According to statistics maintained by the Board of Investment, Japan has been the largest source of foreign direct investments into Thailand, followed by China and the United States. Thailand’s largest export markets in December 2009 were ASEAN nations (15.62 percent), China (12.84 percent), United States (10.66 percent), the European Union (10.90 percent), Japan (9.82 percent), Hong Kong (6.30 percent) and Australia (5.33 percent).
Thailand is a constitutional monarchy with the King as head of state and the Prime Minister as the head of the government. Under the constitution, the Prime Minister is required to be a Member of Parliament. The legislative branch comprises the bicameral Thai legislature called the National Assembly (commonly known as the Parliament). The Thai Parliament consists of an elected House of Representatives with 480 seats and a Senate with 150 seats, with a mix of elected and appointed members. Members of the House of Representatives serve four-year terms, while Senators serve six-year terms.
According to statistics maintained by the National Statistical Office, as at December 2009 Thailand’s population was approximately 67 million. As of 2008, an overwhelming majority of Thai people (93.6 per cent) were Buddhists with a small percentage of Muslims and Christians. English is not widely spoken outside of the international business community and the tourism sector.
Visa and work permit requirements
With very limited exceptions (including for diplomatic or governmental work), foreign nationals require both a work permit and a long-stay visa before commencing work in Thailand. Although the work permit and the visa are issued by different authorities, the two are, in practice, inter-related and are usually valid for the same periods.
Generally, a foreigner applying for a work permit must already have a non-immigrant visa (not a tourist visa) issued by a Thai embassy outside Thailand. There is a distinction between a visa which is issued from outside Thailand and which allows a foreigner to enter Thailand, and a permit to stay, which is issued once the foreigner enters Thailand. The period of the permit will depend on the type of visa used to enter Thailand. A foreigner obtaining a visa on arrival is generally given a 30-day permit to stay whereas a foreigner entering Thailand on a nonimmigrant visa is generally given a longer permit to stay depending on the type of visa obtained. Once a work permit is granted, the non-immigrant visa supports a long-stay visa which should track the period of the work permit (usually one year). Lastly, the permit to stay will be automatically cancelled if the foreigner leaves Thailand without first obtaining either a single or a multiple re-entry permit. Typically, an expatriate worker will hold a work permit, a long-stay visa and a multiple re-entry permit, which are all renewable annually.
Applications for work permits can be made by the employer before the foreign worker enters Thailand, but the work permit will be issued only after he or she enters Thailand. The foreign worker must not commence work until the work permit has been issued. In general, there will be minimum requirements as to the wage of the foreign worker, the registered capital of the employer and the ratio of foreign workers to Thai workers at the employer’s workplace.
Short-term work permits (of up to 15 days) are also available for work which is “urgent and essential”. These types of work permits can be obtained within a day by an applicant who holds a valid visa, but need not be a non-immigrant visa. What is considered “urgent and essential” is not defined in the relevant legislation and, as such, it is at the discretion of the Director General of the Department of Employment.
Companies granted investment privileges by the Board of Investment or the Industrial Estate Authority of Thailand may also receive specific privileges relating to visas and work permits for their foreign workers, including applying different criteria (see below for more details).
One-stop service center
Since 1997, the One-Stop Service Center has been established to expedite and facilitate the issue and renewal of visas and work permits. The center is staffed with representatives from the Board of Investment, the Department of Employment and the Immigration Bureau and processes both visa and work permit applications from a single location. The center is only available to expatriates who satisfy certain conditions.
Recently, changes to the Alien Employment Act B.E. 2551 (2008) extended the maximum period for work permits to two years under certain circumstances. However, the maximum period for long-stay visas is still one year.
In addition to the laws and regulations, there are internal rules, practices and requirements of both the Department of Employment and the Immigration Bureau, all of which change regularly and specific advice should be sought in each case.
The most common form of business entity in Thailand is a private limited liability company. Other forms of business entities include public limited liability companies and various forms of registered and unregistered partnerships. Foreign companies can also choose to have a direct presence by way of a registered branch office.
Although there is no general Thai law requirement to adopt any specific type of business entity in Thailand, through licensing and minimum registered capital requirements, participation in certain business activities requires a form of incorporated entity. The choice of business entity for foreign investors will, generally, be driven by requirements on foreign ownership and also by tax considerations. Specific advice should be sought in each case.
Limited liability companies
Thai incorporated limited liability companies have similar features to those of western jurisdictions. Limited liability companies can be either private or public. Private limited liability companies are governed by the Thai Civil and Commercial Code (CCC) and public limited liability companies are governed by the Public Limited Companies Act B.E. 2535 (1992) (PLCA). Liabilities of the shareholders are limited to the unpaid capital held by the shareholder. Thai private limited liability companies and public (unlisted) limited liability companies are required to have at least three shareholders and 15 shareholders, respectively.
The duties and liabilities of a director of a private company and a public company are primarily contained in the CCC and the PLCA, respectively.
The prescribed directors’ duties are both specific and general. No director of a private or public company may operate a business or act as a director of a company which is of the same nature and competes with the business of the company without shareholders’ consent. There are restrictions on a director’s use of company funds for his own purposes and personal liability to third parties if a director exceeds the scope of his authority. Directors are jointly responsible for certain duties such as fulfilling a number of filing obligations with the Department of Business Development of the Ministry of Commerce (DBD) and convening shareholders’ meetings within fixed periods and ensuring minutes are recorded of such meetings and retained at the company’s registered office.
There is personal liability for directors in the case of specified forms of wrongdoing and also joint liability for certain actions. Directors of a private company may be sued by the company for any breach of their duties, or if the company fails to bring an action, any shareholder or creditor (to the extent that their claims against the company remain unsatisfied) can bring a claim against the directors. Shareholders holding a minimum of 5 per cent of the shares of a public company may bring an action on behalf of the company seeking damages and the removal of such directors from office.
Thai partnerships have similar features to partnership in western jurisdictions. Generally, partnerships are not a separate legal entity from the partners and the partners (other than the limited liability partners of a limited partnership) do not enjoy limited liability. Under the CCC, there are three types of partnerships:
- unregistered ordinary partnerships
- registered ordinary partnerships
- limited partnerships.
Registered partnerships are separate legal entities. However, partners in both an unregistered partnership and a registered partnership are liable jointly for the debts of the partnership. Creditors of a registered partnership must first look to the assets of the partnership to satisfy his or her debt before making any claim against individual partners. Creditors of an unregistered partnership can claim against the individual partners without first claiming against the partnership assets. Limited partnerships have two classes of partners: limited partners, whose liability is limited to their contributions to the partnership, and general partners, who are jointly liable for all the debts of the partnership. Limited partnerships are required by law to have at least one general partner.
Pursuant to Thai law, a foreign corporation can also establish a presence in Thailand by way of:
- a representative office
- a regional office
- a branch office.
A representative office is similar to a branch office but is restricted to “non-trading” activities. In particular, functions of the representative office must be limited to liaison with the head office and a representative office is only permitted to conduct the following activities:
- to procure sources of goods or services in Thailand for its head office
- to monitor and control quality and quantity of goods its head office buys or contract manufactures in Thailand
- to advise its head office in relation to distributors or customers
- to distribute any information relating to new goods and services of its head office
- to report on the business in Thailand to its head office.
The representative office is subject to the following requirements:
- it must not generate income from its activities
- it must not receive purchase orders, offer to sell products or negotiate transactions with any individual or business entity in Thailand
- its operational expenditures must be funded by its head office.
As the representative office must not generate income, it is not subject to corporate income tax under the Thai Revenue Code.
A multinational corporation may have a regional office in Thailand to liaise with its branches and affiliates in the Asia region. The regional office need not be incorporated as a juristic person in Thailand.
The regional office’s functions are to provide its head office’s branches and affiliated companies with the following services:
- coordination and supervision of the operation of the head office’s branches or affiliates in the Asia region on behalf of the head office
- advisory and management services
- training and personnel development services
- financial management services
- marketing and sales promotion services
- product development
- research and development services.
The regional office is subject to the following requirements:
- the head office must have branch offices or affiliates in the Asia region
- it must not generate income from its activities
- it must not receive purchase orders, offer to sell products or negotiate transactions with any individual or business entity in Thailand
- its operational expenditures must be funded by its head office.
The regional office is not subject to corporate income tax under the Thai Revenue Code.
A foreign company incorporated overseas may establish a branch office to conduct business in Thailand. The branch office is regarded as the same legal entity as its head office and the actions of the branch office will be viewed as the actions of the head office.
There is no specific law requiring a branch office of such foreign company to be registered under Thai law in order to do business in Thailand. However, in order for such foreign company to have a legal branch office in Thailand, it is required to submit a set of its constitutional documents and a power of attorney (appointing a branch manager to act for it in Thailand) to the DBD. In addition, activities of the branch office are subject to the Foreign Business Act B.E. 2542 (1999) (FBA) and laws relating to foreign investment in Thailand. The branch office may be required to seek approval or license to carry on certain types of business or may be prohibited from carrying on certain types of business. Where the activity of the branch office is subject to a license from the DBD, the branch office will be required to receive funds from abroad for its operation in Thailand of at least THB2 million.
The income derived by the branch office will be subject to corporate income tax under the Thai Revenue Code.
Foreign investment law
There are no generally applicable limitations on the level of foreign ownership of shares in companies incorporated in Thailand. However, there are wide-ranging limitations on activities conducted by non-Thais including by foreign individuals and companies where, in effect, more than half of the shares are held by non-Thais.
Foreign Business Act
The majority of the restrictions on activities being undertaken by non-Thais are contained in the FBA.
The FBA prescribes a wide range of business activities as restricted businesses which are reserved for Thai nationals and therefore cannot be carried out by “foreigners” (as defined in the FBA) at all or cannot be carried out by “foreigners” without an appropriate license or exemption. These restricted businesses are further categorized into three Schedules attached to the FBA, depending on the level of protection accorded to the relevant business:
- Schedule 1 lists the businesses reserved for Thai nationals for “special reasons” and there is a total prohibition on “foreigners” engaging in those businesses
- Schedule 2 lists the businesses reserved for Thai nationals because they affect national security or arts, culture, tradition, local handicrafts or natural resources and the environment. Foreigners are prohibited from engaging in those restricted businesses, except with a license from the Minister of Commerce and approval from the Cabinet
- Schedule 3 lists the businesses reserved for Thai nationals because Thai nationals are not yet prepared to compete with foreigners. Foreigners are prohibited from engaging in those restricted businesses, except with a license from the Director General of the Commercial Registration Department of the Ministry of Commerce and an approval from the Foreign Business Committee.
The Committee reviews applications under the FBA and makes its recommendations to either the Minister of Commerce or the Director General, whichever is applicable. In addition to the FBA, certain other acts contain industry-specific restrictions.
There is no clear and uniform definition of a “foreign” company under Thai law. Each act adopts a slightly different definition.
The Land Code generally prohibits a foreign national (individuals or companies) from owning land in Thailand. There are some exceptions to this general prohibition. Foreign individuals can own units in a condominium building, provided the total foreign ownership in the relevant building does not exceed 49 per cent of the total floor space. Foreign companies can be granted the privilege to own land in certain circumstances, such as:
- for the purposes of carrying on a business “promoted” by the Board of Investment (see below)
- pursuant to the Petroleum Act B.E. 2514 (1971), which allows an oil concessionaire to own land to carry on its business
- pursuant to the Industrial Estate Authority of Thailand Act B.E. 2522 (1979), which allows foreign business operator to own land in certain industrial zones (see below)
- where the Minister of Interior, under specific conditions, waives the prohibition on foreign land ownership.
Both the Life Insurance Act B.E. 2535 (1992) and Non-Life Insurance Act B.E. 2535 (1992) set foreign ownership limits for companies carrying on insurance business at 25 percent less one share – in other words, Thais must hold more than 75 percent of the total issued shares. In addition, no fewer than three quarters of the directors of insurance companies must be Thai nationals. The insurance regulator (the Office of Insurance Commission (OIC)), the Thai insurance regulator, has the discretion to increase the foreign shareholding limit in a particular case to 49 percent of the total issued voting shares and increase the limit on foreign directors to not more than half. In addition, the Minister of Finance, upon recommendation from the OIC, has the discretion in a particular case to increase the foreign shareholding limit beyond 49 percent of the total issued voting shares, and increase the limit on foreign directors to more than half, if the operation of the insurance company may have an adverse effect on the insured or the public.
Government initiatives and incentives
The Board of Investment (BoI) and the Industrial Estate Authority of Thailand (IEAT) are the principal agencies responsible for administering government incentives to promote investments, both domestic and foreign, in Thailand.
Board of Investment
The BoI administers the Board of Investment Act B.E. 2520 (1977) (BoI Act) and is empowered under the BoI Act to grant a wide range of investment incentives and concessions for relevant qualifying business activities (Promoted Activities), including:
- limited period exemptions from or reductions in corporate income tax in respect of income derived from the Promoted Activities
- exemption from or reduction of import duties on imports of raw material, components and machinery used in the Promoted Activities
- the right for foreigners to own land used in the Promoted Activities
- permission to bring in foreign skilled workers
- exemption from tax for dividends derived from Promoted Activities
- permission to remit foreign currency abroad.
To attract investments to particular provinces, the BoI has divided Thailand into investment zones, and projects located in a particular zone will receive the special privileges granted to that particular zone.
In addition, the BoI Act itself provides for specified protections in respect of the Promoted Activities, including:
- a guarantee against nationalisation
- protection from competition from the government
- protection against government price control.
Industrial Estate Authority of Thailand The IEAT administers the Industrial Estate Authority of Thailand Act B.E. 2522 (1979) (IEAT Act) and operates (either on its own or jointly with the private sector) various industrial estates in Thailand. There are two types of industrial estate: general industrial estates which house manufacturing operations for export and/or domestic consumption; and export and processing industrial estates which house manufacturing operations for exports only.
In addition to access to the established infrastructure (including water, electricity, waste management, workers’ accommodation and security) and proximity to the complementary goods and services, industrial operations located within an industrial estate may be eligible for various investment privileges, including:
- the right for foreigners to own land used in the industrial operation
- permission to bring in foreign skilled workers
- the operations located within an export and processing industrial estate may receive exemptions from import/export duties, VAT and excise tax on imports of raw material, components and machinery and exports of goods manufactured.
There are privately owned and managed industrial estates in respect of which the owner may receive special promotion from the BoI. However, the individuals who operate their business in this private industrial estate will not be entitled to BoI or IEAT incentives.
The principal Thai taxation law is the Revenue Code, which regulates the collection of income tax (both personal and corporate), value added tax, specific business tax and stamp duties. There are other acts which govern the collection of other taxes, such as the Customs Act (which governs the collection of customs duties) and the Excise Act (which governs the collection of excise duties), the Land and Housing Tax Act and the Land Development Act (which govern the collection of housing and land tax), the Signboard Tax Act (which governs the collection of tax on signboards) and the Petroleum Tax Act (which governs the collection of tax on petroleum products).
The Revenue Department of the Ministry of Finance administers the collection of taxes under the Revenue Code. Generally, Thailand applies a self-assessment system.
Thailand is a party to double taxation treaties with various countries, which will affect taxation payable in Thailand by nationals of the relevant countries and taxation payable by Thai nationals in the relevant countries.
Corporate income tax
Domestic corporations are taxed on their worldwide income, while foreign corporations are taxed on income generated in Thailand. The income tax rate is, generally, 30 per cent and the same rate applies to both domestic and foreign corporations (which have a permanent establishment in Thailand). Generally, taxable income includes business income, dividends, interests, royalties and service fees. Capital gains are treated as ordinary income and are subject to the same corporate income tax rate.
There may be specific tax concessions which are applicable to corporations with privileges from the BoI, corporations listed on the SET or the Market for Alternative Investment, and corporations with regional operating headquarters privileges.
In addition, withholding tax applies to specific categories of income paid to corporations, including dividends, interest, royalties, capital gains and certain service/professional fees.
Thailand’s consumption tax is value-added tax (VAT), collected on the sale of goods and provision of services. The standard rate of VAT under the Revenue Code is 10 percent. However, as at 1 January 2010, a concession rate of 7 percent still applied.
Personal income tax
Individuals resident in Thailand are taxed on their income derived in Thailand and income derived from outside Thailand and brought into Thailand in the same year in which the income is earned, while non-resident individuals are taxed only on income derived from sources in Thailand.
Personal income tax rates are progressive, ranging from 5 percent to 37 percent, with a tax-free threshold of THB100,000 per year. Employers are required to withhold tax on payments of salary based on the projected tax payable for the year and remit them to the Revenue Department on a monthly basis.
Stamp duties are collected on instruments specified in the stamp duty schedule of the Revenue Code at the applicable rates, which are also specified in the schedule. Generally, transfers of shares (in private and public companies) are subject to stamp duty at a rate of 0.1 percent of the par value of the shares or the transfer price of the relevant shares (whichever is greater). Where the Thailand Securities Depository Co. Ltd is appointed as the registrar of the transferred shares (which is the case with all companies listed on the SET), the transfer will be exempt from stamp duty.
The principal Thai labor protection laws are the Labor Relations Act B.E. 2518 (1975), which sets, among other matters, the framework for formation, operation of labor unions and collective bargaining agreement, and the Labor Protection Act B.E. 2541 (1998), which sets out various statutory minimum benefits and welfare for employees.
Currently provident funds are voluntary. All employers must contribute to the Social Security Fund and the Compensation Fund. The rate of contribution to the Social Security Fund is 5 per cent of the total salary of each employee with a cap of 750 per employee per month. Employees can draw on the Social Security Fund for specific and limited benefits, including non-work-related injuries, sickness or death, old age pension and unemployment. The rate of contribution to the Compensation Fund varies depending on the type of business and the nature of the work, ranging from 0.2 per cent to 1.0 per cent of the total wages paid to employees per annum. For the purposes of calculating the Compensation Fund contributions, the annual wage for any single employee is capped at 240,000. The rate of contribution is subject to change, depending on the claim history. Employees can draw on the Compensation Fund for work-related injury, sickness or death.
Terms of employment
In addition to the statutory minimum welfare and benefits and the individual employment contracts, the terms of employment are also found in the company’s work rules. Every company with at least 10 employees must file a set of work rules with the Director General of the Department of Labor Protection and Welfare.
Termination of employment
Under Thai labor laws, termination of employment may trigger one or more of the following:
- payment in lieu of notice
- severance pay
- unfair termination compensation.
The analysis below is not intended to apply to fixed-term contracts and is subject to the terms of any individual employment contract, the work rules of the company and the terms of any collective bargaining agreement.
Payment in lieu under the Civil and Commercial Code
Under Section 582 of the CCC, termination of employment by either the employer or the employee (subject to limited exceptions) requires appropriate advance notice or payment in lieu of such notice.
Notice must be at least equal to one pay period and the termination must be effective on the next pay day. For example, if an employee is paid on a monthly basis at the end of the month and notice of termination is given in the middle of January, the earliest that termination can be effected is the end of February.
Severance Pay under the Labor Protection Act Under the Labor Protection Act B.E. 2541 (1998) (LPA), an employer who has terminated the employment of an employee (other on one of the grounds prescribed in the LPA) must pay severance. The statutory minimum severance rates are:
- for an employee who has worked for at least 120 consecutive days, but less than one year, the minimum severance amount is equal to 30 days’ pay
- for an employee who has worked consecutively for at least one year, but less than three years, the minimum severance amount is equal to 90 days’ pay
- for an employee who has worked consecutively for at least three years, but less than six years, the minimum severance amount is equal to 180 days’ pay
- for an employee who has worked consecutively for at least six years, but less than ten years, the minimum severance amount is equal to 240 days’ pay
- for an employee who has worked consecutively for more than ten years, the minimum severance amount is equal to 300 days’ pay.
Unfair termination compensation
Under the Act Establishing the Labor Court and Labor Case Procedure B.E. 2522 (1979) (ALC), if the employee brings an action for unfair dismissal in the Labor Court and the Labor Court is of a view that the termination of employment was unfair, the Labor Court may order the employer to reinstate the employee; or if the Labor Court is of the view that reinstatement is not practicable, the Labor Court will determine an amount of compensation to be paid, taking into account:
- the employee’s age
- his employment period
- any adverse effect of the termination on the employee
- the grounds for termination
- the amount of severance payable. Directors’ liabilities
Under some circumstances a director may incur personal liability for violation by the company of Thai labor laws.
The legal system
Thailand has a codified system of law which shares a number of characteristics of a civil system, but also has elements which are similar to common law systems. The main codes or statutes are the:
- Civil and Commercial Code (which governs, among other matters, private companies, civil rights and obligations, and most general commercial contracts)
- Penal Code (which governs, among other matters, general criminal offences and offences relating to trade, reputation and property)
- Civil Procedure Code (which governs court procedures for civil proceedings)
- Criminal Procedure Code (which governs court procedures for criminal proceedings)
- Revenue Code (which governs the collection of income tax, value-added tax, specific business tax and stamp duty)
- Land Code (which governs ownership of land).
These codes are principally drawn from civil jurisdictions, but with influences from common law jurisdictions as well as Thai customary law.
In recent times, Thailand has looked to both the United States and the UK as models for sector-specific laws, such as the securities and exchange law, arbitration law, trade competition law and intellectual property law. In line with the civil law tradition, the codified laws are brief statements of general principles leaving some room for different interpretations. Owing to a lack of case law reports (only Supreme Court cases are reported) the regulatory authorities tasked with enforcing a particular law are usually consulted on a no-name basis on their policies, practices, interpretation and attitude to enforcement. Occasionally, regulators will seek the opinion of the Council of State (which is the body established under the State Council Commission Act B.E. 2522 (1979)) on interpretation issues. Although the opinions of the Council of State are not binding and do not have the force of law, they are generally followed by regulators and are highly persuasive to the courts. The Supreme Court will generally follow previous rulings of the Supreme Court and Supreme Court cases are highly persuasive on the lower courts.
Dispute resolution Courts
The Thai judicial system comprises the Court of Justice, which hears most of the general civil and criminal cases, and specialist courts (such as the Administrative Court, the Constitutional Court, the Intellectual Property and International Trade Court, the Labor Court, the Juvenile and Family Court, the Tax Court and the Military Court). The Court of Justice is organized into three tiers, with the lowest court being the Court of First Instance, whose decisions are appealable to the Court of Appeals and ultimately to the Supreme Court.
Cases from some of the specialist courts (other than the Administrative Court, the Constitutional Court and the Military Court) may be appealed to the Court of Appeals and ultimately the Supreme Court or directly to the Supreme Court with special leave of the Court of Appeals.
The Administrative Court has jurisdiction over disputes among government agencies, state enterprises and public servants and their employers as well as disputes between the state and the public. The Administrative Court comprise the Administrative Court of First Instance, whose decisions are appealable to the Supreme Administrative Court. The Administrative Court has exclusive jurisdiction over disputes involving “administrative contracts” between the state and the private sector. “Administrative contracts” are principally concessions and other contracts to provide public services or utilities.
Generally, arbitration agreement/clause and arbitration awards (both domestic and foreign) are enforceable in Thailand. Thailand is a party to the Convention on the Recognition and Enforcement of Foreign Arbitration Awards 1958 (commonly known as the New York Convention) and has enacted the Arbitration Act B.E. 2542 (2002) (Arbitration Act).
Arbitration proceedings in Thailand and enforcement of foreign arbitration awards in Thailand are governed by the Arbitration Act. Pursuant to the Arbitration Act, arbitration awards both domestic and foreign are generally enforceable in Thailand through the Thai courts with competent jurisdiction, subject to limited exceptions, which include where the award deals with a dispute which cannot, by law, be settled by arbitration; or where the recognition or enforcement of the award is contrary to “public order or the good morals of the Thai people”.
Foreign arbitration awards will, generally, be enforced by Thai courts only if such arbitration awards are rendered in accordance with an international convention, treaty or agreement to which Thailand is a party and only to the extent that Thailand has agreed to be bound by such international convention, treaty or agreement. For instance, an arbitration award rendered in Singapore in accordance with the New York Convention will, generally, be recognized and enforceable in Thailand pursuant to the Arbitration Act because both Thailand and Singapore (the country in which the award was rendered) are the parties to the New York Convention.
Above summarizes the relevant law as at 9 February 2009.
The principal Thai environmental law is the Enhancement and Conservation of National Environmental Quality Act B.E. 2535 (1992) (NEQ Act). The NEQ Act provides the framework for pollution control and other environmental protection measures by, among other matters, setting the standards to measure noise, air and water pollution, requiring projects which meet certain specified criteria to prepare an environmental impact assessment report (EIA Report) in respect of the project.
In addition, where a license is required from any regulatory authority (for instance, under the Factory Act B.E. 2535 (1992) or the Building Control Act B.E. 2522 (1979)), the NEQ Act requires the EIA Report to be submitted to those authorities and the Office of Natural Resources and Environmental Policy and Planning (ONEP), with and the grant of the relevant license will be subject to ONEP’s approval of the EIA Report.
All financial institutions in Thailand are governed by the Financial Institutions Act B.E. 2551 (2008) (FIA). The FIA consolidated various acts which had, separately, governed commercial banks, finance companies and other types of financial institutions. Commercial banks are licensed under the FIA, which also prescribes a 25 per cent limit on the aggregate foreign shareholding, a 25 per cent limit on foreign directors and a 10 per cent limit on any single shareholding. These limits can be waived by the Bank of Thailand (BoT) or the Minister of Finance, depending on the nature and extent of the waiver required. Thai banks (and other financial institutions) are primarily under the supervision of the BoT.
The Securities and Exchange Act B.E. 2535 (1992) (SEC Act) governs securities business in Thailand. The SEC Act established both the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET). Generally, securities business and/or securities-related activities in Thailand require the approval of the SEC. The SET is the only institution authorized to operate a securities exchange in Thailand. Public companies wishing to offer their shares to the public and list their shares for trading on the stock exchange require the approval of the SEC and the SET, respectively.
The SEC also administers the laws and regulations applicable to the acquisition of securities in companies listed on the SET (Takeover Code). Under the Takeover Code, any acquisition of shares in a listed company (Target) by an acquirer which will result in the total voting rights held by the acquirer and its “related persons” reaching or exceeding 25 percent, 50 percent or 75 percent of the total voting rights of the Target (each a Trigger Point) will trigger a mandatory obligation on the acquirer to make a tender offer for all of the shares and equity linked securities of the Target. For the purposes of determining whether a Trigger Point has been reached or exceeded, the “chain principle” aggregates the direct shareholding of the acquirer with those of all intermediate companies over which the acquirer has a “significant degree of control”. This includes holding 50 percent or more of the total voting rights or having the ability to control the management or operation of an entity.
There are no specific Thai law requirements to disclose the proposed acquisition of shares in listed companies. However, any acquisition of shares which results in the acquirer’s shareholding in a listed company hitting or passing a 5 percent threshold (being each multiple of 5 per cent of the total issued shares) will require it to make a notification to the SEC within three business days.
The SEC Act imposes various disclosure obligations on companies listed on the SET, including an obligation to disclose all material information concerning its affairs and an obligation to issue public statements in response to any rumor or report which is likely to impact on the trading of its shares.
The Trade Competition Act B.E. 2542 (1999) (TCA) prohibits agreements between business operators which reduce or restrict competition in a market for particular goods or services. The TCA also prohibits the abuse of market power by businesses in a dominant position. The TCA subject’s mergers “which may result in monopoly or unfair competition” to the prior approval of the Thai Competition Commission. However, at present the regulations to implement this particular provision have yet to be introduced.
Foreign exchange regulations in Thailand are contained in the Exchange Control Act B.E. 2485 (1942) and related regulations. Generally, the Thai baht is freely convertible and both local and (subject to certain conditions) foreign currency accounts can be kept in Thailand. There are, however, restrictions on the transfer of funds (in local or foreign currency) out of Thailand.
The BoT has, under the notice of the Exchange Control officer, authorized commercial banks to approve certain transactions on its behalf.
Generally, the inward remittance of foreign currency into Thailand does not require prior approval, but the foreign currency must, in effect, be exchanged into local currency by authorized agents (that is, banks) or deposited into a foreign currency account with an authorized agent within a specified period.
Repatriation of profits and repayment of overseas borrowings in foreign currencies can be generally remitted upon submission of supporting evidence of the profit and repayment obligation, respectively.
Repatriation of initial capital investment is allowed in the event of a reduction of capital or liquidation upon submission of supporting evidence of the reduction or liquidation process, respectively.
Please note that these requirements change from time to time and up-to-date advice should be sought in each case.
Thai law recognizes the common categories of intellectual property rights, including copyrights, trademarks and patents and trade secrets. The Central Intellectual Property and International Trade Court was established in 1997 with jurisdiction over both civil and criminal cases relating to intellectual property rights and international trade issues. The Department of Intellectual Property of the Ministry of Commerce (DIP) is responsible for the administration of the various laws enacted for the protection of intellectual property rights.
Under the Copyright Act B.E. 2537 (1994) (Copyright Act), an author gains automatic protection over his or her copyright work. The Copyright Act has a wide definition of “works” that are protected, including literary works, dramatic works, visual and graphic arts, musical works, audio-visual works, cinematic works, sound recordings and broadcasts. Thailand, as member of the Berne Convention, is obliged to protect copyright works of other member states. Although not required to receive protection under the Copyright Act, copyright works can be registered with the DIP for evidentiary purposes.
The Copyright Act protects copyright works against infringement by unauthorized reproduction, adaptation, publication and use. Generally, protection under the Copyright Act lasts during the lifetime of the author and for 50 years after the death of the author.
The owner of a registered trademark receives protection under the Trademark Act B.E. 2534 (1991) (Trademark Act). The Trademark Act defines a “trademark” as a symbol used (or proposed to be used) in respect of a good, to distinguish that good from goods under another trademark. In order to receive protection under the Trademark Act, a trademark must be registered with the Trademark Registrar within the DIP. Any licensing and/or assignment of a registered trademark must also be registered with the DIP in order to receive protection under the Trademark Act.
The Trademark Act protects registered trademarks against infringement by counterfeits and imitations. Generally, protection under the Trademark Act lasts for ten years after the date of the application and can be renewed for additional ten-year periods by submission of an application within the prescribed period.
The owner of a registered patent receives protection under the Patent Act B.E. 2522 (1979) (Patent Act). The Patent Act protects three categories of patents: invention patents, design patents and petty patents. In order to receive protection under the Patent Act, a patent must be registered with the Patent Registrar within the DIP. Any licensing and/or assignment of a registered patent must also be registered with the DIP in order to receive protection under the Patent Act.
The Patent Act protects registered patents against infringement by making, using, selling, keeping for sale or importing the patented products or the products produced using the patented process. Generally, protection of inventions and designs lasts for 20 years and ten years, respectively, from the date of filing and neither can be renewed. Protection of petty patents lasts for six years, but can be renewed twice for periods of two years for each renewal.
The owner of a “trade secret” receives protection under the Trade Secret Act B.E. 2545 (2002) (Trade Secret Act). The Trade Secret Act defines “trade secret” to include the method or process of manufacturing, price lists and customer database. A trade secret need not be registered to receive protection.
The Trade Secret Act protects the trade secret owner from infringement by disclosure, deprivation or usage of trade secret without the consent of the owner. Generally, protection of trade secret lasts so long as it remains a trade secret under the Trade Secret Act.
Consumer protection law
Specific protections for consumers are found in various acts, including the Consumer Protection Act B.E. 2522 (1979) (CPA) and the Unfair Contract Terms Act B.E. 2540 (1997) (UCTA), and more recently the Liability for Damages Caused by Unsafe Goods Act B.E. 2551 (2008) (PLA) and the Consumer Case Procedure Act B.E. 2551 (2008) (CCPA).
The CPA governs advertising and labelling of products and the terms of certain specified types of agreements, including hire purchase and condominium purchase agreements.
The UCTA empowers the court to amend specific categories of contracts made on terms which the court regards as excessively advantageous to the business operator. The court is able to consider various factors (including, good faith of the parties, bargaining power, economic status and past practice) in enforcing the relevant contract to the extent that it is fair and reasonable. The specific categories of contracts covered under the UCTA include consumer contracts, hire purchase contracts and standard term contracts.
The PLA allows any person who suffers damage from an unsafe product to file a claim against the manufacturer, importer or seller of the product. It also shifts the burden of proof from the consumer and allows the consumer to claim for emotional distress.
The CCPA sets out the procedures to be followed in “consumer claims”, aimed at making it easier for consumers to bring an action to the court, including shortening the timeframe. The definition of “consumer claims” under the CCPA is very wide and includes claims under the PLA and other categories of claims between a consumer and business operators.
In addition, the TCA also protects consumers against various restrictive trade practices, including anti-competitive behavior and abuses of dominant position (see above).