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Understanding Share Purchase Agreements in Thailand
24/04/2023
A Share Purchase Agreement (SPA) is a legally binding document that sets out the terms and conditions for acquiring shares in a company. It is a crucial component of buying a business in Thailand. In Thailand, SPAs are commonly used when one party intends to purchase shares of an existing company from another party. The main purpose of a SPA is to ensure that both parties fully understand and agree upon the terms of the transaction, including the purchase price, the number of shares, and any conditions or warranties associated with the shares.
This blog post will explore Share Purchase Agreements in Thailand in more detail.
Key points
- A Share Purchase Agreement (SPA) is a legally binding document that sets out the terms and conditions for acquiring shares in a company.
- A SPA ensures that both parties fully understand and agree upon the terms of the transaction, including the purchase price, the number of shares, and any conditions or warranties associated with the shares.
- The SPA must comply with Thailand’s relevant laws and regulations.
- Any breach of the terms of a SPA can result in legal consequences.
- A SPA can be written in the English language.
What is a Share Purchase Agreement in Thailand?
A Share Purchase Agreement in Thailand is a legal document outlining the terms and conditions of a share acquisition transaction, ensuring that both parties know their rights and responsibilities.
The SPA must comply with Thailand’s relevant laws and regulations and contain essential provisions, such as a detailed description of the shares, the purchase price, and the payment terms. Additionally, the SPA may include provisions related to warranties and representations, indemnity, restrictive covenants, and dispute resolution, all of which aim to safeguard the interests of both parties and ensure a smooth transaction free from legal complications.
It is important to note that a SPA is a legally binding agreement, and any breach of its terms can result in legal consequences
When should you use a Share Purchase Agreement?
Typically, a share purchase agreement will be used when you want to buy or sell shares in a company or business. This could be for a variety of reasons, such as:
Investment: If an investor is interested in buying shares in a company, they would use a share purchase agreement to purchase the shares from the company or the existing shareholders.
Mergers and Acquisitions: If a company is looking to acquire another company, it would use a share purchase agreement to acquire the target company’s shares.
Shareholder Agreements: If shareholders of a company want to sell their shares to other shareholders or a third party, they would use a share purchase agreement to document the sale.
Purchasing Real Estate: In Thailand, a Share Purchase Agreement would be used to buy real estate when a company owns the property.
Exit Strategies: If a company’s founders or early investors want to exit the company and sell their shares, they would use a share purchase agreement to document the sale.
A share purchase agreement should be used whenever a transaction involves buying or selling shares in a company, whether for investment purposes or corporate restructuring.
What are the Legal Requirements for Share Purchase Agreements in Thailand?
A SPA must comply with the Civil and Commercial Code requirements, the Public Limited Companies Act, and other relevant regulations in Thailand. The SPA must be in writing and bear both parties’ signatures. Furthermore, it must include essential provisions, such as the parties’ names, a detailed description of the shares, the purchase price, and the payment terms.
In addition to these essential provisions, a SPA in Thailand may include provisions related to warranties and representations, indemnity, restrictive covenants, and dispute resolution, among others. These provisions protect the parties’ interests and prevent potential legal challenges after the transaction.
Investors should also be aware that Share Purchase Agreements in Thailand can also be written in English; they do not have to be written in Thai. Furthermore, in practice, parties will sign a one-page Share Transfer Instrument that meets the minimum requirement of the Civil and Commercial Code for the share transfer to be valid, alongside a more detailed Share Purchase Agreement that contains specific and detailed provisions.
What are the requirements for a Share Purchase Agreement in Thailand?
In Thailand, the transfer of shares must comply with the regulations stipulated in the Civil and Commercial Code and the Securities and Exchange Act. Some of the conditions for transferring shares in Thailand include the following:
Written Transfer: The transfer of shares must be documented in writing and bear the signatures of both parties or their representatives.
Compliance with Share Transfer Restrictions: Certain business activities are prohibited for foreign-owned companies. As a result, companies engaged in these activities must impose restrictions on the transfer of shares, including pre-emptive rights or restrictions on foreign ownership. An example would be if a majority Thai-owned company is engaged in activities restricted to foreign-owned companies (and the company does not possess the correct business licence) and were to transfer shares, resulting in the company becoming foreign-owned. Such a scenario would mean that the company would be in breach of the Foreign Business Act and subject to possible penalties for this breach.
Compliance with the company’s Articles of Association: Articles of Association determine how a company will operate and undertake specific procedures. Typically, a company’s Articles of Association will contain details about shares and the transfer of shares, including pre-emptive rights and restrictions to share transfers. In such situations, waivers may need to be prepared to facilitate the share transfer. For more information, please check our blog post on Articles of Association here.
Approval by Relevant Authorities: In certain rare cases, transferring company shares in Thailand requires approval from the relevant authorities. Prior approval must be obtained before proceeding with the transfer. Please note this situation is rare. One such example is for BOI companies; for example, if a share transfer affects the percentage of Thai ownership within the company, the relevant authorities must be informed.
Payment of Applicable Taxes and Fees: Transferring shares in Thailand may necessitate the payment of certain taxes and fees, such as stamp duty and withholding tax.
Compliance with Anti-Money Laundering Regulations: Thailand has stringent anti-money laundering laws, and both parties must comply with these regulations when transferring shares.
Registering the Share Transfer with the Ministry of Commerce
A Share Transfer Agreement (Instrument) can be prepared in English and signed (physically or electronically) by both parties.
To register the change, one of the company’s Directors submits the share transfer to the Department of Business Development; this can be done online. Once this has been done, the company can obtain the updated list of shareholders and update the shareholder register accordingly.
Upon the completion of the share transfer, Private Limited companies in Thailand are required to issue share certificates to the transferee. Each share certificate must be signed by one of the company directors and contain the company seal.
Understanding and adhering to these share transfer conditions ensures a smooth transaction.
What should be included in a Share Purchase Agreement?
Typically, a share purchase agreement in Thailand includes the following provisions:
- Identifying the parties
The agreement should identify the transferred shares’ buyer and seller.
- Description of the shares
The agreement should describe the shares on transfer. It should also include the number of shares, the type, and any relevant rights attached to those shares.
- Consideration
The agreement should specify the purchase price or other considerations for the shares.
- Payment terms
The agreement should detail the timing and method of payment for the shares.
- Representations and Warranties
The agreement should include the buyer’s and seller’s representations and warranties. These can be regarding their ownership of the shares and other relevant matters.
6. Conditions precedent
The agreement should specify all necessary conditions before the transfer, such as regulatory approvals.
- Indemnification
The agreement should include provisions for indemnification in case of breach by either party.
- Governing law and jurisdiction
The agreement should specify the governing law and jurisdiction to address any disputes from the agreement.
- Signatures
Both parties and any relevant witnesses or representatives should sign the agreement.
How can Belaws help?
For more information about starting share purchase agreements in Thailand, why not talk to one of our experts now?
This article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
How to register import export company in Thailand?
To register an import-export company in Thailand, you need to follow a few steps. Firstly, you need to obtain a Foreign Business License from the Department of Business Development (DBD) or the Board of Investment (BOI). Secondly, you need to register your company with the Ministry of Commerce. Finally, you need to obtain a Tax Identification Number (TIN) from the Revenue Department.
Which company is best for import and export?
It is not possible to name a specific company as the best for import and export as it depends on various factors such as the type of products you want to import/export, the countries you want to trade with, and your specific requirements. However, there are several well-established companies in Thailand that have a good reputation in the import-export industry, such as the Thai Trade Center and the Thai Chamber of Commerce.
What is the main import and export of Thailand?
Thailand’s main exports are electrical appliances, computer components, vehicles, and parts, chemicals, and plastic products. On the other hand, Thailand’s main imports are crude oil, refined petroleum, electronic integrated circuits, and chemicals.
What is the top export industry in Thailand?
The top export industries in Thailand are the automotive industry, the electronic industry, and the food industry. These industries account for a significant portion of Thailand’s total export revenue.
How to register a company in Thailand as a foreigner?
Foreigners can register a company in Thailand by following a few steps. Firstly, they need to obtain a Foreign Business License from the Department of Business Development or the Board of Investment. Secondly, they need to register their company with the Ministry of Commerce. Finally, they need to obtain a Tax Identification Number from the Revenue Department.
How do I get a Thai export permit?
To obtain a Thai export permit, you need to submit an application to the Department of Foreign Trade. The application should include information about the products you want to export, the destination country, and the quantity. Once your application is approved, you will receive an export permit.
How to start import export business?
To start an import-export business, you need to follow a few steps. Firstly, you need to research the market and identify the products that have a high demand in the target market. Secondly, you need to obtain the necessary licenses and permits. Thirdly, you need to establish relationships with suppliers and buyers. Finally, you need to set up logistics and shipping arrangements.
How to get a Thailand import export license?
To get a Thailand import-export license, you need to obtain a Foreign Business License from the Department of Business Development or the Board of Investment. Once you have obtained the Foreign Business License, you can register your company with the Ministry of Commerce and obtain a Tax Identification Number from the Revenue Department.
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