The small business acquisition in Thailand

This post deals with legal aspects when buying a small business as a single entrepreneur or a small group of investors. 


Business purchase in Thailand: The buyer’s business considerations

The acquisition of an existing business on a turnkey basis (“brownfield”) is for a foreign investor the alternative to setting up a Thai company and starting a new activity (“greenfield”). The advantage of this approach is the existing infrastructure, trained workforce, customer base and business premises. The business history gives an indication whether the venture at that location, with that service offers and that pricing level, is promising. The buyer can learn from the mistakes of the seller. 

Also, the buyer benefits from the accomplishment of lengthy license applications processes, the completion of the start-up phase, a steady stream of customers and the building of market reputation. The business is therefore ready for a new owner to just walk in and take over. This might add up to healthy profit margins from the beginning, making this a tremendous opportunity to grow this business. In theory.

The primary downside of the acquisition of a turnkey-ready business venture is the legitimate expectation of the seller to get his business development paid by the buyer. The purchase price is not calculated as the scrap value of all assets but as the discounted cash flow of all future profits. 

The investment structure for the turnkey business

The business might be currently structured as a sole entrepreneurship, as a partnership or as a corporation. Therefore, the foreign buyer will acquire either assets or company rights. As a general rule, a foreign investment structure as single entrepreneurship or partnership is either illegal or highly disadvantages. To be compliant with the foreigner legislation and to protect the investment, the only reasonable decision is to run the foreign business in the form of a Thai corporation (Company Limited).

In the case of a “share deal”, the transfer of shares is just one element of the overall project structure. Arrangements with the Thai shareholders, licenses held by the shareholders and directors instead of the company, use rights for trademarks and brands, and financial arrangements are just a few additional elements which add uo to a complex package of contracts and supporting documents. 

The investment in an existing business can be carried out by taking over a long-term lease agreement from the current entrepreneur, to carry on the business under the same or a different business name. Alternatively, the investor can enter into a sub-lease with the head lessee. The total investment amount covers

  1. the payment for the stock, furniture, fixtures, fittings, and equipment
  2. the ongoing payments under the lease agreement less the lease deposit,
  3. the expenditures for new licenses, as far as current licenses do not survive the lease transfer,
  4. the key money to be paid to the landlord and, as the case may be, and
  5. the tea money to be paid for special purposes.

Whether all this is legally valid and business-wise a clever approach, has to be examined in detail.

The corporate due diligence examination 

Whether a purchased business is fit for purpose is under  Thailand’s legislation the sole responsibility of the buyer. He needs to do an examination whether the company is in good standing, the licenses are in place and whether he acquires liabilities, obligations and financial burdens together with the assets and shares. After the sale of his business, the seller is typically moving overseas and is not accessible for complaints and litigations.

Share transfers and shareholders registrations are often wrong. Therefore, the second part of the due diligence examination has to confirm that the seller is in a position to transfer the assets or shares to the buyer. It has to be investigated whether licenses are transferred automatically, by an additional supporting document or not.

Particular legal matters are concerned in case of the acquisition of a BOI promoted company, a franchise store or other particular businesses.


PUGNATORIUS Ltd. is the Bangkok-headquartered specialist provider of bespoke transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. Sophisticated solutions in a complex legal environment. Serious legal and tax advice in the land of smile.


The sale and purchase agreement and supporting documents

From the seller perspective, a sale and purchase agreement should be as simple and short as possible. Thailand’s legal system favors the seller over the interests of the buyer. The avoidance of a complex agreement prevents the buyer to enforce his rights and protect his interests if a dispute with the seller occurs in the future. 

Substantial assets are not all shown on the balance sheet and might not even belong to the company but to the owner respectively shareholders. The sole purchase of shares does not guarantee that the transferred values can keep the business in a going-concern status. The “human assets” and immaterial property might not be accessible to the new owner and the seller might even start a similar business to compete with the buyer soon – sometimes by keeping the good reviews on TripAdvisor and even with the same old social media websites (Facebook, Instagram), which had not been part of the deal.

The negotiated agreements have to be signed, the purchase price has to be paid and the transfer of ownership – or another form of investment in the business – has to take place. 

Professional services to acquire a small business

The law firm guides foreign investors through all the steps to acquire an existing small business from a Thai or foreign seller. This includes:

  • Development of a valid, protected, legally compliant and tax efficient investment structure 
  • Comprehensive due diligence examination of the existing business and, as far as required, the seller
  • Design, preparation, and negotiation of all purchase agreements and supporting documents
  • Legal management of the whole acquisition process, signing, closing, payment, transfer, as well as government registration and the announcement of the change in ownership.

After the acquisition has been accomplished, the law firm advises and assists on extension and renewal of licenses, lease and employment agreements, visa and work permit, tax planning aspects, and regular legal matters.


If you have any queries about what we do, or if you would like to approach us to discuss your legal requirements, please e-mail, message or call us using the details set out on the top of this page. Secure your investment in paradise.

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