Closing Down a Business Legitimately & Efficiently

With competition flooding the market and with more goods and services causing a surplus in supply, some businesses are bound to get left in the dust. This unfortunate but necessary part of a market economy can cause great stress upon a business owner. However as a business owner it is necessary and required to shut down a business as legally as possible to ensure that there is no legal blowback on top of the financial impact that has already occurred. The three most important steps to shutting down a business are as follows, pre-dissolution, dissolution, and liquidation.

In Thailand, you will require a combination of support from a legal services firm and an accounting services firm.

Firstly, there is pre-dissolution which normally involves the collection of all credit and the summation of all assets. Then it should be determined whether or not the company has enough assets in order to cover its liabilities. In Thailand, it is standard practice for business owners to wrap up any legal proceedings that may be pending before the closure of the company. Lastly, it is important that the business owner wait until tax refunds are issued in order to close the business. Your accounts need to be in order, and audited, prior to your company being closed down.

Secondly, the first step to dissolution in Thailand is organizing the shareholders to pass a resolution dissolving the company.  Said resolution must be accepted by at least 75% of the shareholders in order for it to be passable (and therefore legal). After the resolution has passed it is standard procedure for the shareholders to elect one or more liquidators which have no liability unless misconduct has occurred.  When dissolving a company, it is required to inform the Business Development Department (BDD) of the closure and all the company’s creditors MUST be notified.

A final audit must be made prior to the dissolution date which is prepared by the liquidator / accounting service provider. This audit must then be approved by the shareholders before it is submitted to the BDD. When it comes to value added tax (VAT) the dissolution application must be sent to the revenue department along with VAT filing forms for the past 2 years. If the revenue department were to find any irregularities in the documentation, it can request that the company hold of liquidation until the irregularity has been resolved.

Lastly, the process of liquidation, which begins after the dissolution date, involves paying off any extra debt and refund the remaining capital to shareholders. According to Thai law, a severance pay must be allocated to each employee if the dissolution is voluntary.

These three simplified steps are the basics of closing down a business in Thailand. There are various additional factors and considerations to take in to account, so please do consult with an expert such as Sutlet Group, who can handle both legal and accounting elements of this closure.

Considerations also need to be made regarding your visa and work permit, as these do need to be cancelled properly with the Ministry of Labour and Immigration, in order to prevent problems if and when you apply for new visas and work permits.

Written by Ben Henderson

Edited by Stuart Blott, General Manager, Sutlet Group