Thai Business Partnership

What is Partnership under Thai Law?

A business partnership is a specific kind of legal relationship formed by the agreement between two or more individuals to carry on a business as co-owners. Section 1012 of the Civil and Commercial Code in Thailand defines partnership as a contract whereby two or more persons agree to a unit for a common undertaking, with a view of sharing the profits which may be derived therefrom. Upon registration of the partnership, it constitutes a juristic person distinct from the partners of whom it is composed. In Thailand, there are two types of partnerships:

1. Ordinary partnership; and

2. Limited partnership.

Ordinary Partnership

Section 1025 of the Civil and Commercial Code provides that an ordinary partnership is that kind of partnership in which all the partners are jointly and unlimitedly liable for all the obligations of the partnership. The Ordinary Partnership is a business set up by a minimum of two persons. Each partner must bring a contribution to the partnership. Such contributions may consist of money or other properties or of services.

The partners may agree upon themselves the amount of money, property or service to be contributed to the partnership. If there is no express agreement to that effect, it is presumed that the partners’ contributions are of equal value. If the contribution of the partner consists merely of his personal services and the contract of partnership does not fix the value of such services, the share of such partner in the profits is equivalent to the average of the shares of the partners whose contributions are in money or other properties.

If a partner brings the use of a property as a contribution, the relations between such partner and the partnership with regards to the delivery and repair, liability for defects, liability for eviction, the clause of non-liability are governed by the provisions of the Hire of Property. On the other hand, if the contribution of a partner consists of the ownership of a property, the relations between such partner and the partnership with regard to the abovementioned consideration of a property are governed by the provisions of Sale under the Civil and Commercial Code.

With regard to the management of the business of the partnership, the partners may agree. If nothing has been agreed, such business may be managed by each of the partners, provided that no partner may enter into a contract to which another partner objects.

In a partnership, the person who manages the business is called the Managing Partner. A managing partner may be removed only by the consent of all the other partners unless provided otherwise.

The persons are joint partners who share unlimited liability for all the Partnership's obligations.

It is not mandatory to register an Ordinary Partnership but partners can choose to do so as provided in Section 1064 of Civil and Commercial Code, reads in part "An ordinary partnership may be registered."

Each partner is, jointly and severally, personally liable for debts and taxes of the partnership. For example, if the partnership assets are insufficient to satisfy a creditor's claims, the partners' personal assets are subject to attachment and liquidation to pay the business debts.

Each partner may be held jointly and severally liable for a co-partner's wrongdoing or tortuous act (e.g. the misapplication of another person's money or property).

Unless otherwise provided in the partnership agreement, no one can become a member of the partnership without the consent of all partners.

Dissolution and Liquidation of Ordinary Partnerships

Section 1055 of the Civil and Commercial Code provides that an ordinary partnership may be dissolved as follows:

1. As provided by the contract of partnership;

2. If made for a definite period of time, by the expiration of such period;

3. If made for a single undertaking, by the termination of such undertaking;

4. By any of the partners giving to the other partners due notice; and

5. By the death of any partner or by any partner becoming bankrupt or incapacitated.

Limited Partnership

A limited partnership is that kind of in which there are:

1. One or more partners whose liability is limited to such amount as they may respectively undertake to contribute to the partnership; and

2. One or more partners who are jointly and unlimitedly liable for all the obligations of the partnership.

A Limited Partnership is in several ways similar to an Ordinary Partnership, though it provides for two types of partners. One partner whose liability is limited and the other partner whose liability is unlimited.

Unlike an Ordinary Thai partnership, Limited Partnerships must be registered. Until registration, a limited partnership is deemed an ordinary partnership in which all the partners are jointly and unlimitedly liable for all the obligations of the partnership.

In a limited partnership, the contributions of the partners with limited liability must be in money or other properties.

As to the management of the partnership, the same can be managed only by the partners with unlimited liability. If a partner with limited liability interferes with the management of the partnership, he becomes jointly and unlimitedly liable for all the obligations of the partnership.

Unlike an ordinary partnership, death, bankruptcy or incapacity of one of the partners does not dissolve the partnership, unless it is expressly so provided in the contract of partnership.

Effect of Dissolution of a Limited Partnership to Creditors

The creditors of a limited partnership have no action against the partners with limited liability as long as the partnership is not dissolved. When the partnership is dissolved, the creditors may take the following actions against the partners with limited liability:

1. The part of the contribution of such partner which has not been delivered to the partnership;

2. Such part of the contribution as the partner may have withdrawn from the assets of the partnership;

3. Dividends and interest which the partner may have received in bad faith.

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