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Buy Business in Thailand: Legal Guide
Although buying an existing firm is a common possibility for entrepreneurs, starting a new business in Thailand is frequently the first option. If you buy a business in Thailand, it has several benefits because it will be fully incorporated and prepared to launch or continue operations. Also, obtaining a work permit in Thailand and immigration benefits can go more smoothly than starting a new company. In this article, we’ll look at some of the important factors to take into account while deciding how to buy a business in Thailand. If you don’t have much time to read through this article, let us help you with some precautions that you must take when you buy a business in Thailand – - Do the right due diligence before buying an existing business. - Check that you buy the business formally through business purchase agreements or share purchase agreements. - After you are done with the purchase, you have to complete the following tasks mandatorily: - Finalize and register the share transfer, - Change the directors, and, - Make changes to the company’s structure, such as new articles of incorporation and a shareholders’ agreement. Now, if you want to know more, continue reading our knowledge-rich article on how to buy a business in Thailand! Before going deep into the process of buying a business in Thailand, let us first update you on the advantages and disadvantages of doing so. This will help you make the right decision! 𝐀𝐝𝐯𝐚𝐧𝐭𝐚𝐠𝐞𝐬 𝐨𝐟 𝐁𝐮𝐲𝐢𝐧𝐠 𝐚 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐢𝐧 𝐓𝐡𝐚𝐢𝐥𝐚𝐧𝐝 - The initial work necessary to launch the business will already have been finished. - It may be easier to secure money as the business will have an established record. - For the good or service, a market will already be established. - There may already be a customer base, a steady income, and a solid brand reputation. - You should be able to use the experience of current personnel. - Many of the issues will have already been identified and fixed. 𝐃𝐢𝐬𝐚𝐝𝐯𝐚𝐧𝐭𝐚𝐠𝐞𝐬 𝐨𝐟 𝐁𝐮𝐲𝐢𝐧𝐠 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐢𝐧 𝐓𝐡𝐚𝐢𝐥𝐚𝐧𝐝 - It frequently takes a substantial capital commitment to buy an existing firm. - To help with cash flow, many months’ worth of working capital will be needed. - You might need to uphold or renegotiate any unfulfilled agreements the last owner made. 𝐖𝐡𝐚𝐭 𝐒𝐡𝐨𝐮𝐥𝐝 𝐘𝐨𝐮 𝐂𝐨𝐧𝐬𝐢𝐝𝐞𝐫 𝐖𝐡𝐞𝐧 𝐘𝐨𝐮 𝐁𝐮𝐲 𝐚 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐢𝐧 𝐓𝐡𝐚𝐢𝐥𝐚𝐧𝐝? When you buy a business in Thailand, DO consider the following aspects: - Due Diligence - Contract Drafting and Review, and, - Company Restructuring and Registration 𝗗𝘂𝗲 𝗗𝗶𝗹𝗶𝗴𝗲𝗻𝗰𝗲 𝘁𝗼 𝗕𝘂𝘆 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗶𝗻 𝗧𝗵𝗮𝗶𝗹𝗮𝗻𝗱 Similar to buying real estate in Thailand, doing your homework is crucial when purchasing an existing business. Due diligence gives prospective buyers the chance to check important information about the target company. The areas that must fall under your scanner of due diligence are as follows: - Company registration details, - Current shareholder list, - Current director(s), - Business balance sheets and bank statements, - Employment contracts and all other contracts signed/entered into, - Inquire about any potential disputes the company may be involved in. A proper due diligence process must include a background check to see if it has any tax debts or financial legal actions, such as bankruptcy. 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝗗𝗿𝗮𝗳𝘁𝗶𝗻𝗴 𝗮𝗻𝗱 𝗥𝗲𝘃𝗶𝗲𝘄 The next step is to create and prepare the business purchase agreement/share transfer agreement and the contract outlining any other terms and conditions for the sale of the company if the due diligence process proceeds smoothly with the approval of the transaction. 𝑪𝒐𝒏𝒕𝒆𝒏𝒕 𝒐𝒇 𝑩𝒖𝒔𝒊𝒏𝒆𝒔𝒔 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆 𝑨𝒈𝒓𝒆𝒆𝒎𝒆𝒏𝒕 You must follow a legal process when buying a business, that starts with a Business Purchase Agreement. With a business purchase agreement, you can buy a firm with certainty. If you are purchasing shares of the company that owns the firm, this sort of transaction must hold a Share Purchase Agreement (SPA). Such an agreement requires the buyer to acquire the business in accordance with the terms and circumstances of the agreement. A SPA frequently includes the following terms: 𝑇𝑒𝑟𝑚 1: 𝑃𝑎𝑟𝑡𝑦 𝐼𝑑𝑒𝑛𝑡𝑖𝑓𝑖𝑐𝑎𝑡𝑖𝑜𝑛 The mention of this clause is at the start of the business purchase agreement. It includes the full names and addresses of the buyer and vendor. 𝘛𝘦𝘳𝘮 2: 𝘋𝘦𝘴𝘤𝘳𝘪𝘱𝘵𝘪𝘰𝘯 𝘰𝘧 𝘵𝘩𝘦 𝘉𝘶𝘴𝘪𝘯𝘦𝘴𝘴 This is a description of the business’s operations along with other legal representations and warranties. This description should contain an attestation confirming the seller’s legitimacy as the seller of record for the sale. 𝘛𝘦𝘳𝘮 3: 𝘍𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘋𝘦𝘵𝘢𝘪𝘭𝘴 This includes information about the purchase price, any deposits the seller may have requested, and the time and date of the transfer. 𝘛𝘦𝘳𝘮 4: 𝘋𝘦𝘵𝘢𝘪𝘭𝘴 𝘰𝘧 𝘵𝘩𝘦 𝘚𝘢𝘭𝘦 It is crucial to specify the type of sale, along with the inclusive and exclusive assets in the deal. This clause will also contain a section on property transfers that describes the state and cost of assets including machinery, tools, and property. 𝘛𝘦𝘳𝘮 5: 𝘊𝘰𝘷𝘦𝘯𝘢𝘯𝘵𝘴 This will include information about the seller’s closing-related obligations, such as taxes, debts, fees, benefit transfers, and salary. You can also mention buyer and seller contracts in this section, as well as safety measures like a non-compete clause. 𝘛𝘦𝘳𝘮 6: 𝘛𝘳𝘢𝘯𝘴𝘧𝘦𝘳𝘴 𝘢𝘯𝘥 𝘖𝘣𝘭𝘪𝘨𝘢𝘵𝘪𝘰𝘯𝘴 You and the seller must understand who is in charge of what, including the seller’s position, new employee training, and customer obligations. You can specify that the finalization of a bill of sale is mandatory to complete a transaction. 𝘛𝘦𝘳𝘮 7: 𝘊𝘭𝘰𝘴𝘪𝘯𝘨 The business purchase agreement must mention the logistics, the closing date, and the time in detail. It also carries out title transfers and stipulates the payable amount of money at closing. 𝘛𝘦𝘳𝘮 8: 𝘞𝘢𝘳𝘳𝘢𝘯𝘵𝘪𝘦𝘴 The premises and equipment must be under warranty in compliance with all applicable laws and regulations as of the closing date. You should also ensure that payment of all taxes is up to date. This tactic guarantees that both the buyer and the seller engage in a transaction in good faith. 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗥𝗲𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗶𝗻𝗴 𝗮𝗻𝗱 𝗥𝗲𝗴𝗶𝘀𝘁𝗿𝗮𝘁𝗶𝗼𝗻 It will be necessary to make some structural adjustments to an existing business when buying it in order to give the buyer full ownership. The “transfer of shares” and the “replacement of the company directors” are the two most important necessities in this process. 𝑯𝒐𝒘 𝑾𝒊𝒍𝒍 𝒀𝒐𝒖 𝑻𝒓𝒂𝒏𝒔𝒇𝒆𝒓 𝑺𝒉𝒂𝒓𝒆𝒔 𝑾𝒉𝒆𝒏 𝒀𝒐𝒖 𝑩𝒖𝒚 𝑩𝒖𝒔𝒊𝒏𝒆𝒔𝒔 𝒊𝒏 𝑻𝒉𝒂𝒊𝒍𝒂𝒏𝒅? This process comprises the following steps: 𝘚𝘵𝘦𝘱 1: 𝘌𝘹𝘦𝘤𝘶𝘵𝘪𝘰𝘯 𝘰𝘧 𝘚𝘩𝘢𝘳𝘦 𝘛𝘳𝘢𝘯𝘴𝘧𝘦𝘳 𝘐𝘯𝘴𝘵𝘳𝘶𝘮𝘦𝘯𝘵 The transferee and the transferor must sign a “Share Transfer Instrument” in order for the process to begin. The Share Transfer Document must have the names of the transferor and transferee, the number of shares, and the share numbers. Both parties must sign the document with a minimum of one witness. 𝘚𝘵𝘦𝘱 2: 𝘜𝘱𝘥𝘢𝘵𝘦 𝘚𝘩𝘢𝘳𝘦𝘩𝘰𝘭𝘥𝘦𝘳𝘴 𝘙𝘦𝘨𝘪𝘴𝘵𝘦𝘳 After the successful deal, modification of the company’s shareholders registry is mandatory. Additionally, the purchaser and seller must report these changes to the Ministry of Commerce of Thailand. Without completing this step, the share transfer holds an invalid status. 𝘚𝘵𝘦𝘱 3: 𝘐𝘴𝘴𝘶𝘦 𝘕𝘦𝘸 𝘚𝘩𝘢𝘳𝘦 𝘊𝘦𝘳𝘵𝘪𝘧𝘪𝘤𝘢𝘵𝘦 The Thai Limited Company must issue a share certificate to the transferee. 𝘚𝘵𝘦𝘱 4: 𝘗𝘢𝘺 𝘵𝘩𝘦 𝘚𝘵𝘢𝘮𝘱 𝘋𝘶𝘵𝘺 In Thailand, payment of stamp duty is mandatory before the transfer of shares. Charges for Stamp Duty is 1 Baht for every 1,000 Baht, or fraction thereof, of the paid-up value of shares. 𝑹𝒆𝒑𝒍𝒂𝒄𝒆𝒎𝒆𝒏𝒕 𝒐𝒇 𝑪𝒐𝒎𝒑𝒂𝒏𝒚 𝑫𝒊𝒓𝒆𝒄𝒕𝒐𝒓𝒔 One can complete this process in the following steps: 𝘚𝘵𝘦𝘱 1: 𝘊𝘰𝘯𝘥𝘶𝘤𝘵 𝘢 𝘉𝘰𝘢𝘳𝘥 𝘰𝘧 𝘋𝘪𝘳𝘦𝘤𝘵𝘰𝘳𝘴 𝘔𝘦𝘦𝘵𝘪𝘯𝘨 In order to pass the resolution about the change of the company’s director and/or the authority of the director, the Board of Directors often needs to call for a shareholders’ meeting. There won’t need to be a resolution from the shareholders’ meeting if the company’s articles of association allow the board of directors to alter the director’s authority. 𝘚𝘵𝘦𝘱 2: 𝘖𝘳𝘨𝘢𝘯𝘪𝘻𝘦 𝘚𝘩𝘢𝘳𝘦𝘩𝘰𝘭𝘥𝘦𝘳𝘴’ 𝘔𝘦𝘦𝘵𝘪𝘯𝘨 Businesses must provide shareholders with enough notice before the meeting. Also, the notice must be printed no later than seven days before the meeting date in a local newspaper. Also, stockholders whose names are on the shareholder registry must get a notice through registered mail. If the registered mail was delivered to the shareholder at the given address, it will be presumed to have been received. Seven days before the meeting, this must be completed. Only if one-fourth of the company’s shareholders are present can the shareholders’ meeting be held. Unless otherwise specified in the notice to call for the shareholders’ meeting, the shareholders must receive the notice at least seven days prior to the meeting. 𝘚𝘵𝘦𝘱 3: 𝘖𝘣𝘵𝘢𝘪𝘯 𝘋𝘪𝘳𝘦𝘤𝘵𝘰𝘳’𝘴 𝘚𝘪𝘨𝘯𝘢𝘵𝘶𝘳𝘦 The required forms will be filled out once the Board of Directors meeting or the shareholders have authorized the change of directors. The director must sign the documents with consent from other authorized directors of the company. Please take note that the director must physically be present in Thailand in order to sign the necessary paperwork. It is mandatory to complete this formality within 14 days from the date of resignation of the previous directors. 𝘚𝘵𝘦𝘱 4: 𝘙𝘦𝘨𝘪𝘴𝘵𝘦𝘳 𝘵𝘩𝘦 𝘊𝘩𝘢𝘯𝘨𝘦 𝘵𝘰 𝘵𝘩𝘦 𝘋𝘦𝘱𝘢𝘳𝘵𝘮𝘦𝘯𝘵 𝘰𝘧 𝘉𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘋𝘦𝘷𝘦𝘭𝘰𝘱𝘮𝘦𝘯𝘵 The forms must be submitted to the Department of Business Development once they have been filled out and signed. The business must modify its company affidavit to reflect the change in staff within 24 hours of the filing. After 14 days of the transition, the authorized “former” director must fill out the application forms at the Department of Business Development for changing the director and/or the authority of the director, along with copies of the ID cards and passports of the new and old directors (signed). 𝙏𝙝𝙚 𝙋𝙧𝙤𝙘𝙚𝙨𝙨 𝙤𝙛 𝘾𝙤𝙢𝙥𝙖𝙣𝙮 𝙍𝙚𝙨𝙩𝙧𝙪𝙘𝙩𝙪𝙧𝙞𝙣𝙜 𝙞𝙨 𝙖𝙨 𝙛𝙤𝙡𝙡𝙤𝙬𝙨: To register the company’s restructuring, it is mandatory to finish or prepare the following procedures, legal paperwork, and official forms: - Performing the share transfer, - Registration of a new shareholder list, - Changing the company directors, - Registration of the new board of directors, - Drafting a company resolution to authorize the new owners to access the corporate bank account, - Any amendments to the company structuring, such as new articles of associations and shareholders’ agreements. Now, if you have read up to here and are really about to initiate your process to buy a business in Thailand, let us help you with this. With more than a decade of experience in helping investors successfully register their ventures in Thailand, our expertise is going to make your task easier. Email us your queries at [email protected].
  • Thailand
  • Commercial and Business Law
  • Corporate and Company

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