Properly Closing a Thai Company


Closing a Thai Company

As of March 29 this year, the World Health Organization reported that there were 571,678 cases with 62,514 new ones and 26,494 deaths from the COVID-19 virus at a 4.63% rate. On the same date, Thailand had 143 new cases and a total of 1,388 confirmed cases. The new cases were mostly nationals who recently returned from other countries or having been exposed to many people. A negligible number of them were health care workers, aged 20 to 49 and male. Male patients were those who frequented boxing stadiums, entertainment spots, and the Dakwah pilgrimage.

Businesses Close, Events Put Off

The Thai government is contemplating on closing down or suspending the operations of schools, entertainment and sports centers in response to the increase in infection cases of COVID-19. Cockfighting is a favorite sport among Thais that may be withdrawn at least while the pandemic rages. The much-awaited New Year holiday next month is also likely to be put off to reduce the spread of infection. These were responses to the unabated rise in the number of infected cases in the kingdom at three times a week.

The government allows restaurants to operate if they comply with the requirement for social distancing. Officials take serious note of the link between the spread of clusters of the viral infection and entertainment and sports centers. This led them to limit public gatherings stringently. They also directed government employees to work at home to prevent or limit human contact when this is possible and feasible. The government prioritizes people’s lives over economic and social factors as far as necessary, as there is no telling where the situation will lead to.

Some enterprises did not need prompting from the government. They themselves either close their businesses down for lack of customers and waste of profit. Pub owner Jumbaree Parlick who operated at Bangkok’s once busiest night spots for more than 40 years did so by herself. She did not find continued operation profitable.

Steps in Closing Down a Business in Thailand

Establishing and operating an enterprise in Thailand is difficult enough for a foreign investor. He has to fully comply with the process of forming his business, set up necessary utilities and recruit a workforce by filling out the required forms at respective government offices. He also confronts difficulties in recruiting a tight labor market in the kingdom. When he manages to cope with these challenges and his business starts operating, he must contend with unavoidable cultural differences as a foreign entity. Conflicts with his employees, customers, and other stakeholders are not only very likely but should be expected. And there too is the menace of complying with contracts written in Thai language and transacting with the bureaucracy made harder unless he knows the language well.

Assuming that he overcomes these daunting pitfalls and his business achieves a level of success, vicissitudes can turn his situation around. Despite his best efforts or through no fault of his own, he may need to face the reality that his business can no longer thrive. Unless someone buys it, he needs to go through another series of troublesome processes of properly closing the business he painstakingly started and operated with a measure of success. In addition to losing his business, he faces the troublesome of complying with lengthy legal procedures in terminating it properly.

As mentioned in an overview of company dissolution, the company might be dissolved either By Law or By Court order.

A company is dissolved by law under the following scenarios:

  1. In the cases, if any, provided by its regulations;
  2. If formed for a period of time, by the expiration of such period;
  3. If formed for a single undertaking, by the termination of that undertaking;
  4. By a special resolution to dissolve; and
  5. By the company becoming bankrupt.

A limited company may also be dissolved by the Court on the following grounds:

  1. If default is made in filing the statutory report or in holding the statutory meeting;
  2. If the company does not commence its business within a year from the date of registration or suspends its business for a whole year;
  3. If the business of the company can only be carried on at a loss; and
  4. If the number of shareholders is reduced to what has been prescribed by law.

Doing so involves the following steps:

  • Formally filing for the closing down his company with the Department of Business Development;
  • Liquidating its assets if it has become solvent;
  • If insolvent, shareholders can infuse additional capital into it. Otherwise, the liquidator should begin complying with bankruptcy proceedings. These proceedings require that debts are legally cleared before the business can be closed;
  • The business should not overlook the filing its income tax returns and paying all taxes due as filing for bankruptcy will not cancel tax debt;
  • The company must also pay the salaries and separation pays of its employees;
  • It must return the work permits of foreign employees, if it has any, to the Ministry of Labor within the first seven days of their employment;
  • The company must formally and legally inform suppliers and customers of the closing down of business. This is basically to likewise terminate contracts with them for services;
  • The company must also settle and close all accounts with banks and other financial institutions;
  • The company must also notify the landlord or unit owner of the business of the termination of operations so as to terminate the lease as well. This is if the company is a lessee; and
  • The company must pay excess tax amounts and pay debts to its shareholders.

The current situation brought about by a global pandemic presents the need to close some businesses that can no longer sustain operations. Closing them is unfortunate but the need to do so properly remains. It is particularly important to settle all debts or unfulfilled contracts as failing to do so can be a ground for a court suit against the business’ directors and owners. There are competent and tested corporate lawyers that can handle all these distressing requirements and procedures to make sure that the termination will go smoothly and without fear of lawsuits.

Our corporate lawyers can provide the following services:

  • Review available strategies and choose the most suitable in closing the business and at the least possible cost;
  • Draft the minutes of the meeting to be held for terminating the business;
  • Handle legal settlements and other negotiations with separating the workforce according to the provisions of the labor law;
  • Handle payment negotiation with the landlord-lessor, if the business is a lessee, for the earliest termination of the lease;
  • Prepare the draft on existing agreements with suppliers if these exist;
  • Draft the required audit report on the shutting down of the company for submission to the Department of Business Development;
  • Terminate all VAT and tax accounts of the company with all Thai government entities, and
  • Extend necessary legal assistance and representation in case of insolvency or bankruptcy as well as the restructuring of insolvency as supervised by the court.

If you have questions or in need of assistance in properly closing down your company, please contact us.

 

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