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 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:
- The 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].
