Close a company because one no longer wishes to carry on its activity is not an easy thing for the entrepreneur. Various reasons can justify this decision: insufficient activity, disagreement between partners, retirement because the procedure of dissolution-liquidation is a little complex if a Thai lawyer does not accompany you. To close company, you must first decide on its early dissolution and appoint a liquidator. Then, you have to proceed with the closing of the company. This will result in the division and final closure of your company. With Themis Partner, we can put you in touch with a Thai lawyer specialized in the closure of your company in Thailand who will assist you in all the procedures related to the closure of the company.
What is the cause of the closure of your business?
There are many reasons to close a company. Among them are low profitability, economic situation, inability to maintain business operations, decision of shareholders not to continue their business in Thailand. In these cases, the dissolution of the company is carried out, on the one hand, by the decision of dissolution adopted in general assembly and, on the other hand, by the procedure of liquidation of the assets of the company to clear the liabilities. This is a voluntary procedure at the initiative of the company’s director.
Articles 1236 and 1237 of the Thai Civil and Commercial Code provide for the different causes of close company. A distinction can be made between legal dissolutions and court-ordered dissolutions.
Legal close a company are as follows:
➤ In the cases provided for in its articles of association
➤ If the company is incorporated for a fixed term, by the expiration of that term
➤ By a special resolution of dissolution
➤ By the bankruptcy of the corporation
The Thai court can close a company in the following cases:
➤ If the filing of the statutory report or the holding of the statutory meeting is deficient
➤ If the company does not start its activities within one year from the date of registration or if it suspends its activities for a whole year
➤ If the company's business can only be carried on at a loss and there is no prospect of recovery
➤ If the number of shareholders is reduced to less than three
Who can close a company?
Close a company may be decided by the Thai courts or by the general meeting of shareholders. When the closure of the company is decided by the company, the general meeting must pass a special resolution. The procedure is as follows:
A special resolution of the shareholders must introduce the closure, and all shareholders must be notified. With respect to the Civil and Commercial Code, the notice of meeting regarding the closure of a Thai company must be published in a local newspaper and sent to each shareholder by mail at least 14 days before the meeting to vote on the close company.
According to the Civil and Commercial Code, at least one-fourth of the voting rights of the shareholders must be present at the general meeting to achieve a quorum. At the general meeting, at least three quarters of the votes, i.e. 75%, must be in favor of the close company.
The shareholders appoint the liquidators and the auditors. Otherwise, the directors are automatically appointed as liquidators, unless the company’s articles of association provide otherwise. The name of the liquidator and the dissolution itself must be registered with the Department of Development Affairs. The registration must be made within 14 days after the date of dissolution by the liquidator.
The decision of the extraordinary general meeting is published in local newspapers within 14 days of the decision. A notification is also sent to the creditors within 14 days informing them of the dissolution of the company.
The appointment of the liquidator depends on the cause of dissolution. If the corporation is dissolved for a reason other than bankruptcy, the director becomes the liquidator, unless the articles of the corporation provide otherwise. On the other hand, if the corporation is dissolved for bankruptcy, the court will appoint the liquidator. The main role of the liquidator is to settle the company’s debts and distribute its assets.
The liquidator has the following duties:
➤ Finalize the financial statements and have them certified by an auditor. To validate the balance sheet, he must convene an extraordinary general meeting
➤ Present every three months to the competent authorities a report on the company's activity and the liquidation accounts
➤ If the assets are insufficient to compensate the liabilities, the liquidator must file a bankruptcy petition with the court
➤ If the liquidation continues for more than one year, the liquidator must convene a general meeting at the end of each year from the beginning of the liquidation and draw up a report on the company's activities and a detailed statement of its situation
➤ At the end of the liquidation, the liquidator must draw up a liquidation report indicating how the liquidation was carried out and how the company's assets were disposed of. He must convene a general meeting to approve this account
The powers of the liquidator are as follows:
➤ To represent the company in any legal proceedings
➤ To diligently pursue the business of the company
➤ To sell the assets of the corporation
➤ Act on behalf of the corporation to effect liquidation
➤ To require the shareholders to pay any outstanding capital contributions or actions
How do you close a company?
The dissolution of a company takes place in two stages:
➤ The first stage is dissolution - this is the formal termination of the company's legal presence at an extraordinary general meeting
➤ The second stage is liquidation - distribution of assets and discharge of debts by the liquidators
A distinction should be made between the dissolution of a company, which includes the phase of closing the company necessary to clear the liabilities and distribute the remaining assets. Judicial liquidation, which is part of the law on companies in difficulty, is also known as “Bankruptcy“. This procedure differs from the closure of a voluntarily dissolved company, which does not require financial difficulties. Indeed, the judicial liquidation of a company is the procedure applicable to a bankrupt company, i.e. a company that is unable to meet its liabilities with its available assets. In simple terms, a company that is no longer able to pay its debts is in the red. The closure of a company is necessary when there is no longer any way to continue the economic activity. Thus, close a company can be voluntary or judicial, provided that a creditor initiates the procedure for the closure of the company.
The procedure for close company involves several steps that must comply with sections 1247 to 1273 of the Thai Civil and Commercial Code.
Step 1. Calling a Special General Meeting
First, the dissolution must be voted on by a public meeting on a special resolution to close the company. All shareholders must be convened, failing which the meeting may be cancelled.
Step 2. Formalities with the tax authorities
Once the closure of the business is declared, the certificate of registration of VAT for cancellation must be submitted to the Revenue Department by notifying the general manager within 15 days of the registration of the dissolution with the DBD. Then, the company must notify Social Security of the dissolution of the company by the 15th of the month following the registration of the dissolution with the DBD.
Step 3. Publication of the company's closure
Within fourteen days of the date of dissolution and appointment of a liquidator by the court, several formalities must be completed:
➤ Publish the liquidation in a local newspaper to inform creditors that the company is dissolved and to inform the liquidator of their claims
➤ Send a notice by registered letter with acknowledgement of receipt to each creditor whose name appears on the books or documents of the company
➤ Register the dissolution of the corporation and the name of the liquidator with the DBD
Step 4. Register the dissolution of the company
In the second step, the liquidator must register the dissolution of the company with the relevant authorities within 14 days of the general meeting. In doing so, the DBD will issue a certificate indicating the date of closure of the company. Once this certificate is obtained, the director or liquidator must prepare the balance sheet showing the current accounts and be certified by the Thai auditor. Then the liquidator will announce a meeting where the shareholders will be invited to review the balance sheet and authorize the closure of the company.
Step 5. Statement of the company's assets and liabilities
The last step is the settlement of the company’s debts, more precisely the discharge of the liabilities. The liquidator can now sell the assets and attempt to settle the debts of the business. As part of the process of closing the business, the liquidator must inform the creditors of the dissolution of the business by publishing it in a local newspaper and sending a registered letter. The money that results from the closure of the company is effectively used for the reimbursement of the creditors. In addition, the balance is distributed to the shareholders. During this period, a business closure report must be submitted to the DBD every three months. The information must include an up-to-date accounting of the process and be available for inspection by creditors and shareholders. Once the assets are liquidated, the administrator or liquidator prepares a final report. However, before the process is finalized, the company must return the tax ID card to the Revenue Department. Once all assets have been liquidated and it has been confirmed that the business does not owe taxes, the administrator or liquidator can then register the completion of the business closure process.
Step 6. Termination of the closure
The closed company ends after the approval of the liquidation accounts by the general assembly, when all debts have been settled or when all assets have been sold, even if they are insufficient to settle the liabilities. The process of dissolving and liquidating the company can take from six months to one and a half years, depending on the audit of the accounts, the absence of legal proceedings and the possibility of meeting the liabilities with the available assets.
What is the procedure to close a company?
When a company experiences financial difficulties and is no longer able to meet its debts, bankruptcy proceedings may be initiated against the debtor company by a writ of summons from the unpaid creditor. In this case, the procedure becomes judicial. At this stage, two procedures can be considered: the judicial closure of the company, which aims to dissolve the company, and the reorganization, whose main objective is to reorganize and restore the company to a state of continuous operation. Corporate insolvency in Thailand is primarily governed by the Bankruptcy Act B.E. 2483, as amended, and the Civil and Commercial Code (CCC). Under the Thai Bankruptcy Act, a debtor will be presumed to be insolvent if a creditor brings an action against the debtor for claims exceeding THB 2 million for a corporate debtor or THB 1 million for an individual debtor. The law also provides for other grounds for insolvency, including any attempt by the debtor to avoid paying its debt, to transfer the management rights of its assets, or simply to declare its insolvency to the court. If any of these conditions are met, the court will authorize the bankruptcy proceedings.
Once the court has accepted the proceeding and issued an order to open a closed judicial corporation, neither the debtor nor the creditor can ask the court to reorganize the corporation. The court will appoint an administrator, also known as a “receiver”, who will be responsible for managing the debtor’s affairs, including those related to the recovery of money, property or any other assets that can be used to pay off debts. Once the receiver has taken control of the debtor’s assets, an order must be published in the Royal Thai Gazette and in a newspaper so that creditors are informed of the debtor’s insolvency. Local creditors then have two months after the date of publication to file their claims. Creditors residing outside Thailand have four months to file their claims with the administrator. The administrator will be in charge of establishing the statement of claims on the one hand and of reconstituting the assets on the other hand. During the period of closure of the company, the director of the company cannot make any payment and no legal proceedings can be initiated against him. The administrator will then proceed to the payment of the creditors in the order provided for by the law.
What is the rehabilitation procedure in the Thai Court?
The debtor may wish to reorganize its business. It is also possible for a company to choose to restructure, but only if it chooses to do so before the court issues an order to close a company. This choice may be voluntary or involuntary. The application is voluntary if it is filed by the debtor or involuntary if a creditor or group of creditors files an application for reorganization against the insolvent debtor with a debt amount exceeding 10 million baht. This application is made under the supervision of a court-appointed administrator who will oversee the preparation of a restructuring plan to be approved by the creditors. The court must confirm the approval of the plan by the creditors.
Can we find an agreement with the creditors before the liquidation?
A Company Balance Sheet is a financial statement that lists the assets, liabilities, and equity of a business during the fiscal year. A balance sheet documents the disposition of money in a store. It indicates the accounting value of all the assets, liabilities, and equity of the organization, which can lead to assumptions about the entity’s liquidity.
It is called a balance sheet because it balances the two sides. A company has to pay for all the things it has (assets) either by borrowing money (liabilities) or by getting it from shareholders (equity of the shareholders). Such three parts of the balance sheet give investors an idea of what the company owns and owes and the amount the shareholders spend.
A balance sheet must be drawn up at least once every 12 months in which the twelve-month span is the accounting or financial year of the company. A newly formed corporation will close accounts within 12 months of incorporation. It must be approved by a professional external auditor and must be filed annually with the Department of Revenue and Business Development.
The balance sheet must be checked by one or more auditors and sent to a general meeting for approval within four months of its date. A copy of it must be sent to each person enrolled in the shareholders’ list at least three days before the general meeting. Copies must also be kept available at the company’s offices for the same time for shareholders’ inspection.
The corporation’s annual financial statement must be filed with the Revenue Department and Business Operations Department, along with its annual income tax report, within 150 days of the close of its accounting period. Otherwise, the corporation may be liable for a specific penalty or fine that may also extend to the responsible officer. If a corporation wants to adjust its accounting period, it must receive written approval from the Revenue Department’s Chief Accounts Auditor by sending out SorBorChor 4 and other documentation listed in the form in question.
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