Ignite Finance easing way for Global Investor to Start Finance Business in Thailand

 

Are you planning to start a finance business in Thailand? Now is the perfect time to steadfast your planning process and register your company in Thailand. If banking, derivatives, securities, digital assets, or insurance are the sectors you are planning to focus on, the “Ignite Finance” initiative is for you.

Announced by the Honorable Prime Minister of Thailand on July 19, 2024, the “Ignite Finance” initiative is targeting global investors to transform Thailand into a Global Financial Hub.

Ignite Finance: Thailand’s Vision for a Global Financial Hub

The Ignite Finance initiative is a part of the “Ignite Thailand” scheme. Ignite Thailand has successfully implemented promotional measures to boost foreign direct investments in tourism, wellness and medical, agriculture and food, aviation, logistics, future mobility, and digital industries. Now it is focusing on the Finance industry.

Now a question may trigger your senses – why the finance industry? The most probable set of answers are as follows:

• There is a worldwide digital growth in the finance industry. As Thailand has already started boosting its digital ecosystem, this can be a plan to enhance its involvement in the finance sector of the kingdom.

• The dependency of Thai consumers has increased greatly on digital payment and purchase interfaces. This calls for implementing a more developed and secure digital ecosystem in the Thai finance industry.

• Ever since the discontinuance of the COVID lockdown, the global tourism footfall in Thailand has witnessed a year-on-year increase. International tourists may face issues in making international transactions with limited financial systems and infrastructure in place. Therefore, a boost in these segments is necessary to cater to their requirements and make their stay pleasant in Thailand.

• The greatest reason is that the Board of Investment of Thailand has opened doors to innovative and creative projects in almost all industries. The Finance Industry was lagging in the queue. This initiative can place the same in a position of priority.

Read our article on the importance of BOI Thailand promotions for global investors. 

Aren’t the reasons interesting? Then certainly you are now interested in knowing about the benefits of the “Ignite Finance” scheme. These privileges will certainly inspire you to boost your preparations to start a finance business in Thailand. However, there are certain strategic reasons in place to illuminate better trajectories behind the announcement of “Ignite Thailand”, which are as follows:

• To strengthen Thailand as a “global financial hub”, it is targeting the implementation of regulatory reforms, incentives, and a productive ecosystem.
• Expansion of financial accessibility for underserved communities and small businesses in Thailand.
• Developing a nation as a global financial hub automatically brings in a positive change in the economic structure without any investment budget.
• Attracting foreign direct investment, investors, and skilled professionals will automatically add to the returns with new ideas and knowledge in the kingdom.

Benefits of the “Ignite Finance” initiative

As announced by the PM of Thailand, Mr. Srettha Thavisin, and Deputy PM-cum-Finance Minister, Mr. Pichai Chunhavajira, the scheme mainly focuses on the following three points:

Bring reforms in the regulatory system of the finance business

This key element is going to be of great advantage for foreign investors planning to start a finance business in Thailand. Various Thai protocols often restrict global investors from exercising their full business idea in Thailand. A reformation of these existing regulations can give some relief.

As stated by Mr. Pichai Chunhavajira, the thought process is actively planning the introduction of a new financial business law. The goal of this law will be to facilitate foreign direct investment in Thailand in the finance sector. This will certainly help in making the process of incorporation and continuity of business in Thailand easy for foreign investors.

Introduce new forms of incentives

These incentives can be both tax and non-tax in category. Some of the already-announced benefits include easing of work permit issuance process and disbursement of additional incentives in the form of grants.

Implementation of this key element will make the process of bringing in skilled professionals to Thailand easier. Furthermore, the tax incentives will certainly reduce the annual financial liabilities of foreign companies in Thailand.

Empowering the finance ecosystem favorable for business operations

This key element includes the implementation of modern and innovative solutions to ease the process of financial business operations. Aiming towards a seamless transactional, procurement, and disbursal mechanism, this seeks a robust digital infrastructure.

This key element is going to increase the ease of operations of finance companies in Thailand, Additionally, this will extend opportunities to the key players of other industries in the digital and information technology domain.

Types of Finance Businesses to benefit from “Ignite Thailand”

The initiative targets the entire financial industry as a whole. However, if you try to understand the pattern of the benefits announced, the following types of finance businesses can avail greater advantages:

• Equity, Derivative, and Debt Security Services
• Digital Wallets or Payment Gateways
• Tourist/Travel Insurance Services
• Digital Currency or Commodity Trading Platforms
• Digital Asset Procurement and Protection Platforms
• Insurance Services of all categories

This isn’t any exclusive list. The scheme has great potential to support any type of business in the Thai finance industry. Therefore, this is the correct time if you want to start a fintech business in Thailand as well. It is because you can now gain access to a more developed digital ecosystem through the implementation of the “Ignite Thailand” initiative.

Starting a finance business in Thailand offers a wealth of opportunities, particularly with the support of the “Ignite Finance” program. By leveraging its benefits, you can establish a successful finance business in Thailand and tap into the dynamic Southeast Asian market. 
Embrace this opportunity to ignite your financial venture in the Land of Smiles. Email us at officer@konradlegal.com to get in touch with our updated corporate law professionals and avail the benefits of “Ignite Thailand”.

Process of buying business in Thailand

 

Are you planning to start a business in Thailand? Buying a business in Thailand is a more viable and convenient option to register your presence in the Thai market. This process offers several advantages when compared to starting a new business from scratch. 

How to buy a business in Thailand?

In Thailand, potential investors seeking to purchase a business have multiple avenues to acquire an existing entity. Typically, two prominent strategies emerge out of these multiple avenues.

1. Outright business acquisition;
2. Purchase of business assets to transfer to a newly formed company.

Each approach involves distinct procedures, offers unique advantages, and necessitates careful consideration.

Buying the Business Outright

Purchasing a business requires obtaining both its assets and liabilities. The investor assumes control of the entire entity. This includes its operational structure, existing agreements with suppliers and clients, workforce, and market standing.

A significant benefit of this approach is preserving the business’s relationships with customers, suppliers, and employees.

However, this method also entails accepting the company’s liabilities, which may include hidden debts or potential legal disputes. Due diligence is crucial to ensure that you fully grasp all facets of the business you’re acquiring.

Buying the Assets and Transferring Them to a New Company

Rather than acquiring an existing business in its entirety, investors can choose to purchase only its assets. Eventually, they can transfer them to a newly established company. This approach is often preferred to avoid assuming the risks associated with the existing business’s liabilities.

By selecting this method, the buyer can avoid inheriting previous obligations and legal challenges concealed within the old business’s history. Instead, they acquire valuable assets. These can be property, equipment, key employees, and intellectual property, to utilize within a new business entity.

This option, however, requires careful inventory and valuation of assets and may involve renegotiating contracts and agreements. The buyer must also be ready to build new relationships with stakeholders. This is because the continuity of the business operations may face interruptions during the transition.

What are the Advantages of Buying a Business in Thailand?

When you purchase an existing company, you gain several advantages:

Inherit Existing Contracts with Suppliers and Clients:

• Maintain existing relationships and terms with suppliers and clients.
• Ensure a smooth transition and continuity of business operations.

Established Infrastructure: Acquire an already established infrastructure, saving time and effort in setting up the company.

Capital Requirements for Hiring Foreigners: If the company already has the required registered capital of 2 million THB, the new owners can continue to enjoy this benefit without paying it again.

Existing Market Presence: The business has an existing market for its products or services.

Brand Reputation: Inherit the brand reputation and customer loyalty of the business.

Experienced Workforce: Leverage a skilled and professional workforce to drive growth and operational efficiency.

What are the Disadvantages of Buying a Business in Thailand?

When considering purchasing an established company in Thailand, potential investors should be aware of several potential drawbacks:

Potential Liabilities: The new owner may be liable for unknown or hidden debts, lawsuits, tax obligations, or contractual obligations incurred by the seller before the sale. The buyer may also be held responsible for the seller’s actions or misconduct before the purchase, even if they were not involved or aware of them.

Lease Agreements: In Thailand, commercial leases may be short-term (3 years or less) and not registered with the Land Office. The lack of specific protections for commercial leases can be problematic.

Capital Investment: Buying a business often requires a substantial capital investment, which can be a significant barrier for entrepreneurs and investors.

Working Capital: Investors should have several months’ worth of working capital available to manage cash flow during the transition period.

Advantages of Purchasing the Assets of a Company

When acquiring the assets of a company, several benefits arise:

Liability Avoidance: Buyers can avoid inheriting liabilities like debts, lawsuits, or tax obligations that may not be readily apparent or disclosed by the seller. This shields the buyer from potential financial burdens.

Selective Acquisition: Buyers have the flexibility to choose which assets they wish to acquire and which ones to leave behind. This allows them to tailor the purchase to their specific needs and preferences, ensuring they only acquire assets that align with their business objectives.

Disadvantages of Purchasing the Assets of a Company

Loss of Intangible Assets: The buyer may miss out on the brand reputation, customer loyalty, market presence, and experienced workforce that come with an established business.

Loss of Existing Contracts: The buyer may not inherit any existing contracts with clients, potentially disrupting relationships and revenue streams.

Increased Tax Liabilities: Each asset may be subject to different tax rates and legal fees, potentially resulting in higher taxes and transaction costs for the buyer.

Renegotiating Agreements: The buyer must renegotiate any contracts with suppliers and customers. This is because there is no mode of automatic transfer of existing agreements with the previous company with the assets.

What is Due Diligence When Buying a Company in Thailand?

When purchasing an existing business, thorough due diligence is crucial, similar to the due diligence process for property acquisition. Undertaking due diligence allows investors to validate key information and evaluate potential risks and opportunities associated with the target company.

Key areas of focus during due diligence include:

Company Registration Details: Review the company’s legal status, including registration details, shareholder list, and directors.

Liabilities: Identify any outstanding legal actions or liabilities (such as debts, taxes, contractual obligations, and legal claims) that the new owners would assume.

Financial Analysis: Examine the company’s financial health and stability by reviewing balance sheets, bank statements, and tax records.

Contracts and Obligations: Evaluate all contracts signed by the company, including employment contracts, vendor agreements, and lease agreements.

Legal and Regulatory Compliance: Inquire about potential legal disputes, pending lawsuits, or outstanding tax liabilities that the company may be facing.

By conducting thorough due diligence, investors can gain a comprehensive understanding of the target company and make informed decisions regarding the acquisition.

Drafting and Reviewing a Purchase Agreement

After finalizing the due diligence process, the next critical step is to draft and review the formal business purchase or share transfer agreement. These legally binding contracts set the terms and conditions for the sale, ensuring a seamless transfer of ownership. The following are the typical key elements in such agreements:

Party Identification: The agreement begins by providing the legal names and contact information of both the buyer and the seller.

Business Description: A comprehensive overview of the company is provided, including its operations, assets, and the seller’s legal authority to authorize the sale.

Financial Terms: The purchase price, any deposits required, and the precise date and time of the transfer are specified.

Sale Details: The definition of the type of sale depends on the assets that are inclusions or exclusions from the transaction. This may include equipment, property, and intellectual property rights.

Covenants: The seller’s obligations surrounding the closing process are outlined, including tax obligations, loan repayments, employee benefits, and any non-competition agreements.

Transfers and Obligations: The responsibilities of both the buyer and seller are clarified, such as the buyer’s role in employee training and customer obligations.

Closing Process: The logistics of the closing process must include the specific date, time, and location, as well as the transfer of title and payment arrangements.

Warranties: Warranties ensure compliance with applicable laws and regulations, as well as the payment of taxes and other financial obligations.

How do you Restructure the Company After the Sale?

When acquiring an existing business in Thailand, several structural adjustments must be made and registered with the relevant government agencies. Two primary modifications commonly required are the transfer of shares and the substitution of company directors.

Changing Company Directors

Board of Directors Meeting: The board of directors convenes a shareholders’ meeting to pass a resolution regarding the alteration of company directors or their authority.

Shareholders’ Meeting: A shareholders’ meeting is held to obtain their approval and confirmation of the change.

Director’s Signature: Upon approval of the director’s change, the necessary forms are completed and signed by the outgoing and incoming directors. Witnessing of the signatures is required.

Registration: Completed forms are submitted to the Department of Business Development, and the company’s company affidavit is updated to reflect the change in personnel.

Transferring Shares

Share Transfer Instrument: The transferor and transferee execute a share transfer instrument outlining the transfer details, such as party names, the number of shares, and share numbers.

Updating Shareholders Register: Post-transaction, the company’s shareholders register is updated, and the change is registered with the Ministry of Commerce.

Issuing a New Share Certificate: The Thai Limited Company issues a new share certificate to the transferee.

Payment of Stamp Duty: The transfer of shares is subject to stamp duty, calculated based on the paid-up value of the shares.

As a Thai or global investor, completing all these phases by yourself can be difficult and prone to errors. These errors might not show themselves in the initial phases of the business but can halt your growth. For complete end-to-end support on buying a business in Thailand, feel free to contact us.
You need to complete only one step before contacting us – select and open the deal with the business you want to buy in Thailand. Henceforth, we will take it forward legally in compliance with the Thai Commercial and Civil Code. Additionally, our add-on bookkeeping, accounting, and tax services can help you set up and maintain the finances of your new company as well. Email us at officer@konradlegal.com.

Business Contract Drafting Service in Thailand

 

Are you planning to start a business in Thailand? Be assured that you have to undergo the process of drafting, reviewing, and executing several types of agreements and contracts. It will start from the lease or purchase contract of your business premises. Then there are service providers, vendors, employment, and labor contracts. In the process, you have to ensure that you are drafting a contract strictly under Thai law.

The same goes when you are planning to lease or buy property in Thailand. Be it a freehold or leasehold, a villa or a condominium, contracts will govern the process of your possession of any type of property in Thailand. Therefore, you must have basic knowledge about the process of drafting a contract under Thai law. The attachments, annexures, titles, or structures can be distinctly different from those in your native country. Thai residents are conversant with these protocols, but if you are an international investor, the only thumb rule to safety is to take local Thai legal consultation.

This article outlines the conditions of drafting, reviewing, and validity of a contract under Thai law. Being the basic principles, the information in this article applies to all types of contracts requiring the approval of Thai law.

Definition of “Contract” under Thai Law

Contract law deals with promises, which create both parties’ rights and obligations. To be a valid contract, not only must the parties agree on the essential terms, specific performance, warranties and assignment, force majeure, and contract remedies for instance, but also subject to the validity of the contract, the illegality of the subject matter, fraud in the inducement, and a lack of legal capacity, for instance.

A contract comes into action when two or more parties agree on a specific set of operational or business conditions on paper. However, a contract’s effectiveness and legal validity depend on its adherence to Thai Law. In addition, nowadays contract law deals with electronic data, which is influenced by international model law. All electronic transactions must be taken into account when making one.

Let us help you understand the requisites of drafting a contract under Thai law. Firstly, note that all contracts and agreements in Thailand are under the Civil and Commercial Code of Thailand (CCC). Additionally, there can be more governing laws applicable based on the nature of the business or type of property you are planning to buy in Thailand. 

In the context of law, a contract refers to a legal agreement between two or more parties that establishes, alters, transfers, safeguards, or terminates their rights and responsibilities. It brings about reciprocal legal obligations among the involved parties, as outlined in Section 149 of the Civil and Commercial Code of Thailand (CCC).

Step 1: The free and clear consent of the parties

To prevent a contract from becoming void, the declaration of core intention must be free from errors. For instance, imagine you purchase a Picasso for a high price after consulting with an expert, only to later discover that the painting is not by the renowned master. This mistake is an essential part of your consent to the contract. If you had known this fact at the time of purchase, you would not have agreed to pay such a high price. In this scenario, the mistake regarding a crucial element allows us to consider the contract potentially void.

Step 2: The legal capacity

In Thailand, the minimum age to enter into a contract alone, known as “sui juris,” is twenty years old. This legal threshold determines an individual’s capacity to engage in contractual agreements without the need for a legal representative’s consent. However, age is not the sole criterion.

Adults under legal protection, must have a guardian’s consent to engage in contractual activities. This must be in adherence to Sections 153, 19, and 21 of the Civil and Commercial Code of Thailand.

A notable illustration of this principle involves the sale of real estate. While one spouse’s name may be on the title deed, any transaction involving the sale or creation of a lien on the property requires the other spouse’s written consent. Without this consent, the transaction is invalid, as per Supreme Court Judgement n. 6889/2540. 

Step 3: The objective must be permissible by the law

• A contract must not contradict public order, or good Thai morals, be impossible to execute, or hold legal prohibitions.
• The cause is the reason parties enter into a contract, and the object is the subject matter of the contract.
• Illegal contracts, such as those involving the sale of narcotics, are void.
• If some terms violate public order or morals, the rest of the contract may still be valid.
• Unfair terms, even if understood, may be void to protect vulnerable parties (Unfair Terms and Conditions Act, B.E. 2540).

Step 4: Use compulsory forms

• Section 152 of the Civil and Commercial Code (CCC) specifies mandatory form conditions for certain contracts.
• Contracts such as construction agreements can be verbal, while land purchases and leases must be written, signed, and registered.
• Loan agreements require the borrower’s signature but not additional signatures.
• Since 2001, virtual signatures like emails have been permitted but excluded for specific juristic acts like family and inheritance contracts.
• Non-compliance can result in the contract being void, affecting both parties and third parties depending on their good faith.
• Consequences of failing to adhere to form conditions can vary and may impact the validity of the contract.

Step 5: Prevent the common mistakes

In Thailand, several common mistakes can negatively impact the validity of a contract. These mistakes include:

1: Unclear terms and conditions and interpretation of the parties

The term “lease” is more appropriate than “rental agreement” when the contract period exceeds three years. The parties must adhere to the laws governing leases. Additionally, it must avoid the term “rental” outside of the reference of the Civil and Commercial Code of Thailand (CCC).

However, legal disputes arising from a contract without its registration with the land department need certain considerations. In such cases, the court will consider the parties’ intent, the form of the contract, and the duration of the agreement. In such cases, the tenant or lessor may lose the case if the contract exceeds three years without registration. Note that a lease or rental agreement of more than three years must be written and registered at the Land Department, as per Sections 171 and 538 of the CCC.

2: Conflict of interest in the case of company director(s)

To provide benefits to the director, a Thai company is mandatory. This includes purchasing real estate under the company’s name and subsequently renting it out solely for the director’s use. It’s important to note that the declaration of this benefit is at a value lower than the prevailing market rate. This rule is according to Section 74 of the Civil and Commercial Code of Thailand (CCC).

3: Amended terms and conditions without evidence

The adage “Words fly away, writings remain” emphasizes the significance of written documentation, particularly in a legal setting. The life cycle of a contract involves three key stages: preparation, execution, and termination. Each stage requires meticulous attention and thorough comprehension, regardless of whether the contract is private or administrative.

Drawing from our extensive experience, we have encountered various unique situations. If you have queries regarding Thailand’s contract laws or seek the assistance of a contract lawyer for drafting or reviewing a contract in Thailand, do not hesitate to leverage our knowledge and long-standing experience to safeguard your interests. Email us at officer@konradlegal.com to connect with our contract lawyers specializing in Thai law.