Liquidating in Thailand: What Happens When You Need to Close a Companyadmin
For businesses seeking to close down shop in Thailand, the legal framework surrounding dissolution and liquidation of assets may seem daunting; however, failure to comply with these processes can generate ongoing fines and criminal liability for directors. Regardless of whether a company elects to, or is enjoined to liquidate, it should carefully follow the prescribed process in order to minimize losses and residual damages. This article provides an overview of key steps to be aware of when closing a Thai company.
The first step towards liquidation is informing all shareholders of a company’s intention to close. Formal invitations to attend a Shareholder’s Meeting must be sent by registered mail to all shareholders, and the letter must be published in a local newspaper at least 14 days prior to the meeting. During the meeting, the agenda for dissolution is discussed and a liquidator will be assigned to oversee the process. The liquidator is often a director of the company, but may also be a third party.
The liquidator is responsible for registering the company’s dissolution with Department of Business Development (DBD) within 14 days of the Shareholder’s Meeting, and the DBD will issue a certificate indicating the company’s closing date. Once he or she has obtained the certificate, the liquidator must prepare a balance sheet indicating current accounts up to the company’s closing date, and have it certified by a Thai auditor. Subsequently, the liquidator will announce and hold another Shareholder’s Meeting, during which shareholders may vet the balance sheet and authorize liquidation.
At this point, the liquidator can begin selling assets and taking the necessary actions to settle the company’s debts. He or she must also notify all creditors of the company’s dissolution by publishing a notice in at least one newspaper, and by sending registered mail requesting that creditors claim unresolved debts. Cash resulting from liquidation is used to repay creditors and the balance is distributed to shareholders according to ownership.
During this period, a liquidation report must be submitted to the DBD every three months. The liquidation reports must provide up to date accounting of the process, and must be made available for inspection by all creditors and shareholders. Once all assets have been liquidated, the liquidator prepares a final report and announces a Shareholder Meeting to vet the report.
Before the process is finalized, the company must also return its Tax I.D. Card to the Revenue Department (RD). If the company forms part of the Value Added Tax (VAT) system, it must also return its Registration Certificate to the RD within 15 days of dissolution. (NOTE: Companies are responsible to continue submitting monthly VAT returns until the RD issues a letter confirming their deregistration). Pending successful return of the Company Tax I.D. and VAT Certificate, the liquidating company may request that the RD send a letter to the DBD, confirming that the company has paid all outstanding taxes.
With all assets liquidated and certification that the company owes no taxes, the liquidator can register completion of the company’s liquidation with the DBD and receive a certification that the process has been completed. The company’s records will be retained by the DBD and remain available to the public for a ten-year period.