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Overview of Types of Business Organizations

:: Partnerships
:: Limited Companies
:: Public Limited Companies
:: Other Forms of Corporate Presence
:: Alien Business License

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Types of Business organizations - Alien Business License

Foreigners, whether individuals or juristic entities (companies, partnerships, etc.), who invest and carry out business in Thailand, may be restricted by the "Alien Business Act 1999". This legislation came into force on December 4, 1999. The Act classifies businesses into 3 categories. Generally, Category A businesses are closed to aliens for special reasons, while Categories B and C businesses are opened to aliens subject to conditions. There are remaining a number of businesses, including most manufacturing businesses, which do not fall within any of these three categories and are opened for investments by aliens.
Apart from the above, the 1996 Treaty of Amity and Economic Relations between Thailand and the USA provides an exemption from the restrictions in the Alien Business Act for US nationals and corporations for most (but not all) controlled businesses.

There is also the possibility of exemption under certain treaties to which Thailand is a party, as well as for businesses approved by the BOI.

Restrictions on Aliens Doing Business in Thailand
There is no general licensing requirement for foreign investors in Thailand. Restrictions on the percentage of alien ownership of commercial banks, finance companies, commercial fishing, aircraft, commercial transportation, commodity export, mining and other enterprises exist under various laws, Cabinet policies, trade association regulations, etc. In connection with seeking promotion by the Board of Investment, Thai participation requirements will generally be prescribed.

Alien Business Law
The most important law governing majority alien-owned businesses in Thailand is the Alien Business Law, which controls three broad categories of businesses. Generally, businesses in category A are closed to aliens, while businesses in categories B and C are open to aliens under some conditions. There remain a number of businesses, including most manufacturing businesses, which do not fall within any of the three categories and are open for investment by aliens.

The 1996 Treaty of Amity and Economic Relations between Thailand and the USA provides an exemption from the restrictions of the Alien Business Law for US nationals and corporations for most (but not all) controlled businesses.

"Alien" means a natural person and juristic person without Thai nationality, including a company with half or more than half of its shares held by aliens, or a company with half or more than half of its shareholders being aliens.

The new Act prescribes 42 restricted businesses in 3 categories as follows:

:: Category A: 9 businesses prohibited for special reasons.
:: Category B: 13 businesses related to national safety or security or affecting arts, culture, traditional customs, folk handicrafts, natural resources and the environment.
:: Category C: 21 businesses in which Thai people are not yet ready to compete with foreigners. Licenses may be issued by the Director General with the consent of the Alien Business Operation Committee.

There is a limited 'grandfather provision' with respect to existing businesses. There is also the possibility of exemption under certain treaties to which Thailand is a party, as well as for businesses promoted by the BOI.

In case of a restricted business carried out by an alien, a minimum capital of 3,000,000 Baht or greater is prescribed, to be specified in a ministerial regulation. In the case of businesses under Category B, at least 2/5 of the directors must be Thai and a minimum of 40 percent of the shares must be owned by Thai persons (which may be reduced to 25 percent with Cabinet approval). Businesses under Category B and C may have conditions attached to alien licenses such as: minimum debt/equity ratio, number of alien directors resident in Thailand, amount and period of investment, technology and assets, etc.

There are additional provisions of importance in the Act, including, for example, a minimum capital of 2,000,000 Baht applicable to all alien businesses (not only restricted businesses), and a requirement for existing restricted businesses to obtain a certificate.

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