Acquiring an existing company in Thailand can offer a faster route into the market than establishing a new business. The target may already have customers, employees, operating licences, contracts, premises and an established commercial presence.
However, an existing company also comes with a history. Unpaid taxes, undisclosed liabilities, defective corporate records, employment disputes and regulatory non-compliance can become significant problems after completion.
For foreign investors, the risks may extend beyond ordinary commercial due diligence. The acquisition may affect foreign business restrictions, investment promotion privileges, sector-specific licences and the company's ability to continue operating under its existing structure.
A careful legal due diligence process helps buyers identify these risks before committing to the transaction and determine whether they can be addressed through the purchase price, contractual protections or a different acquisition structure.
1. Share Acquisition vs. Asset Acquisition
The first question is whether to acquire the shares of the existing company or purchase selected business assets.
Share acquisition
In a share acquisition, the buyer purchases shares from the existing shareholders. The target company remains the same legal entity, generally retaining its existing assets, contracts, employees, liabilities and legal history.
This structure can preserve business continuity, but it also means the buyer is acquiring an entity that may have undisclosed or contingent liabilities arising from its past activities.
A share acquisition should therefore involve a review of the company's legal, financial, tax, employment and regulatory position, not merely its current commercial performance.
Asset acquisition
In an asset acquisition, the buyer purchases specified assets or parts of the business rather than the shares of the company itself.
This can provide greater control over what is acquired, but it does not automatically eliminate every liability or regulatory issue. Certain contracts may require consent or novation, employees may need to be addressed under applicable employment law, and licences or permits may not be transferable.
The transaction may also require separate steps to transfer land, intellectual property, equipment, customer contracts or other assets.
The appropriate structure depends on the assets being acquired, the liabilities involved, the regulatory position and the buyer's commercial objectives.
2. Verify the Company's Legal Existence and Ownership
A buyer should confirm that the target company has been properly incorporated and remains in good standing under applicable Thai law.
The review should include its current company affidavit, memorandum of association, Articles of Association, shareholder records, director information, registered capital and relevant corporate filings.
The buyer should also examine the company's share register and share certificates, where applicable, to verify the ownership of the shares being sold and identify any restrictions or competing claims.
Importantly, a shareholder list filed with the Department of Business Development (DBD) should not be treated as conclusive proof of ownership. The DBD has expressly clarified that a filed shareholder list reflects information submitted by the company's directors; the company's own share register is the relevant record for determining shareholder status.
The buyer should reconcile the corporate documents, share register, share certificates and transaction history. Any unexplained inconsistency should be resolved before completion.
The review should also identify outstanding corporate actions, changes in directors, changes in authorized signatories, capital increases or reductions, and any filings that have not been completed properly.
3. Review Financial Records and Hidden Liabilities
Financial due diligence should test whether the company's reported financial position reflects its actual obligations.
Buyers should examine the financial statements, management accounts, bank statements, loan agreements, accounts payable and receivable, tax records and material transactions with shareholders or related parties.
The review should pay particular attention to:
- Loans, guarantees and security interests.
- Unpaid supplier invoices and overdue customer receivables.
- Shareholder loans and undocumented withdrawals.
- Transactions with related parties that may not be on arm's-length terms.
- Litigation provisions, contingent liabilities and off-balance-sheet commitments.
- Assets that are obsolete, impaired, pledged or not owned by the company.
- Unrecorded expenses or obligations that could materially affect the purchase price.
A company can appear profitable while having significant cash-flow problems or liabilities that are not immediately visible in its financial statements.
Where appropriate, the buyer should reconcile reported revenue against bank receipts, tax filings, contracts and supporting documents. Material discrepancies should be explained and independently verified before the transaction proceeds.
4. Tax Due Diligence: Unpaid Taxes and Historical Exposure
Tax liabilities are among the most important risks in a share acquisition because the target company remains responsible for its own historical tax obligations after the ownership changes.
The review should cover corporate income tax, value-added tax (VAT), withholding tax, payroll-related tax obligations and other taxes applicable to the company's activities.
The buyer should examine tax returns, payment receipts, tax assessments, correspondence with the Revenue Department, outstanding disputes and any history of late filings or corrections.
Particular attention should be given to:
- Revenue that may have been omitted or incorrectly reported.
- Expenses that lack sufficient supporting evidence.
- VAT filings that do not reconcile with sales and purchase records.
- Withholding tax that should have been deducted or remitted.
- Related-party transactions and transfer pricing issues, where applicable.
- Tax incentives or exemptions for which the company may not have satisfied the conditions.
- Pending audits, assessments, penalties and surcharges.
A tax clearance document or a history of filing returns does not necessarily establish that all tax obligations have been correctly discharged.
Buyers should assess the potential exposure, determine whether additional tax advice or a specialist review is required, and consider appropriate contractual protection for pre-completion tax liabilities.
5. Contracts, Litigation and Existing Commitments
The buyer should identify the contracts that are essential to the business and determine whether the acquisition could affect their continuation.
Relevant documents may include customer and supplier agreements, leases, financing arrangements, distribution agreements, franchise agreements, service contracts, intellectual property licences and agreements with related parties.
The review should identify provisions concerning change of control, assignment, termination, exclusivity, minimum purchase commitments, renewal and price adjustments.
Some agreements may allow a counterparty to terminate or renegotiate the contract when ownership changes. Others may require prior consent or notice.
The buyer should also investigate pending or threatened litigation, arbitration, regulatory investigations, unpaid judgments and material disputes with customers, suppliers or business partners.
Where the company depends heavily on a small number of customers or suppliers, the buyer should evaluate whether those relationships are likely to continue after completion.
6. Employment Liabilities and Key Personnel
An acquisition can expose the buyer to employment-related liabilities that arose before the transaction.
For a share acquisition, the employer remains the same legal entity. Existing employment relationships generally continue, and the company's historical employment obligations do not disappear merely because its shareholders change.
The review should cover employment contracts, work rules, payroll records, social security contributions, provident fund arrangements where applicable, accrued leave, unpaid wages, overtime, bonuses, severance exposure and ongoing employment disputes.
The buyer should also assess whether the company employs foreign nationals and whether their visas and work authorizations remain valid for the intended roles and employer arrangements.
Where key personnel are essential to the business, the buyer should consider retention arrangements, confidentiality obligations, intellectual property ownership and any enforceable restrictive covenants.
In an asset acquisition, employee transfers require separate analysis. The applicable legal requirements and the treatment of employees should be addressed before the transaction is implemented.
7. Licences, Permits and Regulatory Compliance
A company's existing operating licences should never be assumed to remain valid for the buyer's intended business without verification.
The buyer should identify all material licences, permits, registrations and approvals, confirm their validity and scope, and check whether a change of ownership, director, business activity or control requires notification, consent or a new application.
Depending on the business, this may involve factory licences, food or product approvals, sector-specific permits, environmental approvals, import or export registrations, or other regulatory requirements.
Foreign investors should also review the Foreign Business Act B.E. 2542 (1999). A company that has historically operated under a particular ownership structure may face restrictions if the acquisition changes its status under the Act.
Where the target holds Board of Investment (BOI) promotion or another special authorization, the buyer should verify the conditions attached to the approval and whether the proposed ownership or management changes require prior approval.
A licence held by the target company should not be assumed to authorize a different entity or automatically cover activities outside its approved scope.
8. Foreign Ownership and Nominee Risks
Foreign investors should assess the proposed ownership structure before acquiring shares in a Thai company.
Under the Foreign Business Act, a company may be treated as a foreigner depending on its ownership and other statutory criteria. If the business falls within a restricted category, the acquisition may require an applicable licence, certificate, exemption or other lawful basis for operation.
The buyer should verify the actual ownership and funding arrangements rather than relying solely on the names appearing in the company's filings.
Arrangements in which Thai shareholders are used to conceal foreign ownership or circumvent statutory restrictions can create serious legal risks. Section 36 of the Foreign Business Act addresses specified nominee arrangements and assistance in circumventing the restrictions.
If the transaction involves a business that requires foreign business authorization, the buyer should confirm that the company holds the correct authorization and that it covers the activities intended after completion.
The acquisition should not proceed on the assumption that an existing company's historical operations prove that its ownership and business structure are lawful.
9. Land, Property and Security Interests
Where the target owns or leases land, buildings or other significant property, the buyer should verify the relevant rights and restrictions.
For owned land, the review should include title documents, registered encumbrances, mortgages, servitudes, access rights, boundary issues and any disputes affecting ownership or use.
For leased property, the buyer should examine the lease term, renewal options, rent adjustment provisions, assignment restrictions and any change-of-control clauses.
Foreign ownership raises additional considerations because foreign companies are generally subject to restrictions on land ownership, subject to limited statutory exceptions and specific permissions.
The buyer should also search for registered security interests over business assets and investigate whether equipment, inventory or receivables have been pledged or are subject to third-party rights.
Any material property or security issue should be resolved or expressly addressed in the transaction documents.
10. Intellectual Property, Data and Technology
A target's intellectual property and data assets may represent a substantial part of its value.
The buyer should verify ownership of trademarks, copyrights, patents, domain names, software, databases and other relevant intellectual property. It should also review licences granted to or by the company, including restrictions on assignment or change of control.
Where software or technology was developed by employees, consultants or external vendors, the buyer should confirm that the company has the necessary rights to use and commercialize the work.
The review should also cover personal data processing, privacy notices, data security incidents, vendor agreements and compliance with Thailand's Personal Data Protection Act B.E. 2562 (2019), where applicable.
A company may have valuable customer data but lack adequate documentation concerning its collection, use, disclosure or transfer. These issues should be identified before the buyer relies on the data as part of the acquired business.
11. Purchase Agreement Protections
Due diligence identifies risks; the transaction documents determine how the parties allocate those risks.
A share purchase agreement (SPA) should clearly specify the shares being transferred, the purchase price, completion conditions, required corporate actions and the documents to be delivered at completion.
Depending on the transaction, the buyer may seek:
Representations and warranties. Statements concerning ownership, accounts, taxes, contracts, employees, litigation, assets, licences and compliance with law.
Indemnities. Specific contractual protection for identified risks, such as a known tax dispute or an unresolved historical liability.
Conditions precedent. Requirements that must be satisfied before completion, including regulatory approvals, third-party consents, releases of security interests or delivery of agreed documents.
Purchase price adjustments or retention arrangements. Mechanisms to address agreed financial adjustments or retain part of the purchase price against specified risks, where commercially appropriate.
Pre-completion covenants. Restrictions on specified actions before completion, such as unusual asset disposals, new borrowings or related-party transactions without the buyer's consent.
Disclosure schedules. Detailed disclosure of exceptions to the seller's representations and warranties.
These protections should be drafted to reflect the actual due diligence findings. General wording is not a substitute for identifying known risks and specifying how they will be handled.
The buyer should also review limitation periods, liability caps, claim procedures, survival periods, seller creditworthiness and the practical enforceability of the agreed remedies.
12. Completion: Make Sure the Transfer Is Effective
A signed sale agreement does not necessarily complete every legal step required to transfer shares and implement the acquisition.
Under Section 1129 of the Thai Civil and Commercial Code, a transfer of registered shares must comply with the applicable formalities, including a written instrument signed by the transferor and transferee and witnessed by at least one witness. The instrument must identify the shares transferred, and the transfer must be entered in the company's share register to be effective against the company and third parties.
The buyer should ensure that the share transfer documents, payment arrangements, share certificates, company share register and corporate records are properly coordinated.
The parties should also complete the agreed director changes, authorized signatory changes, regulatory filings, licence notifications and other completion actions as required.
Where the company has material bank facilities, contracts or regulatory approvals, the buyer should confirm that the necessary consents or notices have been obtained and that the business can continue operating after completion.
Conclusion
Buying an existing company in Thailand can provide commercial advantages, but the transaction also carries risks that may not be visible from the company's registration records or headline financial figures.
A comprehensive legal due diligence process should examine ownership, corporate records, financial and tax liabilities, contracts, employment matters, licences, foreign ownership restrictions, property rights and i
