Thailand

Generally, the most common types of for-profit organizations in Thailand are limited partnerships, private limited companies, and public limited companies.

A limited partnership is a registered legal entity with rights that are separate from its partners. There are two types of partners in this kind of entity:

• A limited partner, whose liabilities are limited to their contributions; and
• A general partner, with joint and unlimited liability for all partnership obligations.

A limited partnership must be registered, in order to establish itself as a separate legal entity.

A private limited company is a registered legal entity that is considered a juristic person. Limited companies are formed by three or more persons subscribing their names to a memorandum, which seeks to make profits. A private limited company’s capital is split into equally valued shares, where shareholders’ liability is limited to the unpaid value on their own shares.

A public limited company is a legal entity that is established to offer shares for sale to the public, with the objective of seeking profits. The liability of shareholders in a public limited company is limited to the amount payable on their shares. A public limited company is very similar to a private limited company, with the exception that it is governed by the Public Limited Company Act B.E. 2535 (1992) (PLCA), and it is established for the purpose of offering shares for sale to the public, rather than having private shareholders.

a. Enterprises that seek financing from investors, and which have multiple owners, tend to form private limited companies and public limited companies.

b. A Private Limited Company is the most common type of for-profit organization used by Social Enterprises. It is more flexible in terms of incorporation, timeframe, and modification of the permitted scope of objectives.

Private Limited Company — According to Section 1144 of the Thai Civil and Commercial Code, a director of a private limited company is required to manage the company under the control of a general meeting of shareholders, and according to the regulations of the company. However, Thai laws do not provide specific requirements in respect to the types of interests, or the level of priority of such interests which the board of directors must consider in respect to decision making.

Public Limited Company—Similar to a private company limited, the board of directors of a public limited company is also required to manage the company under the control of a general meeting of the shareholders, and according to the regulations of the company. There are also no specific regulatory requirements in respect to the types of interests, or the level of priority of such interests which the board of directors must consider in decision making.

The Thai Social Enterprise Act B.E. 2562 (2019) (the “Act”) does not specify a particular legal structure for social businesses, but it does place restrictions and requirements in regard to the purpose of the business operations, business investments, and profit distribution.

Yes, the Act also recognizes a Social Enterprise, which does not share profits with partners or shareholders (Nonprofit Social Enterprises).

1. Nonprofit Social Enterprises are also entitled to tax exemptions under the Royal Decree on Tax Exemptions (No. 621). Please refer to our response in *Part  III. Tax for further information.
2. The tax benefits in (a.) are only applicable to Nonprofit Social Enterprises.
3. No, there is currently no form of “hybrid” Nonprofit entity that requires less reporting, and/or allows for faster formation.
4. Due to tax benefits of entity and donor, and the purpose of the Nonprofits – which aims to put all the money it raises towards social support, rather than distributing its income to the organization's shareholders (or equivalent) as profit - make a Nonprofit organization the preferred option for Social Enterprises. There are several Nonprofits Social Enterprise especially for those aim to support local society.

Yes, a cooperative, under the Cooperative Act B.E. 2542 (1999), is a registered group of persons who conduct affairs for collective socioeconomic interests on the basis of self-sufficiency.

A cooperative has a separate legal identity from its members. It can therefore hold assets in its own name, and its members will not be personally liable for the debts and other obligations of the association, provided members comply with the laws and the articles of association of the cooperative. A cooperative may use its own funds to hire workers, enter into agreements, or purchase or rent property. The high-level benefits and restrictions in respect to using cooperatives are as follows:

Benefits:

• Separate legal entity, with the liability of members limited to their share capital.
• Flexible governance arrangements.
• Exemption from certain government fees for immovable property transactions.
• Exemption from corporate income tax and certain stamp duties.
• Access to various funding such as the Cooperative Development Fund.

Restrictions:

• Restrictions on distribution of profits.
• Requirement to comply with ongoing reporting requirements.

The Act prescribes the duty for Social Enterprises to submit the following reports to the National Social Enterprise Office (the “Office”), in accordance with the criteria, methods, and conditions set by the Office:

1. Annual report of the results of business operations;
2. Audited financial report; and
3. Report on the outcomes of the Social Enterprise operations.

Officials are also authorized by the Act to investigate and assess the Social Enterprise’s operations, in order to ensure that it is operating in compliance with the requirements of the Act, including the requirement to operate in compliance to the stated purposes for social benefit, and the profit-sharing requirements.

Since the Act is still at an early stage (came into effect in May 2019), we are not aware of any Supreme Court decisions which directly address Social Enterprises.

There are no ESG requirements in general. Companies that are listed on the stock market are required to disclose information on each company’s business sustainability, corporate governance, and environmental and social footprint, including carbon emissions and human rights commitments. These requirements will start with listed companies whose fiscal year ends on December 31, 2021which will be required to disclose the ESG filing in 2022.

No.

No.

No major investor classes are required to look at ESG issues.

Many private funds and large institutional investors do consider ESG issues when making their investment decisions, and there has been a rise in impact funds that use ESG factors as part of an investment assessment process.

Social Enterprises generally receive charitable investments and traditional investments. The type of funding typically varies based on the type of Enterprise that the Social Enterprise chooses. For example, Social Enterprises which are formed as Nonprofit receive more charitable investments, while Social Enterprises which are formed as for-profit corporations receive more traditional investments.

For-profit impact investments have been increasing, and parties are becoming more familiar with them. An example of this is would be several Equity Funds which have been formed with the principle of selecting stocks to invest in, which must create/have a positive impact with respect to helping to change the world to facilitate sustainable development.

There is no special government funding that is specifically available to Social Enterprises. The Thai government plans to set up a revolving fund for promoting social enterprises. However, the fund will be financed by part of the profits which are generated by social enterprises.

No.

Companies which are listed on the stock market are required to disclose information on each company’s business sustainability, corporate governance, and environmental and social footprint, including carbon emissions and human rights commitments, and file a report to the SEC.

A Private Limited Company or a Nonprofit is not required to disclose ESG factors, although some choose to do so for marketing reasons.
 

Impact bonds have become more prevalent at the public and state levels. The government is considering promoting the social finance system, in order to strengthen the public sector and community enterprises through funding social bonds (Social Impact Bond, Social Investment Bond), with the government sector guaranteeing the issuance of the bonds.

There is no restriction on a donation.

With regard to foreign investment, a Private Limited Company and a Public Company Limited, which has 50% of its shares, or more, held by non-Thais (natural or juristic person) are subject to a foreign business license, which is very subjective and could be an obstacle for for-profit entities.

Crowdfunding is legal, and this allows Small and Medium Enterprises (SMEs) and startups, as well as Social Enterprises, to solicit investment from the general public. These small businesses normally be in the early stages of setting up the business, with the aim of growing their business. However, it is not used as a tool by most successful enterprises due to the costs and restrictions (including a cap on the maximum investment amount).

Under the Royal Decree on Tax Exemption (No. 621), a business shall qualify for corporate income tax exemptions on its net profits if 100% of its profits are invested in the business, or used for the benefit of farmers, the poor, the disabled, the disadvantaged, or other common benefits as prescribed by the Minister of Finance.

Effectively, a Not-for-profit Social Enterprise shall qualify to receive a corporate income tax exemption on its net profits, so long as it complies with the requirements as stipulated by the Director-General of the Revenue Department.

The tax benefits above will apply regardless of the finance/funding options, so long as the Social Enterprise remains compliant with the requirements under the Act, and it is not subject to revocation of the Social Enterprise license. However, as stated above, the corporate income tax exemption shall apply only to Not-for-profit Social Enterprises

Companies and juristic partnerships which donate money or property to a Social Enterprise can enjoy corporate income tax exemption of up to 2% of their net profit, provided the Social Enterprise meets all the required conditions, with the exception that the Social Enterprise can pay up to 30% of its profits in dividends, share of profits, or as a capital reduction. In considering the 2% cap, such donations to social enterprises must be included in aggregate with other qualified charitable donations.

No.

No.

No.

There is no specific support for a Social Enterprise. However, the Thai government offers several measures to help small businesses, and especially during the Covid-19 pandemic, such as loans with low interest, suspending principal and interest payments, and reducing the social security contribution rate in order to help small businesses grow and continue to operate.

No. 

The Social Enterprise Committee of the Social Enterprise Office Promotion is specifically responsible for overseeing Social Enterprises, as registered under the Act.

The qualified entity can be claimed as a Social Enterprise and obtain certification from (i) Thai Social Enterprise Promotion Board as per the Rules of the Office of the Prime Minister regarding National Social Enterprise Promotion B.E. 2554; and (ii) Community Development Department for a Social Enterprise which is established with respect to  Thailand National Policy.

No.

Based on our discussion with the officer at the National Social Enterprise Office, the average time for filing generally takes between 2 weeks to 1 month, depending on the completion of the application and the supporting documents. At present, there are no filing fees for the registration of a Social Enterprise under the Act.

In order to claim legal status and obtain certification as a Social Enterprise, a registration/certification, with Office of Social Enterprise Promotion, must be obtained:

To be registered as a social enterprise, if it meets certain requirements as stipulated under the Social Enterprise Promotion Act and relevant subordinate legislation, including being previously established and operational for at least one year as a juristic entity, such as a limited company, as per the details below. In order to qualify as a social enterprise, among the requirements, a business must also operate with the main purpose of addressing community, social, or environmental concerns, or any other purpose that benefits the public or society, and it must also allocate 70% of its business profits so that it can be used for such required purposes.

The qualifications must be fulfilled at all times, in order to maintain the status of a Social Enterprise.

Yes, startups can easily form and flourish in Thailand. There are a number of types of Enterprises available to choose from, relatively few reporting requirements for private for-profit businesses, and incorporation processes are fast, cheap, and simple.

Social Enterprises can be formed relatively easily if they want to organize as a for-profit enterprise, but they must go through a relatively lengthy application process if they want to form as a Non-profit (with foreign board members) and take advantage of the tax benefits.

One stringent issue that all Social Enterprises face is that they must first be set up for at least one year before they are eligible to register as a Social Enterprise. We have found that this is a significant obstacle and that Social Enterprises cannot easily flourish.

A Private Limited Company and a Public Company Limited, which has 50% of its shares, or more, held by non-Thais (natural or juristic person) are subject to a foreign business license, which is very subjective.

Also, The Act requires that a Social Enterprise can be registered after incorporation of at least one year.

These could discourage their formation and registration as a Social Enterprise.

No.

1. The entity should be allowed to register itself as a Social Enterprise after incorporation, and the one-year waiting period should be removed.

2. Providing tax benefits to for-profit Social Enterprises.

3. Consider excluding foreign business license requirements for those entities that are not profit sharing to its shareholders.

4. Make crowdfunding easier, cheaper, and more accessible in order to broaden public investment in Social Enterprises.

5. The Government should provide more funding support to Social Enterprises.

Implementing a uniform set of standards for ESG policies, which are disclosed to the public, would make it easier for investors and consumers to evaluate and support the organization. This would also help to reflect the fact that the entity: (i) has good corporate governance; (ii) is managed with transparency; (iii) manages risks effectively; (iv) takes into account the stakeholders; (v) has competitive potential; and (vi) it can generate returns and provide benefits to society in the long run, which would drive companies to perform better.

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