What Is a Limited Company in Thailand? The Five Legal Characteristics under Section 1096 of the Civil and Commercial Code

Last updated 12 November 2026 · Legal status: in force · Statutory texts checked against the legal database of the Office of the Council of State

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The definition of a limited company under Section 1096

Section 1096 of the Civil and Commercial Code defines a limited company by two elements: its capital is divided into shares of equal value, and each shareholder’s liability is limited to the amount still unpaid on the shares he or she holds. A limited company is one of the three types of partnership or company under Section 1013, alongside the ordinary partnership and the limited partnership.

Section 1096 provides:

“A limited company is a company formed with its capital divided into shares of equal value, the liability of each shareholder being limited to the amount, if any, remaining unpaid on the shares held by that shareholder.”
— Civil and Commercial Code, Section 1096 (unofficial translation)^[2]

This definition shows what distinguishes a limited company from a partnership. In an ordinary partnership, every partner is liable for the partnership’s debts without limit. A limited partnership can limit the liability of only some classes of partners. A limited company limits the liability of every shareholder. The differences between a limited partnership and a limited company are explained in more detail in Limited partnership or limited company in Thailand.

Broken down into legal characteristics, a limited company has five key features: it is a juristic person separate from its shareholders; its capital is divided into shares of equal value; its shareholders have limited liability; it is formed by two or more promoters; and it has two internal organs, the directors and the general meeting of shareholders. The following sections explain each in turn.

Separate legal personality from the shareholders

Section 1015 of the Civil and Commercial Code provides that a registered partnership or company is a juristic person separate from its shareholders, so the company has its own assets, debts, and rights. Supreme Court Judgment No. 7626/2568 holds that an offence against a company is prosecuted by the company’s representative, but that a shareholder can be an injured person when the director is the one who committed the offence.

“A partnership or company registered under the provisions of this Title is a juristic person separate from the partners or shareholders who have joined together to form it.”
— Civil and Commercial Code, Section 1015 (unofficial translation)^[1]

Juristic personality arises on registration, not when the co-investors reach agreement. Money that shareholders have paid for their shares belongs to the company; it is not a deposit held for the shareholders. Contracts made by the company bind the company, and the company’s creditors enforce their claims against the company’s assets. Conversely, a shareholder’s personal creditors have no direct right to the company’s assets.

Supreme Court Judgment No. 7626/2568: harm to the company and to its shareholders

In this case the company had three shareholders. The joint plaintiff and the defendant were directors who acted on behalf of the company jointly. The defendant withdrew money from the company’s bank account and misappropriated it. The issue was whether a shareholder was an injured person entitled to file a criminal complaint. According to the summary in the Supreme Court’s judgment database, the Court held that the case was an offence committed against a juristic person, for which Section 5(3) of the Criminal Procedure Code provides that the manager or another representative of the juristic person brings the case on its behalf. But where the offender is the very director authorised to act on behalf of the company, that person will not bring a case accusing himself. The Court therefore held that “the joint plaintiff, as a shareholder of the company with a direct interest in the results of the juristic person’s business, has suffered damage.”^[12]

This judgment shows the two levels of Section 1015. At the first level, the party directly harmed by the misappropriation of company money is the company, not the shareholders. At the second level, when the company’s representative is the wrongdoer, a shareholder with a direct interest may step in and exercise rights. On the civil side, the Civil and Commercial Code provides a separate route for shareholders to sue directors for the benefit of the company. Directors’ personal liability is explained in the Thai article Can company directors be personally liable? (Thai) and in Criminal liability of company directors in Thailand.

Capital divided into shares, and share transfers

The capital of a limited company is divided into shares of equal value under Section 1096. Each share is worth at least five baht under Section 1117, is indivisible under Section 1118, and must be paid up in full in money under Section 1119 unless issued under a statutory exception. Section 1129 allows shares to be transferred without the company’s consent unless the articles of association provide otherwise for shares specified by name.

Dividing the capital into equal units, with a minimum share value of five baht under Section 1117,^[5] means that shareholders’ rights can be measured by the number of shares held. A shareholder with more shares has proportionally more votes and a larger share of profits. Section 1118, paragraph two, also provides that where two or more persons hold one share jointly, they must appoint one of them to exercise the rights of a shareholder.^[6]

Section 1119, paragraph two, prohibits a shareholder from setting off debts against the company when paying for shares.^[7] This rule protects the company’s creditors, because the registered capital must come in as real money, not as figures offset against each other in the accounts.

As to transfers, Section 1129, paragraph one, allows shares to be transferred without the company’s consent, except for shares specified by name in the share certificate where the articles of association provide otherwise. Paragraph two prescribes the form of a transfer of shares specified by name: it must be in writing, signed by the transferor and the transferee, and certified by at least one witness, failing which it is void. Paragraph three provides that the transfer cannot be set up against the company or third parties until it has been entered in the register of shareholders.^[8] A company whose co-investors want to control the entry of new shareholders must therefore put transfer restrictions in its articles of association, as explained in the Thai article Memorandum, articles of association, and shareholders’ agreements (Thai).

Shareholders’ limited liability and its limits

Limited liability under Section 1096 of the Civil and Commercial Code means that a shareholder is liable for the company’s debts only up to the amount still unpaid on his or her shares. A shareholder who has paid in full therefore does not have to use personal assets to pay the company’s debts. Limited liability does not, however, cover obligations that the shareholder takes on personally, such as a guarantee of the company’s debts.

For example, a shareholder holds 1,000 shares with a value of THB 100 each, of which THB 50 per share has been paid. That shareholder’s liability for the company’s debts as a shareholder is capped at the unpaid share money, THB 50,000. Once every share has been paid in full, no liability as a shareholder remains, even if the company’s debts exceed its assets.

Three situations should be kept distinct. First, a shareholder who signs a guarantee of the company’s debts is liable under his or her own guarantee, not as a shareholder. Second, a shareholder who is also a director may be liable for his or her own acts as a director. Third, limited liability arises from registration, so people who do business together without registering do not have this protection. Worked figures for registered capital, paid-up capital, and the share money that shareholders still owe are set out in Registered capital of a Thai limited company.

Two promoters and the memorandum of association

Section 1097 of the Civil and Commercial Code allows two or more persons to promote and form a limited company by subscribing their names to a memorandum of association, which must contain the six particulars in Section 1098, including a name ending with the word “Limited”. The number of shareholders still matters after formation, because under Section 1237(4) the court may order a company dissolved if only one shareholder remains.

“Any two or more persons may promote and form a limited company by subscribing their names to a memorandum of association and doing the other acts required by the provisions of this Code.”
— Civil and Commercial Code, Section 1097 (unofficial translation)^[3]

The memorandum of association tells outsiders what the company is. Section 1098 lists six particulars: the company name, which must end with the word “Limited”; the location of the registered office; the objects; a declaration that the shareholders’ liability is limited; the amount of share capital and the value of the shares; and the names, addresses, occupations, and signatures of the promoters, with the number of shares each has subscribed.^[4] The word “Limited” at the end of the name therefore announces to business partners that the shareholders’ liability is limited. The registration steps, from reserving the name to obtaining a company certificate, are explained in How to register a limited company in Thailand.

The number of shareholders is not a condition that applies only on the day of formation. Section 1237 lists five grounds on which the court may order a limited company to be dissolved; ground (4) is “if the number of shareholders is reduced to one.”^[11] The word “may” means that the court has discretion; dissolution does not follow automatically by operation of law. But a company in which one shareholder has acquired all the shares is open to an application to the court.

Directors and the general meeting of shareholders

A limited company acts through two internal organs. Section 1144 of the Civil and Commercial Code requires a company to have one or more directors who manage it in accordance with the articles of association, under the control of the general meeting of shareholders, and Section 1167 provides that the relationship between the directors, the company, and third parties is governed by the rules on agency. A shareholder therefore does not act on behalf of the company merely by holding shares.

The separation of shareholders from management is a defining feature of a limited company. Shareholders exercise their power through the general meeting, which under Section 1144 controls the directors’ management, while management in accordance with the articles is the directors’ task.^[9] When directors act within their authority, the effects of their acts fall on the company under the rules on agency.^[10] A point that can cause problems in companies where two sides hold similar numbers of shares is the calling of meetings and the passing of resolutions, which is explained with reference to case law in Cancellation of a shareholders’ resolution for an improperly called meeting.

The limited company in comparative law: England, Delaware, and Germany

The company laws of England, the US state of Delaware, and Germany adopt the same principles as Sections 1015 and 1096 of the Civil and Commercial Code: the company is a separate person and its shareholders have limited liability. The difference from Thailand is the number of founders. The English Companies Act 2006, the Delaware General Corporation Law, and the German GmbHG allow a single person to form a company, whereas Section 1097 of the Thai Code requires two.

England. Section 3 of the Companies Act 2006 defines a “limited company” as a company whose members’ liability is limited by its constitution, and a company “limited by shares” as one whose members’ liability is limited to the amount, if any, unpaid on their shares, which corresponds to Section 1096 of the Thai Code. Section 7 allows a company to be formed by “one or more persons”, and section 16 makes the subscribers to the memorandum a body corporate from the date of incorporation.^[13]

Delaware, United States. Section 101(a) of the General Corporation Law allows any person, partnership, association, or corporation to incorporate a corporation “singly or jointly with others”, and section 102(b)(6) provides that, except as the certificate of incorporation provides, stockholders are not personally liable for the corporation’s debts, except by reason of their own conduct or acts.^[14] The exception at the end of this provision matches the distinctions drawn in the section on limited liability above.

Germany. Section 1 of the GmbHG allows a limited liability company (GmbH) to be formed by one or more persons. Section 13(1) gives the company its own rights and obligations, allows it to own land, and allows it to sue and be sued, and section 13(2) provides that the company’s creditors are paid only from the company’s assets.^[15]

For Thai business owners, this comparison has one important practical consequence: a person who wants to run a business alone through a Thai limited company still needs at least two shareholders throughout the life of the company, and should put an agreement between the shareholders in place from the outset, even if the second shareholder holds only a small number of shares.

Section 1096 in law and economics

Law and economics explains limited liability under Section 1096 of the Civil and Commercial Code as a cost-reducing mechanism. Easterbrook and Fischel (1985) argue that limited liability reduces the cost of monitoring managers and other shareholders, makes shares transferable, and lets investors diversify. In small companies, by contrast, lenders commonly require shareholders to give personal guarantees, so limited liability works differently depending on the size of the company.

Easterbrook and Fischel ask why the law gives shareholders limited liability and set out its economic benefits in order. First, limited liability decreases the need to monitor managers, because investors who bear less risk need not spend as much on monitoring. Second, it reduces the cost of monitoring other shareholders, because the wealth of other shareholders does not affect each investor’s own risk. Third, it promotes the free transfer of shares, which gives managers incentives to act efficiently. Fourth, it allows share prices to reflect information about the value of the firm. Fifth, it allows investors to diversify more efficiently. Sixth, it facilitates optimal investment decisions, allowing managers to invest in projects with a positive net present value even when they are risky.^[16]

The analysis that applies most directly to Thai limited companies is where the authors distinguish close corporations from public corporations. They observe that lenders to close corporations commonly require personal guarantees from investors or other modifications of limited liability, and that almost every case in which American courts have allowed creditors to reach shareholders’ assets has involved a close corporation.^[17] The reason is that most of the benefits of limited liability are tied to the separation of ownership from management and to the stock market, which a company run by its own shareholders does not have.

A limited company under the Civil and Commercial Code is a close company in this sense: it may not invite the public to subscribe for its shares (Section 1102),^[2] and in many such companies the shareholders are few and also serve as directors. The practical consequences for Thai business owners are twofold. First, limited liability under Section 1096 does protect shareholders against debts that the company incurs in the ordinary course of trade, but once a shareholder signs a guarantee of a company loan, that protection does not cover that debt. Second, keeping company assets separate from shareholders’ assets, for example through a separate bank account and written records of transactions between shareholders and the company, is what allows juristic personality under Section 1015 to have the effect the law intends.

Frequently asked questions about Thai limited companies

What is a limited company in Thailand?

A limited company is a juristic person whose capital is divided into shares of equal value, with each shareholder liable only up to the amount still unpaid on his or her shares, under Section 1096 of the Civil and Commercial Code. Once registered, it is a person separate from its shareholders under Section 1015.

How many shareholders does a Thai limited company need?

Section 1097 allows two or more persons to promote and form a limited company. After formation, if the number of shareholders falls to one, the court may order the company dissolved under Section 1237(4).

Are shareholders of a Thai limited company liable for the company’s debts?

As shareholders, they are liable only up to the amount still unpaid on their shares under Section 1096. Once their shares are fully paid, they have no further liability, unless they have taken on liability of their own, for example by signing a guarantee of the company’s debts.

What is the minimum value of a share in a Thai limited company?

Section 1117 provides that the value of a share must not be less than five baht, and Section 1118 provides that shares are indivisible.

Can shareholders transfer shares in a Thai limited company?

Yes. Section 1129 allows shares to be transferred without the company’s consent, unless the articles of association provide otherwise for shares specified by name. A transfer of shares specified by name must be in writing, signed by the transferor and the transferee, and certified by at least one witness, and it can be set up against the company and third parties only after it has been entered in the register of shareholders.

When to seek advice

Advice before registering a limited company is most useful when the co-investors hold similar numbers of shares, want to restrict share transfers in the articles of association under Section 1129 of the Civil and Commercial Code, or are being asked to guarantee the company’s debts personally, because these matters set the boundaries of limited liability under Section 1096 and are harder to change later than to put in place from the start.

Eksiam Chaisorn, a legal consultant in partnership, company, and business law, advises from the choice of business form and the drafting of the memorandum and articles of association through to shareholders’ agreements. Once the company starts trading, the legal matters that follow most directly are contracts with business partners, employment, and the handling of customer data, which are covered in Thai contract law before signing, Termination and severance pay in Thailand, and the Thai article PDPA for businesses (Thai). The general theory and comparative law of business forms are discussed in the Thai article Forms of business organisation on Eksiam Legal (Thai).