Thailand Legal Due Diligence in Mergers & Acquisitions (M&A)

Thailand Business, Investment & Corporate Legal


Thailand Legal Due Diligence in M & As


 A Due Diligence exercise is generally understood to mean a professional investigation into a target establishment’s liabilities and tact – an exercise of caution as to what is essentially being acquired. In legal terms, Due Diligence has been defined as follows:

“Due diligence is a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances; not measured by any absolute standard but depends on the relative facts of the special case.”

The crucial 2 breeds of Due Diligence prior to an Acquisition are Financial Due Diligence and Legal Due Diligence, whereas the former is generally conducted by an accounting team and the latter by a legal team. The former is to reveal, inter alia, the financial liabilities and true financial situation of the target establishment and the latter to unravel all legal issues, possibly existent legal discrepancies, and so forth by thorough determination of material legal aspects such as:

  • Terms & Obligations of Commercial Contracts, Employment Agreements and other Agreements
  • Legal Compliance
  • Legitimacy of Issued Shares that are being sold-acquired
  • Encumbrances upon Assets, Shares, etc.
  • Pending Litigation
  • Bankruptcy Filings

In Thailand, there is no legal requirement for Legal Due Diligence to be conducted, however, and especially in terms of larger commercial acquisitions where there are plethoras of legal issues: it is extremely prudent and has become a necessity in practice today.

Caveat Emptor, let the buyer beware!

A Legal Due Diligence exercise is generally initiated by the Legal Team providing a Due Diligence Checklist requiring the target establishment to produce such documents / information necessary for the exercise. The Legal Team sieves through the bulk of documents / information and extracts all salient terms and other legally questionable aspects and consolidates them. This compilation is then thoroughly investigated, and any legal discrepancies, uncertainties, or such possible legal issues are remarked and highlighted in a comprehensive Due Diligence Report.

These materials are of huge importance to both parties – normally attached to disclosure reports, proposals, for consideration & determination by BOD / shareholders of both parties. The Acquirer’s party will consider adjustments on the terms of the acquisition – representations & warranties by the target, rectification of any discrepancies, require amendments and/or renewal / extension of material contracts or employment agreements ,  sale price – or perhaps not to acquire the target establishment at all.

The timeframe for a Legal Due Diligence exercise essentially depends on the size of the target and the volume of documentation varying from a week to a few months.

Corporate Constituency

  • Corporate Registrations
  • Actual Ownership & Shareholding
  • Memorandum & Articles of Association
  • Constituency Agreements
  • Material Resolutions

 Salient Terms & Conditions

  • Representations & Warranties

Why? The Acquirer has to know what Terms & Conditions of Contracts entered into by the target establishment bind it.

Why? Of course, the Acquirer would want to know the company’s employment arrangements and its implications. Change of employers may have a significant impact on its existing employees. Further, some Employment Agreements contain ‘Succession of Employer’ clauses and these should be treated with care.

  • Termination / Potential Termination

Why? Where key Contracts are liable to Termination or are in the process of being terminated, this may prove fatal to the prospect establishment and run contra to the Acquirer’s intentions in the first place.

  • Breach / Potential Breach Of Contract

Why? This may expose the Acquirer to many legal liabilities and also expose such Contracts to undesirable termination.

  • (Potential) Noncompliance / Violation of Laws / Regulations

Why? This is crucial as such  could have such immense implications such as the establishment not being legally run / operated in the first place and the Acquirer could be venturing into a gray area.

  • Restrictions on Share Transfers

 Why? There may be requirements in the Company’s constituency documents that attach themselves to share transfers and it is very possible that such intended share transfer cannot be effected, but represented as having been effected.

  • Restrictions on Foreign Ownership

 Why? Of particular importance with regards to key assets, Acquirers need to properly evaluate whether the target establishment’s assets are currently being ‘illegally’ owned due to Thai restrictions on foreign ownership and where the Acquirer is foreign, if it can legally acquire such assets – or even the shares (linked with the above) as per the acquisition.

  • Control Provisions

Why? Control provisions are essential as they determine the extent of control of the Acquirer.

  • Other Provisions that may obstruct or hinder the Acquisition

 Litigation Searches

In absence of a centralized consolidation of Court records, litigation searches may prove cumbersome, where they have to be conducted via:

Specific Court (Bangkok): Civil Court, Central Intellectual Property and International Trade Court, South Bangkok Civil Court, Central Labor Court, Criminal Court and Central Tax Court

Specific Province (out of Bangkok): Particular provincial Court

Generally, jurisdiction over a case is with the Court located at place of domicile of the Defendant or such place where the cause of action arose.

Bankruptcy Filing and Reorganization Filing Searches

Central Bankruptcy Court and Business Reorganization Office

Property Searches

In absence of a Central Asset Registry (or a National Land Office)

Searches for Real Property need be conducted at relevant Land Office where such Real Property is situated.


Registers of Shareholders are maintained by the target establishment and not made available in public records. Any encumbrances on the target establishment’s shares need to be discovered.

Other significant forms of Due Diligence:



For more information on the foregoing, please contact the author JOEL LOO SEAN EE, the Bangkok-based Senior Regional Counsel at Kelvin Chia Thailand and a member of Kelvin Chia Partnership’s Regional Practice Group at


This article is published to provide general information only and is not offered as specific advice on any particular matter – This information is to be taken subject to proper consultation with a lawyer.

All written material on BANGKOK LEGAL BLOG (BLB) including this post are the Copyright of Joel Loo Sean Ee. Any attempt to plagiarise or reproduce these materials in whole or in part, in verbatim or in paraphrase, or in any other form that it can be conceivable that such attempt is being made is an offense in law and will be an invitation by offenders to face charges and prosecution in a Court of Law.

Leave a comment

Filed under Thailand Business Investment & Corporate Legal, Thailand Company Incorporation

Comments are closed.