Starting a Company in Thailand

A recent sub asked how to start a business in Thailand. I expect many readers are keen on pursuing this issue. Following are my thoughts based on years of experience in Thailand; please note that I am not a lawyer and that you should definitely seek legal advice before proceeding.

There are two ways to legally start a Thai company without a Thai person being involved in ownership.

The first is via the US Thai Amity treaty. Bottom line, if an American owns at least 51% of the Company you do not need a Thai shareholder. An American can hold up to 100% of a company in Thailand and can conduct business as a Thai (although there are restrictions on some of the businesses that can be conducted such as banking or communications).

While most of the readers of this site are not American, it may be that you know an American you trust.

Note that, if you follow this route, the American shareholder (and any other foreigner) would still need a business visa which is granted for every four Thai employees.

The second way to have a company in Thailand without a Thai partner is through an application to the Board of Investment (BOI). This was set up so that Thailand could compete with HK and Singapore as a place to do business. If you apply and are accepted, your company can not only be 100% foreign owned (without Americans) but would have an 8 year tax holiday and would not require 4 Thais to get 1 foreign visa.

It is difficult to get approval which is reserved for companies in sectors bringing IP (Intellectual Property) to Thailand, but it can be done.

With BOI approval you can also get a special visa that allows you to stay in the country to begin work on the project during the initial feasibility study and company set up period.

There is an 8-page form that you must fill out, providing financial projections for your proposed company including expected number of employees.

Note that to receive BOI approval can take up to 6 months.

There is much more information available on line if you Google “Thailand Board of Investment.”

If neither of these options work for you, then you must have a Thai. The law is very clear that (except for the above) all companies operating in Thailand must have at least 51% Thai ownership.

There are several options. The first is to have a Thai partner you can trust. The best option is to have a Thai in your business with you, who has invested alongside you. It goes without saying that you must carefully vet the person beforehand and be 100% certain they are legit.

Then there is the nominee route, where you get a Thai to hold shares but he/she is not involved in the business. This is not strictly legal and if a nominee structure is found by the authorities there could be trouble. What they look for is whether the local shareholder has the funds or knowledge to be a real partner/investor.

There are several Thais I have known for years who are upstanding businessmen and who have agreed to be a nominee for me in some of my companies. They would clearly pass any test.

If the nominee is an Isaan lady then you need to be more careful. First, do not register 51% shares with her, but give 60%. When the authorities see 51% Thai/49% falang ownership they are immediately suspicious. They often don’t look at 60/40 companies.

A second thing the authorities review is whether the nominee has the funds to invest in the business for their shares. This can be covered by creating a loan document in which someone (you for example) “loans” the nominee an amount of money to buy the shares. The Company can even loan the money. So if you capitalize the company at, say 1m baht, you would then have the company loan the nominee 600,000 baht to buy shares.

Of course, no actual money changes hands.

Lastly, if the nominee holds 50%+ shares it is natural that they also must be a Director.

Now your problem is this: you have a Thai company with a nominee holding 50%+ shares and is also a Director. What if things go south?

Before you execute any of this, you must have the Thai sign two documents. The first is an undated resignation letter as Director (which you of course hold). The second is a Sale and Purchase Agreement (undated) where they agree to sell all of their shares to xxx (Must be a Thai). This gives you the control to change the nominee at your pleasure.

I always pay my nominees an annual fee so that are getting something in exchange for their service.

Moving on, there is then the bigger issue of what type of business to go into. Starting a business in Thailand is no different than any other country. Success comes (yes from hard work) but from finding a niche that is not currently exploited, and doing something you deeply understand and love.

Thailand does not need another bar, salon or massage parlour and it would be the height of stupidity to start one.

What do you know? What do you love to do? What does Thailand need?

I know someone who loved wine, and felt (this was 10+ years ago) that Thailand had no decent chain of wine shops. He recently sold Wine Connection for a 100 million euro valuation.

Another friend of mine loved craft beers and started an on line craft beer delivery company.

What products do you love that are not available in Thailand? Can you import them? What services do you want that you cannot get. Can you start such a company? Jim Thompson restarted the entire Thai silk industry because of his love for Thai silk. Can you find a Thai product and export it to your home country?

I’m going to end here and keep this short and sweet. The rules of success are simple: do something you love, do it legally, do it differently.

Good luck.

Take care

Professor

thethaiprofessor@yahoo.com