Mergers and Acquisitions in Thailand

Mergers and acquisitions in Thailand are governed by a composite body of laws and administrative regulations that involve corporate law, competition regulation, foreign investment control, taxation, and, in certain sectors, industry-specific licensing regimes. Unlike jurisdictions with unified M&A statutes, Thailand operates within a fragmented legal framework that varies depending on whether the transaction involves private companies, public companies, or foreign acquirers.

The practical execution of M&A in Thailand is heavily influenced by issues such as land ownership restrictions for foreigners, foreign business license requirements, shareholding thresholds, and merger control filings under the Trade Competition Act. This necessitates not only a legal review but also an understanding of Thailand’s regulatory culture and transactional norms.

II. Legal Framework Governing M&A

A. Core Statutes

Civil and Commercial Code (CCC)
Governs private limited companies and includes rules on share transfers, amalgamations, and director authority.
Public Limited Companies Act B.E. 2535 (1992)
Applies to public and listed companies, setting out procedures for shareholder approval, disclosure, and board resolutions.
Securities and Exchange Act B.E. 2535 (1992)
Regulates public M&A, including tender offers, insider trading, and mandatory disclosures.
Foreign Business Act B.E. 2542 (1999)
Restricts foreign ownership in specific business categories unless an exemption is granted.
Trade Competition Act B.E. 2560 (2017)
Regulates mergers from a competition law perspective, requiring pre-approval or post-deal notification for certain transactions.

III. Deal Structures in Thai M&A Practice

M&A transactions in Thailand typically take one of three structural forms:

A. Share Acquisition

This involves the purchase of existing shares from current shareholders. Key features:

Private Companies: Shares are transferred via endorsement and updated in the shareholder register. Registration must be made with the Department of Business Development (DBD).
Public or Listed Companies: Regulated by the Securities and Exchange Commission (SEC) and Stock Exchange of Thailand (SET), subject to tender offer rules and shareholding disclosures.

Advantages:

Simpler documentation
Continuity of business operations

Risks:

Buyer assumes all liabilities, including those undisclosed or contingent

B. Asset Acquisition

The buyer purchases specific business assets (land, equipment, IP, etc.) without assuming the entire legal entity.

Requirements:

Individual asset transfer agreements
New licenses or permit transfers
New employee contracts (with Labor Protection Act compliance)

Advantages:

Targeted liability exposure

Disadvantages:

Requires third-party consents
VAT and specific business tax implications

C. Statutory Amalgamation (Merger)

Governed by Sections 1237–1243 of the CCC, an amalgamation involves two or more companies combining into a new legal entity.

Process:

Shareholder special resolutions
Public notice and creditor objection period
Registration with DBD and issuance of new company certificate

Amalgamations are rare due to administrative complexity and lack of flexibility in structuring.

IV. Foreign Investment Considerations

A. Foreign Business Act (FBA)

Foreigners (defined as companies with ≥50% foreign shareholding) are restricted from operating in certain sectors without a Foreign Business License (FBL) or a BOI promotion. Restricted categories include:

Service businesses
Retail and wholesale
Land development
Accounting, legal, engineering

Exemptions:

Board of Investment (BOI) Promotion: Offers foreign ownership up to 100%, tax incentives, and simplified work permits
US–Thailand Treaty of Amity: Grants US citizens and companies equal treatment in most business sectors
Eastern Economic Corridor (EEC) incentives

Foreign acquirers must carefully assess the post-transaction shareholding and control structure to avoid unintentional FBA violations. Use of Thai nominee shareholders is illegal and can lead to criminal penalties.

V. Merger Control and Competition Law

Thailand’s Trade Competition Commission (TCC) requires filings for certain M&A transactions that may lead to market concentration.

A. Notification Thresholds

If the transaction results in a business with over THB 1 billion in turnover and does not create a dominant position, post-deal notification must be submitted within 7 days.
If the transaction leads to a dominant position or monopoly, prior approval from the TCC is required.

B. Market Dominance

Defined as a business with:

Market share > 50%, and
Revenue ≥ THB 1 billion per year

Failure to comply can result in fines of up to 0.5% of the transaction value and reputational damage.

VI. Due Diligence and Legal Risk Assessment

Comprehensive due diligence is critical for Thai M&A transactions. This includes:

Corporate Records: Review of company registration, shareholding, and board authority
Licenses and Compliance: Validity and transferability of operational permits
Land and Assets: Verification of title deeds, encumbrances, and land use restrictions
Labor and Contracts: Existing employee obligations, severance liabilities, union agreements
Tax and Litigation: Pending tax audits, lawsuits, or regulatory investigations

In Thailand, public registries can be used to verify corporate data, but land ownership and litigation records often require local physical verification.

VII. Transaction Documentation and Closing

A. Key Documents

Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA)
Disclosure Letter
Board and Shareholder Resolutions
Third-party consents (e.g., from banks, landlords, regulators)
Employment transfer agreements

B. Closing Conditions

Foreign ownership clearance (if applicable)
BOI or FBL amendments
Tax clearance
Settlement of pre-closing liabilities

Escrow arrangements are sometimes used to manage price adjustments or indemnity retention.

VIII. Tax Implications

A. Share Transfers

Generally exempt from VAT
Stamp duty of 0.1% applies to private share transfers
Capital gains may be subject to withholding tax if the seller is a non-resident

B. Asset Transfers

Subject to 7% VAT and Specific Business Tax (SBT) of 3.3% on certain asset types
Possible reassessment of asset values by the Revenue Department
Buyer may inherit VAT/tax liabilities unless contractually indemnified

IX. Post-Transaction Integration

After closing, buyers should:

Update corporate and shareholder records with the DBD
Notify BOI or sectoral regulators (e.g., Ministry of Commerce, FDA)
Harmonize HR policies and employment terms
Ensure compliance with the Personal Data Protection Act (PDPA) during data migration

X. Common Pitfalls and Legal Risks

Unintended FBA violation due to indirect foreign control
Assumption of tax or labor liabilities in share purchases
Defective title or encroachments in land-based deals
Non-compliance with merger control thresholds
Use of illegal nominee shareholders

Mitigation strategies include structuring deals through Thai joint ventures, using escrow and indemnity protections, and engaging in thorough due diligence.

XI. Conclusion

Mergers and acquisitions in Thailand offer strategic opportunities in a dynamic emerging market, but require a careful navigation of legal, regulatory, and commercial complexities. The Thai M&A environment remains relatively open, though sectoral restrictions, regulatory oversight, and formalism in documentation demand meticulous planning.

Foreign investors and domestic acquirers alike must approach M&A transactions with a full understanding of the underlying legal structure, regulatory obligations, and cultural considerations. Deal success hinges not only on price and valuation, but also on precise compliance with Thai legal requirements and effective risk management.