Registered Capital Reduction in Thailand: Creditor Notice and the One-Quarter Floor

What does a registered capital reduction in Thailand involve?

First, section 1224 lets a limited company reduce its capital in two ways: by lowering the value of each share or by reducing the number of shares. Next, sections 1225 to 1228 add a floor, a creditor procedure, a period of continuing shareholder liability and a registration deadline. Section 1228 refers to the special resolution that authorises the reduction, and section 1194 sets that resolution at not less than three-quarters.

How low can a registered capital reduction in Thailand go?

Specifically, section 1225 states that the capital of the company may not be reduced to less than one-fourth of its total amount. Moreover, the Thai text refers to the total capital of the company. However, the text does not define that term, so the sources read leave open whether the floor runs from the capital before the reduction or from an earlier figure.

For that reason, the company should confirm the floor against its own registered figures with the DBD registrar before it passes the resolution.

How does the company notify creditors?

Next, section 1226 requires the company to publish its intention to reduce capital in a local newspaper at least once and to send notice to every person it knows to be a creditor. A creditor who objects must send the objection within thirty days from the date of the notice.

1. The company publishes the intention in a local newspaper at least once.
2. The company sends notice to every known creditor and invites objections.
3. A creditor sends any objection within thirty days from the date of the notice.
4. If a creditor objects, the company may not reduce its capital until it has paid the debt or given security for it.

Which liability remains with shareholders after the reduction?

In addition, section 1227 keeps shareholders who received money back liable to a creditor who failed to object because he did not know of the reduction, where his ignorance was not his own fault. Moreover, the liability extends to the amount refunded and runs for two years from the date the reduction is registered.

Consequently, section 1227 reaches the shareholders personally, not only the company.

How is a registered capital reduction in Thailand registered?

Finally, section 1228 requires the company to register the special resolution within fourteen days after its date. Importantly, the period runs from the date of the resolution, not from the end of the creditor objection period.

However, the sources read leave one point open. Section 1226 gives creditors thirty days from the date of the notice, and section 1228 gives the company fourteen days from the date of the resolution, but neither provision states how the two periods fit together. Therefore, confirm the sequence with the DBD registrar before the company publishes the notice. The current Thai text of each section is available in the Office of the Council of State law database.

Frequently asked questions

Conclusion

A registered capital reduction in Thailand rests on five provisions: the methods in section 1224, the one-quarter floor in section 1225, the creditor procedure in section 1226, the two-year shareholder liability in section 1227 and the fourteen-day registration period in section 1228. In addition, the opposite step is covered in our guide to a registered capital increase, and the closing of a company in our guide to liquidating a company in Thailand. Finally, related reading includes our corporate restructuring guide and our corporate secretarial page.