Mergers and acquisitions in Thailand are governed by a combination of corporate, competition, and foreign investment laws that regulate the transfer of business ownership, restructuring of corporate entities, and foreign participation in domestic businesses. The M&A landscape in Thailand is influenced by the Foreign Business Act (FBA), the Civil and Commercial Code (CCC), the Securities and Exchange Act (SEC), the Trade Competition Act, and the Revenue Code.
This guide provides an in-depth analysis of M&A transactions in Thailand, including legal structures, foreign ownership restrictions, regulatory approvals, due diligence, tax considerations, and key challenges for foreign investors.
1. Legal Framework Governing M&A in Thailand
M&A transactions in Thailand are subject to multiple legal frameworks, depending on the nature of the acquisition and the industry involved. The primary laws and regulatory bodies include:
1.1 Key Legislation
- Civil and Commercial Code (CCC) – Regulates company structures, mergers, and shareholder rights.
- Foreign Business Act B.E. 2542 (1999) (FBA) – Limits foreign ownership in restricted industries.
- Trade Competition Act B.E. 2560 (2017) – Governs anti-competitive behavior in mergers.
- Public Limited Companies Act B.E. 2535 (1992) – Applies to acquisitions involving publicly listed companies.
- Securities and Exchange Act B.E. 2535 (1992) – Oversees takeovers of companies listed on the Stock Exchange of Thailand (SET).
- Revenue Code – Defines tax liabilities and benefits related to M&A transactions.
1.2 Regulatory Authorities
- Department of Business Development (DBD) – Manages company registration and M&A approval for private businesses.
- Office of the Trade Competition Commission (OTCC) – Oversees mergers that may result in anti-competitive behavior.
- Securities and Exchange Commission (SEC) – Regulates acquisitions of public companies.
- Board of Investment (BOI) – Grants foreign investment privileges, including full ownership in certain sectors.
2. Types of M&A Transactions in Thailand
Mergers and acquisitions in Thailand take various forms, depending on business objectives, tax considerations, and regulatory requirements.
2.1 Asset Purchase vs. Share Purchase
| Aspect | Asset Purchase | Share Purchase |
|---|---|---|
| Ownership Transfer | Buyer acquires selected assets and liabilities. | Buyer acquires company shares, taking over all assets and liabilities. |
| Regulatory Complexity | Lower – requires fewer approvals. | Higher – may require FBA, BOI, or SEC approvals. |
| Taxation | Subject to VAT (7%) and transfer fees. | Subject to capital gains tax but exempt from VAT. |
| Liability Risks | Limited to acquired assets. | Includes all past liabilities of the target company. |
2.2 Statutory Mergers
A statutory merger occurs when two companies combine to form a new legal entity. This method is less common due to complex shareholder approval and tax implications.
2.3 Takeovers and Tender Offers
A takeover occurs when one company acquires a controlling stake (more than 50%) in another company. If the target is a publicly listed company, the acquiring party must comply with SEC takeover rules, including:
✔ Mandatory tender offers for remaining shareholders.
✔ Disclosure of acquisition intentions.
✔ Approval from the Stock Exchange of Thailand (SET) if the company remains listed.
3. Foreign Ownership Restrictions in M&A Transactions
Under the Foreign Business Act (FBA), foreign investors face restrictions in certain sectors, unless they:
✔ Obtain a Foreign Business License (FBL).
✔ Receive BOI investment privileges.
✔ Partner with a Thai shareholder to comply with ownership limits.
Restricted businesses include:
❌ Media, land ownership, agriculture, and domestic trade (List 1 – prohibited).
⚠️ Construction, transportation, and financial services (List 2 – requires Cabinet approval).
⚠️ Retail, wholesale, and business services (List 3 – requires an FBL).
Foreign investors often structure M&A deals through:
✔ Joint Ventures (JVs) with Thai partners (holding at least 51%).
✔ BOI-approved entities, allowing 100% foreign ownership.
✔ Preference share structures, giving control despite minority ownership.
4. Regulatory Approvals and Compliance
Depending on the industry and type of acquisition, M&A transactions in Thailand may require approvals from regulatory bodies.
4.1 Approval from the Department of Business Development (DBD)
✔ Required for company registration, share transfers, and new shareholder structures.
✔ Necessary for foreign investors acquiring more than 49% in restricted sectors.
4.2 Trade Competition Commission (OTCC) Approval
✔ If the transaction results in market dominance (more than 50% market share), an M&A clearance application is mandatory.
✔ Failure to obtain approval can result in financial penalties and transaction reversal.
4.3 Board of Investment (BOI) Approvals
✔ Foreign investors seeking 100% ownership must apply for BOI incentives.
✔ BOI-approved M&As may receive:
- Corporate tax exemptions for up to 8 years.
- Work permit and visa privileges for foreign executives.
- Exemptions from foreign ownership restrictions.
5. Tax Implications in M&A Transactions
Tax planning is crucial in M&A transactions to minimize corporate tax, VAT, stamp duty, and capital gains taxes.
5.1 Capital Gains Tax
✔ Thai residents pay progressive tax rates (5-35%) on capital gains from share sales.
✔ Non-residents are subject to withholding tax (WHT) on capital gains if applicable under tax treaties.
5.2 Value Added Tax (VAT) on Asset Sales
✔ VAT (7%) applies to asset transfers but not share purchases.
5.3 Withholding Tax (WHT)
✔ Share transfers may be subject to WHT (10-15%) if the seller is a non-resident.
5.4 Stamp Duty
✔ Applies to share transfers at 0.1% of transaction value.
✔ Not required for BOI-promoted companies.
6. Key Challenges in M&A Transactions in Thailand
| Challenges | Solutions |
|---|---|
| Foreign ownership restrictions | Obtain BOI promotion or structure joint ventures. |
| Regulatory approval delays | Plan for long processing times (3-6 months for FBLs, BOI approvals). |
| Due diligence complexities | Engage legal and financial advisors for in-depth review. |
| Tax inefficiencies | Optimize deal structure to minimize VAT, WHT, and capital gains tax. |
| Post-merger integration | Develop transition plans for operational and cultural alignment. |
7. Notable M&A Transactions in Thailand
7.1 CP Group’s Acquisition of Tesco Lotus Thailand
- Value: USD 10.6 billion
- Details: CP Group acquired Tesco Lotus, requiring Trade Competition Commission approval due to market dominance concerns.
7.2 SCB Bank Restructuring and Digital Expansion
- Value: USD 3 billion
- Details: SCB restructured its corporate structure for fintech expansion, requiring Bank of Thailand (BOT) approvals.
8. Conclusion
M&A transactions in Thailand present significant opportunities for investors, but they require careful navigation of foreign ownership restrictions, regulatory approvals, tax implications, and due diligence considerations.
By leveraging BOI investment incentives, structuring joint ventures, and ensuring compliance with the Foreign Business Act, foreign and local investors can successfully execute mergers and acquisitions while minimizing legal and financial risks. Given the complexity of Thailand’s M&A regulations, legal and tax professionals should always be consulted before proceeding with an acquisition.