Overview of inbound M&A

When companies are considering inbound acquisitions in Thailand, the principal considerations investors need to be aware of are the restrictions on the business activities that can be undertaken by foreign entities.
The legislation relating to foreign investment and M&A transactions in Thailand is the Foreign Business Act 1999 (FBA). The operation of certain businesses in Thailand by foreign nationals is restricted by the FBA under the administration of the Ministry of Commerce (MOC). For the purpose of the FBA restrictions, a ‘foreigner’ is classified as a foreign individual, a company incorporated outside Thailand, or a company incorporated in Thailand that is majority-owned by foreign individuals or foreign companies. The FBA sets out three lists of business categories in which the participation of foreign nationals is either prohibited or restricted. Foreign nationals are prohibited from participating in the businesses specified in List 1, which includes antiques trading, broadcasting, farming and forestry. Foreign nationals are restricted from participating in businesses specified in List 2 unless they obtain a foreign business license (FBL) from the Thai Cabinet. List 2 includes activities related to national safety, agriculture, arts and culture, natural resources and the environment. Foreign nationals are also restricted from participating in the businesses specified in List 3 unless they obtain an FBL from the Director-General of the Department of Business Development, the MOC. List 3 comprises a total of 21 categories of restricted businesses in which Thais are not yet ready to compete with foreigners, including accountancy, engineering, construction (with certain exceptions), retailing and wholesaling (with certain exceptions), advertising, hotel operation (excluding hotel management), tour guiding, sale of food and beverages, and the catch-all category ‘other services’. Certain service businesses are exempt from the FBA by virtue of Ministerial Regulations Nos. 1, 2 and 3 such as: commercial banking business and related businesses of commercial banks, bank representative offices, life insurance, non-life insurance business, securities business and other businesses under the law on securities, asset management company business and business where a government unit or state enterprise is a party.

If a foreign entity has obtained an investment promotion certificate from the Thailand Board of Investment (BOI) (which usually comes with 5-8 years tax holidays and customs tax exemption etc.), or is eligible under a treaty to which Thailand is a party, such as the Treaty of Amity between the United States and Thailand, the ASEAN Framework Agreement on Services or the ASEAN Comprehensive Investment Agreement, an FBL is not required to be obtained but instead a foreign business certificate is required, which would usually be granted as a matter of course. An entity wishing to enjoy protection under a treaty must be incorporated in Thailand and have no less than 50% of its share capital held by US or ASEAN nationals or a company incorporated under the laws of a US state or ASEAN country. More than half of the directors of the juristic person and the authorised directors must also be US or ASEAN nationals.
There are generally no restrictions on capital inward and outward remittances. For outward remittance for bona fide purposes such as payment of dividends, payment of interest and loan repayment, payments under a licensing agreement etc., evidence justifying payment is required to be submitted to the commercial banks who engage in foreign exchange transactions and outward remittances and approval is generally granted as a matter of course.

Thai competition law

Thailand has revised its trade competition legislation: the existing law (the Trade Competition Act B.E. 2542 (1999)) will be repealed in its entirety and replaced by the Trade Competition Act B.E. 2560 (2017), which was gazzetted on July 7 2017 and will come into effect
on October 5 2017 (the “New Trade Competition Law”). In order to foster free and fair trade competition and to create a level playing-field, the New Trade Competition Law focuses on four primary areas, namely: (1) the prohibition of the unlawful exercise of market dominance by dominant business operators (abuses of dominance); (2) the supervision of business mergers and acquisitions which restrict trade competition, or the merger and acquisition of dominant business operators; (3) the prohibition of business agreements which restrict trade competition (restrictive agreements); and (4) the prohibition of behaviors which constitute unfair trade practices.

What constitutes a “dominant business operator” under the New Trade Competition Law has yet to be established. In addition, an independent body called the Trade Competition Committee (the “Committee”) has to be formed and will be responsible for the supervision of compliance with the New Trade Competition Law and issuance of implementing legislation and rules. If a business operator is considered a “dominant business operator” under the New Trade Competition Law, it will be required to seek prior approval from the Trade Competition Committee should it plan to acquire, sell or merge with other businesses in Thailand in the future, and to comply with the rules on the prohibition of unlawful abuse of dominance, as well as other rules applicable to business operators in general, for example, the prohibition of any business agreement which restricts trade competition (restrictive agreements) and the prohibition of behaviors which constitute unfair trade practices. Given that the Committee has yet to be formed, there are uncertainties as to the direction of the implementing legislation and rules to be prescribed and notified by the Committee in the future, as well as the supervisory procedures of the New Trade Competition Law, the implementing legislation and the rules of the Committee, and whether and how such legislation will affect business operating models in the future. The New Trade Competition Law imposes a severe penalty for any violation, such as an administrative fine of up to 10.0% of the income for the year if a violation is committed. In addition, the person who suffers damage from the violation of prohibitions under the New Trade Competition Law is entitled to claim damages from the violator. If a business operator fails to obtain prior approval from the Committee for a business acquisition, sale or merger, an administrative fine of up to 0.5% of the value of the transaction will be imposed.


The main legislation relating to arbitration is the Arbitration Act 2002 (the Act). The Act enshrines the freedom of parties to contract as they may decide on the place of arbitration, the language to be used in the arbitral proceedings, the procedures regarding the appointment of the arbitrators and other practical matters. The provisions relating to such matters in the Act serve as default rules applicable only when the parties fail to agree.

Courts may dismiss an application for the enforcement of an arbitral award if it finds that the award involves a dispute ‘not capable of settlement by arbitration under the law’. Disputes relating to administrative contracts between a government agency and a private enterprise are explicitly recognised as arbitrable. Criminal disputes or civil disputes concerning public policy such as disputes between employers and employees relating to employee rights according to the labour law, disputes relating to trade competition law and disputes relating to mandatory corporate law are not arbitrable.

The Act governs not only arbitration in Thailand but also the enforcement of arbitral awards from other countries. Thai courts are required to enforce an arbitral award made in a foreign country that is a member of an international convention treaty or agreement to which Thailand is also a party, namely the Convention on the Execution of Foreign Arbitral Awards 1927 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Exceptions are in the cases that, among other things, the arbitral award is beyond the scope of the arbitration agreement, the arbitral award relates to a dispute that cannot be legally resolved by the arbitration, or the enforcement of the arbitral award would be contrary to the public order or good morals of the people of Thailand.