Definition of a Foreign Company
According to the Foreign Business Act of 1999 (FBA), the term foreigner means:
- Natural person not of Thai nationality.
- Juristic person not registered in Thailand.
- Juristic person registered in Thailand having the following characteristics:
- Having half or more of the juristic person’s capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic person.
- Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.
- Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2), or (3), or a juristic person having the persons under (1), (2), or (3) investing with the value of half or more of its total capital.
The Foreign Business Act of 1999 has identified 3 lists of activities in which foreign participation may be prohibited or restricted, as follows: List 1: business not permitted for foreigners to operate due to special reasons List 2: business related to national safety or security, or affecting arts and culture, traditional and folk handicraft or natural resources and environment List 3: business which Thai nationals are not yet ready to compete with foreigners As foreigners seeking to engage business activities under List 3 are required to apply for and obtain a Foreign Business License prior to commencing operations. The Foreign Business Act sets forth the process by which the Foreign Business Committee (“Committee”) review the application. It states that the Committee is required to rule on the application within 60 days of submission. However, in practically, the application process has 2 distinct steps. The first step is the process by which the presiding official at the Ministry of Commerce (MOC) accepts the application for review by the Committee’s actual review of the application.
Acceptance by the MOC Official An application for a Foreign Business License is submitted to the MOC together with all required documents and information. The presiding MOC official, who is in charged with accepting the application normally, will not do so until he is satisfied that all documents are in order. The official will perform the preliminary inspection upon presentation, but usually he will require the person submitting the application to leave it for later inspection. The time frame for the official’s review of the application is not specified by statue. In order to avoid these delays make sure that the person designated to submit the application is familiar with the intended operations of the company to respond on the spot to the official’s questions regarding the application. In the case that the official requests additional documents and/ or information, make sure the designated person supplies those documents in a timely fashion.
Review by the Board Once the official accepts the application and issues a receipt, the sixty-day consideration period begins. The factors considered by the Committee when reviewing applications are:
- The advantages and disadvantages to the nation’s safety and security;
- Economic and social development;
- Public order, good morals, art, culture and traditions of the country;
- Natural resources, conservation, energy and environment, consumer protection, size or the enterprises, employment;
- Technology transfer and research and development.
Technology transfer and research and development (R&D) are probably the most important. In 2004, the Ministry issued a document advising foreign investors on how they should describe technology transfer in the license application. Technology here is not just limited to R&D and use of sophisticated equipment, but also specifically includes “administration, management and marketing”. In addition, any planned programs the company has with Thai universities are taken under consideration by the committee. In the event that the Foreign Business License application is rejected, the law requires that the MOC inform the applicant within 15 days of the decision. The notification of rejection must be in writing and expressly state the reasons why the application was rejected. If the application is rejected, the applicant has the right to appeal the decision. The appeal must be submitted within30 days of the date on which the applicant received the rejection notice. The Minister of Commerce is required to rule on the appeal within 30 days of receipt. The decision of the Minister shall be final.
For more information, please feel free to contact us:
Phone: +66 2 933 9000
Fax: +66 2 933 6120
Email: bkk@panwa.co.th