Contracts for Buying and Selling a Thai Business

In order to buy and sell a business in Thailand, the buyer and seller will have to sign an agreement regarding the transaction. Furthermore, the particularities of the contract will vary depending on how the business is registered and what the assets of the business include. In this article, we will review some necessary elements of a sale and purchase agreement for a Thai business in a few different situations. First of all, it should be noted that there are many different legal procedures by which a business could be sold under Thai law. In this article, we will deal with the more common scenario whereby the business is registered as a limited company under Thai law and an outside investor purchases majority ownership of the existing company.

In order to successfully complete the sale and purchase of a business in Thailand, the buyer must gain legal ownership of the capital of the business; however, in most cases, it is also important to ensure that the buyer has gained control over the management as well as assets owned by the company. This is significant because under Thai law it does always follow that the majority owner of a company necessarily controls a company or its assets. Therefore, sale and purchase contract must address these issues.

In terms of assets, if the company owns the land, the easiest way to go about transferring ownership of the land from buyer to seller is merely to keep ownership of the land under the name of the company and not to transact the land separately. This is especially the case, where the buyers of the business include foreign investors since Land Department of Thailand regulations will have strict regulations regarding the sale of land to a Thai company with foreign investors in order to prevent unlawful foreign ownership of land.

The sale and purchase contract should include a clause or clauses related to holding an extraordinary shareholders meeting in order to appoint a new board of directors. Furthermore, the contract should specify a date by which the new directors must be registered with the Department of Business Development (DBD). This procedural step is in fact even more important than the purchase of the actual shares since under Thai law, the company directors have direct control over the company, rather than the shareholders. In this sense, the date by which the new board of directors must be registered is analogous to the “closing date” of a real estate conveyance.

Buying and selling a business in Thailand is complex. Those who are interested in doing business in Thailand should consult with competent Thailand lawyers.

 

Category: Business in Thailand, Company Law