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The central role of a share purchase agreement in Thailand for foreign investors
Foreign investors who intend to acquire equity in a Thai company inevitably encounter a core legal instrument known as the Thailand share purchase agreement. This agreement goes beyond a simple formality: it serves as the central contract that defines how parties transfer ownership rights, allocate risks, and ensure compliance with Thai corporate law. A share purchase agreement sets out the purchase price, the conditions precedent, the seller’s representations and warranties, and the exact completion procedure.
Yet, unlike in some Western jurisdictions, signing the share purchase agreement alone does not make the buyer the legal owner of the shares. Under the Thai Civil and Commercial Code, ownership changes only when the parties endorse the share certificates and the company records the transfer in its share register book, with the directors issuing a new certificate. This distinction makes the share purchase agreement particularly critical in the Thai legal context.
For foreigners, careful drafting plays a critical role. A well-structured share purchase agreement in Thailand protects buyers against hidden liabilities, ensures compliance with ownership restrictions, and creates enforceable remedies in the event of a breach. By contrast, a poorly drafted share purchase agreement can jeopardise the validity of the transaction, trigger tax or regulatory penalties, and even expose the parties to litigation. In short, the share purchase agreement does not merely represent a transactional step; it forms the legal foundation on which successful foreign investment in Thailand depends.
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Table of Contents
How share transfers are regulated in Thailand
The rules regulating share transfers in Thailand are mostly found in the Civil and Commercial Code, the Public Limited Companies Act B.E. 2535, Foreign Business Act B.E. 2542 and notifications of the Department of Business Development. Tax issues are under the reign of the Revenue Code. So, share purchase agreement in Thailand needs to be in accordance with all these laws to avoid controversies or penalties imposed by the authorities. A share purchase agreement in Thailand will read similarly, or be similar, to the ones in Europe or USA. However, Thai business legislation poses certain formalities.
How the law regulates share purchase agreements in Thailand
A share purchase agreement is a bilateral contract between the seller and the buyer. Under Section 456 of the Thai Civil and Commercial Code contracts for sale of property must be consented to by parties and in some instances written. But in the case of shares in a private limited company, there needs to be an endorsement on the share certificate and an entry made in the company’s share register book.
In practice, Thai courts will uphold the provisions of a share purchase agreement as long as they do not conflict with the Civil and Commercial Code or public policy. If a share purchase agreement has provisions that conflict with Thai law, such provisions are null and void under Section 150 of the CCC. So the drafting (as per Thai statutory law) has to be careful!
Formal Requirements
Thai law imposes strict formalities when foreigners buy shares in Thailand. Under Section 456 of the Civil and Commercial Code, contracts for the sale of property must be in writing if they exceed a certain value, and this also applies to share transfers. Agreements should be signed, often with witnesses for evidentiary strength. Most importantly, the share certificate must be endorsed and the transfer registered in the company’s shareholder book before directors issue a new certificate. Without this registration, the buyer is not legally recognized as a shareholder. Unlike in many Western systems, signing the contract alone does not transfer ownership in Thailand.
Substantive Requirements
Beyond form, the content of the share purchase agreement plays a critical role. Certain clauses qualify as essential. The agreement must specify the purchase price and the number of shares transferred, noting that Section 1108 of the Civil and Commercial Code prohibits companies from issuing shares below par value. Representations and warranties also play a central role, as the seller confirms free and clear ownership, compliance with Thai law, and the accuracy of the company’s financial records.
Conditions precedent are common, particularly where foreign investors require a Foreign Business License before closing. Covenants ensure that the seller maintains the company in the ordinary course until completion. Finally, dispute resolution mechanisms, often arbitration clauses, are crucial to provide certainty in case of conflict. Thailand’s Arbitration Act B.E. 2545 and its membership in the New York Convention guarantee that arbitral awards can be enforced, both domestically and internationally.
How to ensure compliance in a share purchase agreement in Thailand
It’s great to close the deal and be paid, but you also need to worry about compliance. Profit from a share sale is treated like other income for corporation tax purposes. Foreigners can hold no more than 49% of the shares in most service businesses under the Foreign Business Act. So, if foreign investors want a majority stake they will need to be creative about the deal. You can register a Foreign Business License or structure under the Treaty of Amity (which is available for U.S. investors).
And also land ownership is limited by foreigners according to the Land Code. Foreign buyers taking more than 49% of shares in a target which owns land could lead to regulators reviewing the deal. A share purchase agreement Thailand should thus also contain representations and warranties regarding compliance with land ownership regulations, if not even in certain cases conditions precedent to obtaining those approvals.
Due diligence before signing
Buyers would be wise to conduct legal due diligence before signing. In Thailand this means searching the company’s affidavit, shareholding structure and corporate documents at the Department of Business Development.
Lawyers should also review financial statements, tax filings, and any pending litigation. This due diligence proves crucial because, as in all matters relating to the Thai property market, caveat emptor applies. If the buyer fails to identify company liabilities, post-closing remedies may remain limited. For example, the buyer may recover damages only if the seller made misrepresentations. For this reason, prudent investors do not sign a share purchase agreement without conducting thorough due diligence.
Signing and completion
In Thailand, the contract for buying shares is signed once the parties agree on the terms, but completion only happens after all conditions precedent are satisfied. At that stage, the seller endorses the share certificates to the buyer, the transfer is recorded in the shareholder register, and the directors issue a new certificate. Until then, no legal transfer has taken place. Under Section 1131 of the Civil and Commercial Code, a shareholder exists only from the date of registration.
For this reason, contracts for foreign investors buying shares in Thailand must clearly describe the completion process, including delivery of certificates, payment method, board resolutions, and updates with the Department of Business Development.
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Dispute resolution
Disputes may arise from misrepresentation, delayed payments, or breach of obligations. While Thai courts operate under the Civil Procedure Code, international investors often prefer arbitration. If the contract for buying shares in Thailand includes an arbitration clause, Thai courts will uphold it unless it is clearly invalid. Under Section 14 of the Arbitration Act, courts must dismiss lawsuits when arbitration has been agreed.
As a result, most disputes are referred to the Thai Arbitration Institute or international centers such as SIAC. Foreign arbitral awards are also enforceable in Thailand under the New York Convention.
Share purchase agreement in Thailand and public companies
If the target is a public company, other rules go into effect. Every transfer of a large undertaking is required to be disclosed under the Public Limited Companies Act. And even under the Securities and Exchange Act B.E. 2535, when an investor’s children obtain ownership of exactly 25%, or 50%, or 75% of shares with voting rights listed in a market exchange, then he/she is required to make a tender offer as well.
As a result, a share purchase agreement that is between a publicly traded company will contain provisions on tender offer procedures and will comply with/on or under the benefit of the Securities and Exchange Commission. In this regard, the share purchase agreement is subject to strict regulation, making expert legal advice indispensable.
Tax implications in Thailand: Uniform rules across all types of companies
Taxation plays a central role. Buyers and sellers should anticipate liabilities to prevent disputes. Individuals who make capital gains from the sale of shares are liable to tax chargeable at progressive rates under Section 48 of the Revenue Code. Corporate income tax is 20% for companies. In case the seller is a foreign entity that does not maintain a permanent establishment in Thailand, withholding tax may be applicable at 15 percent unless there is double tax treaty protection.
Stamp duty is also relevant. Transfers of shares in companies incorporated in Thailand are subject to stamp duty under Section 104 of the Thai Revenue Code at the rate of 1 Baht per 1,000 Baht on the paid-up value of such shares. A share purchase agreement should specify who shall bear this expense. It is frequently split by the buyer and seller
Prohibited clauses and protections
When foreign investors buy shares in Thailand, they must be aware that certain clauses are prohibited and therefore unenforceable under Thai law. Any term that overrides shareholder rights, bypasses restrictions in the Foreign Business Act, or waives liability for fraud or misconduct is void under the Civil and Commercial Code and principles of public order.
A further danger is the use of “blank shares,” certificates signed by the seller but left without the buyer’s name. Ownership in Thailand only becomes effective once the transfer is registered in the shareholder book and a new certificate is issued by the directors. Blank shares therefore expose investors to fraud, disputes, and non-recognition by the courts or the Department of Business Development..
Challenges in finalizing a share purchase agreement in Thailand
In practice, negotiations in Thailand can be complex. Cultural differences, language barriers, and variations in legal traditions often slow progress. Some concepts familiar to civil law systems, such as indemnity or escrow, require adaptation to fit Thai law.
Enforcement is another challenge. While Thai courts do uphold contracts, litigation can be lengthy and costly. For this reason, many contracts for buying shares in Thailand include arbitration clauses. Without a clear dispute resolution mechanism, foreign investors risk facing expensive and prolonged disputes.
Importance of legal advice
For foreigners, it is crucial to recognize that Thai law differs greatly from other jurisdictions. Local legal counsel is indispensable at every stage. Thai lawyers ensure compliance with the Civil and Commercial Code, the Foreign Business Act, the Revenue Code, and other sector-specific rules. They also structure deals to avoid regulatory pitfalls and negotiate terms that protect the client’s interests. For foreign investors buying shares in Thailand, carefully drafted contracts reduce risks and make a smooth completion far more likely.
Conclusion
Buying shares in Thailand is not the same as signing an ordinary contract. It forms the legal backbone of any share transfer and must comply with the Civil and Commercial Code, the Foreign Business Act, and the Revenue Code. Approvals, formalities, and tax rules all need to be considered.
Foreign investors must be aware that without proper contracts, a transaction may be void or unenforceable, and sanctions may apply. With carefully prepared agreements, however, buyers and sellers can complete deals with legal certainty and confidence.
If you need further information, you may schedule an appointment with one of our lawyers.
Q&A
Articoli come gioielli, smartphone, laptop, tablet, orologi, penne, borse e fibbie per cinture, del valore di 40.000 THB o più. Per il bagaglio a mano, sono ammessi anche beni di valore superiore a 100.000 THB.
No, tranne se il valore totale degli acquisti è inferiore a 20.000 THB. In tali casi, la procedura doganale può essere omessa e i moduli possono essere inviati per posta insieme alla documentazione.
No. I servizi e i beni di consumo sono esclusi dal regime di rimborso.
No. Devi essere un turista non residente e non soggiornare per più di 180 giorni per anno solare. I cittadini thailandesi e i residenti permanenti non hanno diritto al rimborso.
No. I rimborsi sono disponibili solo negli aeroporti internazionali.
No. I rimborsi vengono effettuati in baht thailandesi, in contanti (per importi inferiori a 30.000 THB) o tramite assegno/carta di credito per importi superiori.
Nomi o numeri di passaporto errati sul modulo di rimborso possono comportare il rifiuto della richiesta. Controlla sempre attentamente i tuoi documenti al momento dell’acquisto.
Sì, inviando per posta i moduli timbrati dalla dogana e i documenti giustificativi all’Ufficio Rimborso IVA.