Are deeds of transfer from the Thai shareholders to the foreign owners legal?

You are currently viewing Are deeds of transfer from the Thai shareholders to the foreign owners legal?

Deeds of transfer from Thai shareholders to foreign owners are legal in Thailand. The transfer of shares from Thai shareholders to foreign owners is allowed, subject to certain conditions and regulations. The specific requirements and processes for share transfers may vary depending on the type of company and the applicable laws and regulations.

However, the use of “nominee” shareholders is expressly forbidden by the Foreign Business Act of 1999. It is a criminal often with significant penalties including fines and imprisonment. Prior to the introduction of the revised act of 1999 it was common to utilize loan-pledge agreements as a method for foreign minority shareholders to control majority Thai shareholders.  This entails the Thai shareholders borrowing funds from the foreigner and “pledging” the shares back as security. However, the Act of 1999 made this practice illegal. While enforcement of the Thai nominee prohibitions of the Foreign Business Act has been infrequent, the practice is risky particularly if a company has engaged the use of professional nominees whose name appears on multiple company registrations.

In general, the transfer of shares in a Thai company involves the following steps:

  1. Shareholder Agreement: The existing shareholders and the prospective foreign owner need to reach an agreement on the transfer of shares. This agreement may include the terms and conditions of the transfer, the purchase price, and any other relevant provisions.
  1. Approval by the Company: The company’s board of directors or shareholders, depending on the company’s structure, must approve the transfer of shares. This is typically done through a meeting or resolution where the transfer is acknowledged and recorded.
  1. Share Transfer Documentation: The parties involved need to execute a formal share transfer agreement or deed of transfer. This document outlines the details of the transfer, including the names of the transferring and acquiring parties, the number or percentage of shares being transferred, and any conditions or restrictions associated with the transfer.
  1. Amendment of Company Registration: Once the share transfer is completed, the company’s registration documents must be updated to reflect the change in share ownership. This typically involves filing the necessary forms and supporting documents with the Department of Business Development (DBD) or relevant authorities.
  1. Compliance with Foreign Ownership Restrictions: It’s important to note that certain industries in Thailand have specific restrictions on foreign ownership. If the company operates in a restricted industry, the foreign owner must ensure compliance with the applicable laws and obtain any necessary licenses or approvals.

It is recommended to engage legal professionals or experienced advisors who specialize in Thai corporate law to guide you through the share transfer process and ensure compliance with all legal requirements. They can assist with drafting the necessary documentation, advising on any industry-specific regulations, and facilitating a smooth transfer of shares between Thai and foreign shareholders.

Let the Startup Specialists  handhold you for doing business in Thailand.

Interesting Reads : 

Take a FREE Online Consultation here or get essential tips by downloading this e-Book on how to Startup in Thailand.