Thai Corporate Law

Thailand has positioned itself as a gateway to Asian manufacturing. Thai Corporate law blends with civil law principles with legislation for investment regulated governance . The legal system which governs Thailand is there to govern regulate and to dissolve corporates. With Thailand being a rapidly developing economy in South East Asia.

The primary sources of Thai corporate law include the Civil and Commercial Code (CCC), the Public Limited Companies Act B.E. 2535 (1992), the Securities and Exchange Act B.E. 2535 (1992), and the Foreign Business Act B.E. 2542 1999). These laws, alongside other sector- specific statutes governs Thai corporate law. We cover an in-depth discussion of the corporate legal framework in Thailand, focusing on company formation, governance, foreign investment, compliance, disputes, and recent developments. Welcome to Thai Corporate Law.

1.1 Key Legislation

Civil and Commercial Code (CCC) – This law governs partnerships and private limited companies. It also covers incorporation, shareholding, as well as directors’ duties.

Public Limited Companies Act (1992) – The Act provides the framework for public companies, especially those seeking to list on the Stock Exchange of Thailand (SET).

Securities and Exchange Act (1992) – This regulates public securities, disclosure requirements, takeovers, as well as capital markets.

Foreign Business Act (1999) – Restricts foreign ownership in certain sectors and establishes licensing requirements.

Bankruptcy Act and Rehabilitation Laws – These corporate laws define the procedures for both insolvency as well as debt restructuring.

Labour Protection Act and PDPA – This is not strictly corporate but these laws directly impact how companies and labour operate in Thailand.

1.2 Legal System

Thailand as you may know, follows a civil law system, derived from European legal traditions. As such, statutory law is the primary source of corporate regulation. There is limited reliance on judicial precedent. This is Thai Corporate Law.

2.1 Sole Proprietorship

This is the simplest business form in Thailand. This where the corporation is owned by one individual. The owner bears unlimited liability for debts and obligations, making it rare among foreign investors.

2.2 Partnerships

Ordinary Partnership: The partners in the business have unlimited liability. This is for the for the debts of the partnership.

Limited Partnership:

For this type of company at least one partner has unlimited liability. The others are limited to their capital contributions.

2.3 Private Limited Company

The most common business format is regulated under the Civil and Commercial Code. This company needs a minimum of two shareholders (reduced from three following 2022 reforms).

• Liability limited to unpaid share capital.
• Governance vested in the directors.
• It cannot freely offer shares to the public.

2.4 Public Limited Company

• Established under the Public Limited Companies Act.
• Requires at least 15 promoters as well as a board of directors.
• It can issue shares, debentures, and securities to the public.
• This is to list the company on the SET

2.5 Foreign Entities

Foreign businesses may register as one of the following:

Branch Office – This is where the company operates as an extension of a foreign parent company.

Representative Office – Note that this is restricted to non-commercial activities such as market research or liaison.

Regional Office – Oversees operations across multiple countries in Southeast Asia.

3.1 Incorporation Process

The Department of Business Development (DBD), under the Ministry of Commerce, oversees company registration. Steps include:

• Reserving a company name. You will have to give the company a name.
• You will also need to fill the Memorandum of Association.
• Convening a statutory meeting. You will need to have your first meeting.
• Registering the company with the DBD. The will have to give a name to the company. This will need to be registered with the corporate name.
• Applying for a tax ID and VAT registration. The company will need to have a tax and VAT Id.

3.2 Shareholding Rules

• Private limited companies can be fully Thai-owned or foreign-owned, depending on the business sector.
• Foreign ownership exceeding 49% may trigger licensing under the Foreign Business Act.
• Preference shares with special voting rights are permitted.

3.3 Corporate Governance

Board of Directors: The directors are responsible for management and compliance of the company. Directors must act with duty of care and loyalty.

Director Liability: Personal liability arises for fraudulent acts or where there is a breach of fiduciary duty, or violation of statutory obligations.

Shareholder Rights: Annual general meetings needs to held each year for voting. There also needs to be access to company records as well as holding minority protection (e.g., right to petition courts for company dissolution if mismanagement occurs). Thai Corporate Law is explained above.

4.1 The Foreign Business Act (FBA)

The FBA restricts foreign ownership in many sectors considered sensitive to Thai national interests. Activities are divided into three lists:

• Activities absolutely prohibited to foreigner prohibited jobs in Thailand also shows
  this. You can see this also with (e.g., the media, likewise rice farming, land trading).
• Activities permitted with Cabinet approval
• Activities permitted with a license from the Director-General of the DBD.

4.2 Exceptions and Incentives

BOI Promotion: The Board of Investment grants privileges such as tax holidays, land ownership rights, and exemptions from foreign shareholding restrictions. You can see the list of BOI benefits on this website.

Treaties: The U.S.–Thai Treaty of Amity allows U.S. investors to own majority stakes in most sectors.

5.1 Private Company Finance

Globally and locally private companies are typically financed through share capital in the company. Likewise there is shareholder loans, or private debentures.

5.2 Public Companies and Securities Regulation

These companies are governed by the Securities and Exchange Act. Note that in Thailand IPOs require approval from the Securities and Exchange Commission (SEC). Listed companies must adhere to corporate governance standards imposed by the SET and SEC.

5.3 Mergers and Acquisitions

Share and asset acquisitions require shareholder approval.Mandatory tender offer rules apply when acquiring more than 25%, 50%, or 75% of a listed

company’s voting rights.

6.1 Filing Obligations

You will note that there will have to be an annual general meeting. This is required by law. Likewise the audited financial statements must be filed with the DBD as well as with the Revenue Department. Note that companies with foreign ownership may require special reporting. See corporate compliance. 

6.2 Accounting and Auditing

Thai companies must follow Thai Financial Reporting Standards (TFRS). Public companies require certified auditors approved by the SEC.

6.3 Anti-Corruption and CSR

Note that the Organic Act on Counter Corruption applies to both public officials as well as to private companies involved in bribery. Likewise we have noted that corporate social responsibility (CSR) is increasingly emphasized in listed companies.

7.2 Dispute Resolution

The most common way to resolve these disputes are through litigation through the Thai courts. Another option is with arbitration. The concept is new in Thailand and Thailand recognizes domestic and international arbitration under the Arbitration Act. Lastly with regards to the enforcement of foreign arbitral awards is permitted under the New York Convention.

7.3 Bankruptcy and Rehabilitation

Note that when a company is unable to meet obligations it may undergo rehabilitation under the Bankruptcy Act. Likewise Court-appointed planners and administrators restructure debts and business operations.

8.1 Digitalization of Corporate Processes

You will note that in this digital age, Thailand has moved towards e-registration of companies, as well as electronic shareholder meetings, and digital signatures.

8.2 Reduced Incorporation Requirements

Note that reforms in 2022 reduced the minimum shareholder requirement for private companies from three to two, making incorporation more flexible.

8.3 ESG and Compliance Pressure

Thai regulators and investors increasingly demand compliance with Environmental, Social, and Governance (ESG) standards, particularly in listed companies.

8.4 Data Privacy and Tech Companies

The Personal Data Protection Act (PDPA) impacts corporate compliance in digital and technology sectors.