Summary: Preliminary draft of the Sole Company Incorporation Act (“Draft Act”) approved by the Cabinet on 24 January 2017.
The Draft Act has been extensively discussed and studied by both government authorities and the private sector. In this regard, the Department of Business Development, Ministry of Commerce, has played a vital role in proposing and encouraging the enactment of the Draft Act. Upon the Draft Act being approved by the National Legislative Assembly and coming into effect, the government authorities will most likely issue new rules, regulations and policies geared towards productive incentives for domestic investors wishing to commerce business activities under establishment of the new type of juristic entity stipulated by the Draft Act.
The main objective of the Draft Act is to support and facilitate new local entrepreneurs entering into the business market as well as to assist juristic entities in carrying on business activities in a straightforward and swift manner. As a result, the Draft Act will contribute greater benefits to the entire economic system of the Kingdom of Thailand. In addition, both the government and other relevant authorities will be provided the opportunity to closely monitor and regulate juristic entities, particularly under the principle of good corporate governance, given that the juristic entities will be registered in the official database.
The Draft Act contains principals from the Thai Civil and Commercial Code (“Thai CCC”) in relation to the chapter covering Private Company Limited; therefore, the fundamental concept of Private Company Limited under the Thai CCC is utilised in this Draft Act as well. It is necessary that all interested parties be aware and understand this concept. In this context, the material provisions of the Draft Act can be summarized as follows:
- The Company owner shall be a Thai individual and an owner of either cash or property contributed in the Company.
- The Company’s name must always include the compulsory wording “Sole” after its name.
- The registered capital of the Company must be paid in full from the first date of incorporation.
- The Company’s director(s) can be the owner himself or a person appointed by the owner. Any business operations of the Company carried out by the director(s) is under the control of and supervised by the Company owner. The Draft Act also stipulates certain significant issues that require written approval first be obtained by the Company owner such as increase of capital, decrease of capital, amendment of the Articles of Association and so on.
- The Company’s dividend payment must be made from its net profits only and any partial dividend shall be maintained as a statutory reserved fund of the Company.
- The Company is able to transform to the Private Company Limited under the CCC.
- The Company’s dissolution may occur in certain cases, for instance, where the Company owner passes away (except where the Company will be transferred to the legal heir of the Company owner if the heir wishes to continue the business). In this case, the liquidation process must be done and completed as it would under Private Company Limited under the CCC.
- Criminal sanctions are imposed on wrongdoers, including the Company, directors and accountants.
The summary above is subject to the Draft Act as approved by the Cabinet on 24 January 2017. From the date of writing this summary, the Draft Act is being considered by the Office of the Council of State; therefore, additional amendments may further be made to the Draft Act.