Buying a BOI-Promoted Company: Due Diligence Before the Share Transfer

Who this is for, and the short answer

This guide is for an investor, or its advisers, buying the shares of an existing Thai company that holds one or more BOI promotion certificates. The attraction is usually the certificate itself: tax privileges, machinery already installed, a project already running.

The short answer is that you are buying the company's whole BOI history, not just its privileges. The certificate stays with the company, so any past breach, unfiled report or unauthorised change comes with it. And the change of ownership is itself something BOI cares about. Do the BOI diligence before you sign, not after.

This guide covers the acquisition angle only. For what conditions, reporting and revocation mean in general, see living with promotion after approval. For the sale mechanics themselves, see our business sale service.

1. Share purchase or transfer of the project: BOI treats them differently

Settle the deal structure first, because the BOI consequences differ.

• Share purchase. The promoted company is the same legal entity before and after. The certificate stays in place. What changes is who owns it, and BOI's published guide lists a change in the shareholding structure among the amendments to the document attached to the certificate.
• Transfer of the promoted activity to another company. Under the Investment Promotion Act, if the promoted person dissolves the activity, merges it with others or transfers it to others, the certificate remains valid for no more than 3 months from that event. The new operator who wants to take over the promoted activity must apply for promotion within that period. The Board may then issue a new certificate carrying the rights that would remain to the original holder, or may withdraw the rights.

For most buyers, a share purchase is usually the smoother route precisely because the certificate does not have to be re-issued. But it is also why you inherit everything. If you are tempted to buy only the plant and customers instead, treat that as a new BOI application with a hard clock, not as a shortcut.

2. Get and read every certificate

Ask the seller for the full file, and read it as a set of conditions, not a trophy.

1. Every promotion certificate, with all amendments and attached documents, not only the latest. A company may hold several projects with different conditions.
2. The project description: activity, capacity, location, investment amount.
3. Dated conditions: BOI's guide sets machinery import within 30 months and the request to start full operation within 36 months of the certificate date, but your certificate may state other periods or special conditions. Read the one you are buying.
4. Specific conditions, including any requirement about Thai or foreign shareholding, standards or reports. Confirm whether the incoming shareholding still satisfies them.
5. Whether full operation has been approved yet. A project that has not reached that milestone still has dated obligations ahead of it, and those become the buyer's problem.

Red flag: a seller who cannot produce the amendment history. Shareholder, capacity or location changes that were never put through BOI mean the certificate may not describe the business any more.

3. Reports and outstanding conditions

BOI's guide says that promoted projects report through the e-Monitoring system: projects that have not yet applied for full operation are asked for a progress report each February and again each July, and projects that have applied are asked for a performance report each July. Verify the current schedule on boi.go.th before relying on it.

Ask for:

• copies of each report filed and the system confirmation
• any BOI letter, warning or request for explanation
• evidence of compliance with any condition named in the certificate

Our practical advice: have the seller's finance lead walk you through the last cycle. A company that cannot show its filings has probably not been managing the certificate, and that is the best predictor of what else is missing.

4. Machinery and raw materials

Duty privileges are where historic breaches hide, and they are the part with a money consequence.

• Machinery. The Act prohibits, for a period fixed by the Board of not less than 5 and not more than 15 years, using duty-exempt machinery for anything other than the promoted activity, letting anyone else use it, or moving the factory to a locality other than the one in the certificate. Selling, mortgaging, leasing or moving it needs the Board's permission.
• Imported raw materials. BOI's guide describes approval of the master list, the production formula and material usage balances through its online system. Ask for the current stock and balance records, and have your accountants reconcile them against the physical stock.

Check with a site visit: is the machinery on the approved list where it should be, used only for the promoted activity? Is any of it pledged to a lender, shared with an affiliate or already sold? Each of those may need Board permission that nobody applied for.

Our practical advice: if your post-closing plan involves moving production, consolidating lines or sharing equipment with another group company, put that on the table now and ask BOI first.

5. Past breaches and the claw-back risk

The Board has the power to withdraw the rights and benefits, in whole or in part, where the promoted person fails to comply with the conditions. Where the failure was unintentional, the Act provides for a written warning and a period to remedy before the Board acts.

The consequence you must price in: if the tax and duty privileges on imports are withdrawn in whole, the Act treats the company as if it had never had the exemption or reduction. It pays the duties on the basis of the condition and price of the goods and the rates at the date of import. If they are withdrawn in part, the company pays on the withdrawn part, and it must contact customs within 1 month.

Because you are buying the company, that liability would be yours. Ask the seller directly, in writing, whether any warning, show-cause letter or withdrawal has ever been received, and make the answer a warranty.

6. How much corporate income tax exemption is actually left

The exemption is not simply "eight years from today". Verify these points from the certificate and the company's records:

• The Act measures the exemption from the date the promoted activity first derived income, not from the certificate date, and BOI's guide repeats that the period is counted from the first revenue after promotion.
• Many exemptions are capped by reference to the investment capital (excluding land and working capital). Whether the cap has already been used up matters as much as the years remaining.
• The exemption covers the promoted activity only, so the company's accounts must separate promoted from other income.

Ask for the BOI tax-incentive approvals, the company's tax computations for the exempt years and a schedule of the cap used to date. Have your tax adviser model the real remaining benefit before agreeing the price, and see our accounting and tax service.

7. Foreign staff after the change

Foreign specialists working on a promoted project are approved against positions in the project, not as individuals. If the company's work permit staff rely on the BOI channel, check before closing: whose positions are approved, when they expire, and whether the project's reporting position is clean. Any restructuring after closing should be checked against these approvals first. The BOI work permit and visa guide explains the channel.

8. Putting BOI into the share purchase agreement

Our practical advice, not a legal requirement. The structure that tends to work:

1. Conditions precedent: delivery of the full BOI file; any BOI amendment or confirmation needed for the shareholder change; consent from BOI where a certificate condition requires it.
2. Warranties: certificates valid and unrevoked; all dated conditions and reports met; no warning or withdrawal; machinery used only for the promoted activity and not charged or transferred; income of the promoted activity separately accounted for.
3. Specific indemnity for duty and tax clawed back for pre-closing breaches, outside the general liability cap, with a longer claim period.
4. Retention or escrow from the price, sized to the duty exposure your due diligence finds.
5. Pre-closing covenants: no changes to the project, machinery or shareholders without your consent.
6. Seller cooperation for filings and BOI meetings after closing.

If several investors are buying together, settle the cap table and a shareholders' agreement first; see the multi-founder shareholding guide.

Further reading

• Living with promotion after approval: conditions, reporting and withdrawal
• Foreign founders in a BOI company: shareholding decisions
• Work permits and visas through the BOI channel
• The complete guide to foreign investment in Thailand

A BOI certificate is not an asset you buy. It is a record of compliance you inherit, so audit the record before you pay for the privilege.

We advise buyers and sellers on acquisitions of BOI-promoted companies, from due diligence to the share purchase agreement and BOI amendments. Initial consultation is free — call +66 92 254 2045 or send us the details. See also our business sale service and contracts and documents service.

This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.