Our latest article analyzes the available options regarding the legal structures of NGOs in Thailand, and we provide some recommendations based on our experience.
The term “NGO / Non-Governmental Organization” is not a legal term, and the legal forms of NGOs are diverse. Most are set up in the form of not-for-profit associations or foundations. However, there are other possibilities as well.
Under Thai law, the foundation and the association are required to be registered as juristic persons. They may generate income, but the income must be reinvested for the objectives of the association/foundation, and it must comply with tax law and other laws of Thailand. They are required to file annual reports with the competent Thailand government ministries including financial statements certified by an accountant and a copy of the minutes of the annual meeting.
Additionally, Thai law provides the option of a so-called “Permission to Operate in Thailand for Foreign Private Organizations”.
Furthermore, we will discuss the possibility of using a private limited liability company and a Social Enterprise for the purposes of carrying on the business of an NGO.
A foundation consists of assets appropriated for charitable, religious, artistic, scientific, literary, educational or other purposes for the benefit of the public and not for profit sharing.
The specially allocated assets of the foundation must be managed to (or “intending to”) implementing the objectives of the foundation. They shall strictly not be used for individual interest. Some typical examples of activities of foundations include the management of a fund, building, etc.
To be established, a foundation must have an initial registered capital of THB 500,000 or not less than THB 250,000 if there are other assets included instead of monetary funds. The initial registered capital may be reduced if the foundation has a charitable purpose.
The foundation shall have regulations related to the management, in particular, accounting. It shall have a committee, consisting of at least three persons. It is legally not required to have Thai nationals as committee members. However, this may be advisable from a practical point of view.
The foundation shall not be involved in political activities.
A foundation is a relatively rigid legal structure. Once the objectives are adopted on registration, they can only be changed for following purposes:
if circumstances make the objective of the foundation undesirable or if the objectives are impossible to achieve, the objectives shall be amended in a manner that reflects the initial objectives as closely as possible.
Based on our experience, we would therefore recommend drafting regulations that are as broad as possible.
We note that the Registrar shall have the authority to inspect, control and supervise the management of the foundation to ensure conformity with the regulations of the foundation. This may even include the dismissal of a committee member or the entire committee in severe cases of wrongful actions, and the appointment of a new committee member or committee.
The dissolution of a foundation may only take place under specific conditions set forth by the foundation’s regulations or by law. It is important to note that the committee is notauthorized to dissolve the foundation independently.
The non-profit association is the most common legal form for NGOs in Thailand.
An association may be created for any lawful activity that, according to its nature, is to be done continuously and collectively by persons other than distributing profits to its members.
It may engage in activities beneficial to the public, however, by definition associations are organizations of members who act together to achieve specified objectives. Some typical examples of activities of associations include sports clubs, hobby clubs, and religious organizations.
The association is not required to hold an initial registered capital.
The association shall have at least ten members. Their names, addresses, and occupation shall be indicated in the application for registration of the association. The members shall pay a subscription fee to the association.
The association shall adopt regulations in accordance with Thai laws. Alterations of and additions to the regulations may be made by a resolution of the general meeting. This means that the legal structure of the association is more flexible compared to that of the foundation.
An association is represented by its committee in its relations with third parties. The appointment of committee members shall take place according to the regulations of the Association and Thai law. The appointment must then be registered. The Registrar may refuse the appointment of a committee member, but only under specific circumstances such as the committee member not having the status or conduct required for implementing the object of the association. The registrar would then have to notify the association in writing regarding the reasons for such a decision.
The association may be dissolved under specific circumstances, including a resolution to dissolve passed in a general meeting. In the case of dissolution, the liquidation of assets will follow the principles of liquidations of (for-profit) companies.
Juristic persons under the law of another country that do not have a profit-making or political purpose have the possibility to obtain a Permission to Operate in Thailand for Foreign Private Organizations (“FPO”).
Such organizations should have the objective to provide assistance in economic, social and academic aspects for Thailand with assistance guidelines in connection with the development and stability policy of Thai government.
The permitted scope of operations can be categorized as follows:
The requirements for the permission vary depending on the category as per above.
For Category 1, the duration of the permission is limited to one year for the first application. In the case of an extension of permission, two-year periods shall be granted at a time.
The permission does not involve the establishment of a juristic person in Thailand. The head office abroad would always act on its own behalf.
We note that the FPO will by nature have a strong involvement of the head office abroad. It will furthermore be able to benefit from the good reputation and standing of the head office.
The time required to obtain the FPO permission will be significantly shorter than for the establishment of a foundation or an association.
NGOs may be set up as private limited liability companies (“LLC”) as well, if there is an objective to generate income and profit.
If it is meant to be not-for-profit, the Social Enterprise (“SE”) may be suitable being a hybrid company with specified social goals as its primary objective. In the SE, profits are primarily utilized to fund social activities, and SEs attempt to maximize profits while maximizing benefits to society and the environment.
The core characteristics of social enterprises in Thailand are:
The key advantages of social enterprises are:
A social enterprise is a business that aims to give back to society in the form of an enterprise that will take into account social responsibility, fairness and sharing. Furthermore, based on our experience, the potential tax exemptions for social enterprises may be advantageous for a person or firm that wants to help society while also running a business at the same time.
As a result, we note that traditionally two types of non-governmental organizations may be registered in Thailand: foundations and associations. The association is the more common legal form for NGOs.
NGOs registered in foreign countries may apply for a “Permission to Operate in Thailand for FPO”.
If the operations of the NGO involve profit-generating activities, the ordinary limited liability company or the newer legal form of a Social Enterprise may be suitable as well.
Please feel free to contact us if you have any inquiries regarding NGOs in Thailand at [email protected]
Fabian Doppler Connect with me on LinkedIn
Fabian, a founding partner of FRANK Legal & Tax, is a German-trained lawyer with expertise in corporate/commercial and real estate law, and litigation, and has been living and working in Thailand since 2005.