Business registration changes set to spur growth

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Business registration changes set to spur growth

The Business Development Department has noted that government changes to the Secured Transactions Act and the incorporation of juristic persons will, combined, lead to an expected eight+ percent growth in new business registrations across 2016.

The government has been keen to promote small and medium-sized enterprises (SMEs) as well as infrastructure development and tourism, all in the hope of helping the general economy to recover from the stagnation of recent years.

Reducing the incorporation of juristic persons to just a single entity, down from the current requirement of a minimum of three people, will help reduce overall costs, and cut the onerous procedures for incorporation and calling shareholders meetings.

The current setup demands that incorporation can only occur with a minimum of three people as promoters or shareholders for a limited company and at least two promoters for a limited partnership.

The rules also require at least one director, an auditor, a memorandum of association, a statutory meeting and registration of the incorporation papers.

Yet the Business Development Department conducted a study which showed that while most juristic persons are established with between three and four people, in practice, only one shareholder was the true owner and manager.

Bowing to the reality of life, the government has agreed to amend the rules to allow for a juristic person to be a single entity, capable of holding the statutory meeting and pass resolutions without the need to officially call for a shareholders meeting.

The single-shareholder company scheme is expected to lead to greater registration of SMEs, giving them better access to financial resources and allow for reduced compliance costs compared with limited companies which are incorporated under the Civil and Commercial Code.

Changes to the Secured Transaction Act will also gives SMEs easier access to credit, allowing them to use intellectual property, raw materials and inventory as collateral.

At present, around 70 percent of SMEs use their land as collateral, while the remainder use other assets. This compares to most developed countries where just 30 percent of SMEs use their land as collateral.

Thailand has 2.8 million registered SMEs, and of these 610,000 are recorded as juristic persons.

In 2015, new business registrations rose by just one percent, to 60,147. Given the government’s acceleration of investment in large-scale infrastructure projects, it’s probably no surprise that much of the new businesses being registered were involved in general construction, real estate, restaurants and food, construction material wholesaling and business consulting services.

The Business Development Department also stated it had teamed up with the Japanese Mizuho Bank to introduce a juristic persons e-certificate service in order to help Japanese companies doing business in Thailand.

The Department also has partnerships with six local commercial banks to provide the same e-certificate service.