The Factory Act of 1992 is the key set of regulations for setting up manufacturing businesses in Thailand. The act governs all activities related to the construction, operations, and expansion of any manufacturing unit along with setting safety standards. This article intends to explain the legal framework governing the operations and expansion of manufacturing businesses in Thailand.
Factory Operations
The Ministry of Industry of Thailand has the authority to designate the following:
- The size and quantity of the type of factory in each category should be built or expanded on any location within the country.
- Raw materials and/or factors or types of energy to be used or manufactured in a factory, as well as their type, quality, source of origin, and ratio.
- The type or standard of goods to be produced in a new or expanded factory.
- The use of products from factories that are being established or expanded in specific industries, as well as the export of all or part of those products.
According to the Factory Act of 1992 and the subsequent amendments, you must know that factories are classified into three categories in Thailand:
- Factories that do not need a license.
- Factories that only need notification to officials prior to the start of operations. The operators can begin operations by obtaining a receipt form from the Ministry.
- Factories that need a license from the Ministry of Industry’s Department of Industrial Works to start operations. The operators can have a permit for developing parts of the factory prior to the license. However, this is at the Ministry’s discretion.
If Category 2 or 3 factory stops working for more than a year in a row, the operator must notify the competent authority in writing. They have to do so within seven days of the one-year cycle ending. Additionally, they must notify the competent authority in writing before restarting operations. For a Category 3 factory, the operator must first obtain approval from the competent authority to restart the operations.
Accident in Factory
When an accident results in the death, injury, or disability of a worker for more than 72 hours, the operator must alert the responsible authority in writing within three days of the death or the end of the 72-hour duration. If an accident happens that allows the plant to close down for longer than seven days, the operator must inform the relevant authority in writing within ten days of the accident.
Migration of Production Facility
The Permanent Secretary of the Ministry of Industry must grant permission for a factory operator to move equipment from its original location to another location for temporary operations. Permission may be granted for a period of time determined by the request, but no longer than one year. When moving a factory to a different location, the operator must treat it as though it were a new factory.
Transfer, Rent, or Lease of Factory
A licensed factory must be transferred, rented, offered for hire, purchase, or sale with relevant permission from the competent authority. In these situations, the previous license is deemed to have expired. The transferee, lessee, or hire-purchase must apply for a new license within seven days. Following the submission of such an application, the factory company could proceed as usual pending the receipt of a license, as if the applicant were the licensee.
Death of Licensee
When the licensee dies, the beneficiary or trustee of the estate must apply for the license to be transferred within 90 days of the date of death. Otherwise, the license would be assumed to have expired. The beneficiary or trustee of the estate of a factory business may gain consideration. It is only if they were the holder of a license upon receipt of such application.
The points discussed above are very important as far as factory or production facility operations are concerned. These are the most basic factors but yet crucial ones with high strategic importance on the factory operations. Now let us move to the clauses explaining the Factory expansion process in Thailand.
Factory Expansion
No factory expansion is possible without approval from the competent authority. To apply to expand a factory, you must pay a fee of 100,000 baht. Factory expansion is according to the Act for the following activities:
- An increase in the number of machines, or a change or modification of machines. This can aim to increase aggregate power by 50% or more.
- An increase from 50 horsepower or more. This can be in cases where the original machines’ aggregate powers were not more than 100 horsepower or an equivalent thereof.
- An increase from 100 horsepower or more in case the original machines, or/and,
- Every part of the factory building is added to or altered in such a way that it requires any part of the factory’s base to carry a load of 500 kilograms or more.
A licensee must submit a written notification to the competent authority within seven days of the move if he/she/they do any or all of the following:
- Raises the number of machines, adjusts or modifies the machines used for output or generation of electricity, but not by more than 50% of the increased aggregate power.
- Increases the area of the factory building or builds a new factory building for the immediate advantage of the factory’s company, allowing the factory building’s area to be increased by 50% or more in cases where the factory building’s area does not reach 200 square meters, or by 100 square meters or more in cases where the factory’s area exceeds 20 square meters.
A certificate for the extended portion must be available for the same amount of time as the original license.
The above points should be enough to provide you with a basic overview of the operations and expansion of your factory or manufacturing units in Thailand. For detailed information related to the same and assistance in opening manufacturing businesses in Thailand, mail us at [email protected] and our professional team of Thai legal experts will get connected with you at the earliest.
