to incorporate a foreign company in Thailand.
Before incorporating a company, it is essential to check whether the company can carry out economic activity through a foreign company in Thailand. Indeed, most economic activities cannot be carried out by international companies or majority owned by foreigners. In fact, Thai law requires that the vast majority of economic activities be majority owned by Thai people (51%), so it is necessary to find a Thai shareholder who holds 51% of the company’s shares.
In order to have full foreign business ownership, it is important to study all the documents necessary to obtain your license. Sometimes, your license application can be filed before your company is incorporated to increase the chances that your license application will be approved by the Thai authorities.
You must come up with a unique name for the company. The company name cannot be duplicated. Therefore, it is essential to make sure that no other organization has the same name. But the reservation of the approved company name will be valid only for 30 days. In addition, according to Thai government rules, there are a few words that are prohibited in a company name. So you have many options to choose the name. Before making this reservation, make sure you already know the name of the director who will sign the incorporation documents.
Once the name of the corporation has been approved, the incorporation documents must be filed with the Department of Business Development (DBD). Note that once the company is established, you can give 100% of the shares to foreign shareholders. However, it is essential to note that if a specific authorization is requested, the company will have to wait to obtain the license from the FBL or BOI before starting the economic activity. It will also be necessary to hold a statutory meeting to incorporate the company.
The application for registration of the company must be filed within three months of the statutory meeting of directors. However, the formation of a corporation can be done within 3 business days. All incorporation documents must be filed with the DBD, and all documents related to the formation of a corporation must be completed and signed by the director of the corporation. Please note that it is not necessary for the directors of the corporation to file the application themselves. In any case, due to the complexity of the procedure, we advise you to be represented by an advisor or a lawyer for the creation of your company with foreign business ownership.
Upon submission of the documents, a certificate of registration and all company documents will be sent to you. A corporate tax identification number will also be issued to you and will appear on the company’s affidavit document. You can contact us for professional accounting services for further process.
If your company is required to obtain a prior authorization (BOI, FBL, US Friendship Treaty) before you can start your business in Thailand, it will be important not to carry out any business activity during the authorization period. Of course, you will be able to carry out your activity after having obtained your licenses.
The Foreign Enterprise Act defines the term “foreign enterprise” as follows:
|➤ A natural person who is not a Thai national|
|➤ A legal entity not registered in Thailand|
|➤ A legal entity registered in Thailand, of which half or more of the shares in the capital are held by a person or legal entity, as mentioned in (1) or (2)|
|➤ A legal entity registered in Thailand, half of whose capital shares are owned by a person mentioned in (1), (2) or (3)|
There are three different lists of business activities:
|➤ Business activities not permitted to foreigners, which are strictly prohibited to foreigners|
|➤ Activities allowed to foreigners if they have the permission of the Minister of the Ministry of Commerce with the approval of the Cabinet|
|➤ Activities prohibited to foreigners, unless permission is granted by the Director General of the Department of Trade Development with the support of the Committee|
According to the Thai law called Foreign Business Act (FBA), the above mentioned code indicates three different types of business areas restricted by Thai law:
Foreigners are not allowed to conduct business in Thailand in the following sectors:
|➤ Newspaper industries, radio and television station industries|
|➤ Business activities related to agriculture, rice cultivation or gardening|
|➤ Business activities related to animal husbandry|
|➤ Commercial activities related to forestry and natural resources of forests|
|➤ Commercial activities related to fishing industries in Thai waters and specific economic zones|
|➤ Commercial activities related to Thai herbal extraction|
|➤ Sale and trade of Thai historical relics, goods and artifacts|
|➤ Casting or manufacturing of Buddha images|
|➤ Land trading|
In the categories defined in List 1, foreigners can hold a maximum of 49% of the shares in these business sectors. The company must also have a minimum registered capital of three million baht. And the limit of foreign share ownership is 49%. However, to enter the company’s capital, foreign shareholders will have to submit their application to the Department of Business Development. Upon receipt of the application, the DBD will have 30 days to approve or disapprove the applicant’s application.
The following group includes three different categories:
|➤ Commercial industries related to national security or safety|
|➤ Equipment or components, all categories of war materials: firearms, ammunition, gunpowder, composite materials and explosives, weapons, ships, aircraft or military vehicles|
|➤ Land located in Thailand, air and water transport industries|
|➤ Trade in arts and culture, traditional and folk crafts: Trade in antiques that are Thai art or crafts, woodcarving, Thai silk weaving, or Thai silk printing, Thai musical instrument making|
|➤ The production of gold, silver, niello, bronze or lacquer objects|
The company may have more than 49% foreign business ownership shares and a minimum capital of three million baht if the following conditions are met:
|➤ The registered capital of the company must not be less than three million baht, and 25% must be delivered upon incorporation of the company, and then 25% every year for three years|
|➤ A maximum of 60% of the ownership of foreign shares. However, most of the shares held by foreign shareholders cannot exceed 75% after receiving approval from the Minister of Commerce|
|➤ The board of directors must be composed of 2/5 Thai directors|
For any List 2 business, an FBL must be applied for before the company can operate. Upon receipt of the application, the Business Development Department will request the application from the Minister of Commerce’s office. After receiving support, the applicant will receive an FBL.
|➤ Production of rice flour from rice and local plants|
|➤ Fishing activity involving only the hatching and breeding of aquatic animals|
|➤ Reforestation and development of forest areas|
|➤ Production of plywood, veneer, particleboard or hardboard|
|➤ Lime production|
|➤ Provision of accounting services|
|➤ Provision of legal services|
|➤ Provision of architectural services|
|➤ Provision of engineering services|
|➤ Construction, except construction of public infrastructure|
|➤ Being a broker or agent in the sale or purchase of securities|
|➤ Retail trade in goods of any kind|
|➤ Wholesale trade of any kind with a minimum capital of each store of less than one hundred million baht|
|➤ Advertising and publishing|
|➤ Hotel business, except hotel management services|
|➤ Guided tour in Thailand|
|➤ Sale of food and beverages|
|➤ Cultivation, propagation or development of plant varieties|
|➤ Other service activities, except service activities prescribed by ministerial regulations|
The company can own more than 100% of the shares of a Thai company if the following conditions are met:
|➤ The registered capital of the company must be at least 3 million, and 25% of the registered capital must be repaid when the company is incorporated. (25% of the amount is repaid every year for three years after the company's incorporation)|
|➤ The applicant must submit the application to the director general of DBD with the necessary documents presenting the project in Thailand|
|➤ After approval, the foreign business license will be issued within 15 days, which will allow the applicant to foreign business ownership|
Within the framework of your activity, we wish to draw your attention to the risks related to the use of nominees in Thailand. The use of nominee shareholders is expressly prohibited by the Foreign Business Act. The use of nominees can circumvent Thai shareholder ownership in a company up to 51%. However, you can use a shareholder agreement to set out the rights and responsibilities of shareholders. Foreigners are allowed to control the company as a minority shareholder (49%) and can be appointed as CEO of the company under the current Foreign Enterprise Act.