The core answer
Thai legal due diligence is only as useful as its scope. Before Thai counsel opens the data room, the instructing firm should define what is reviewed, against what threshold, over what period and in what format. The report should then put deal-stopping issues on its first page, not in an appendix.
The rule (Foreign Business Act, Land Code and labour law). Several Thai rules can change a deal's structure, not just its price. Under the Foreign Business Act B.E. 2542 a company in which foreigners hold half or more of the shares is treated as a foreigner and needs a licence or another lawful basis for restricted businesses, and Thai shareholders who hold shares on behalf of a foreigner commit an offence. Under the Land Code foreigners, including companies treated as foreign, generally cannot own land except with specific permission. Under the Civil and Commercial Code an employee's transfer to a new employer needs the employee's consent, and the Labour Protection Act B.E. 2541 carries employees' rights over when an employer is transferred or merged.
Our practical view. Agree a written scope with exclusions, a materiality threshold and a red-flag rule. Ask for a short red-flag report early and the full report later. Keep valuation, tax and technical review with the advisers who own them.
For a deal involving a BOI-promoted target, see also buying a BOI-promoted company: due diligence before the share transfer.
1. What should the instructing firm define before Thai counsel starts?
| Item | What to decide | Why it matters |
|---|---|---|
| Target and structure | Share or asset purchase; which entities | Decides which consents and transfers are needed |
| Timetable | Data room opening, red-flag date, signing, closing | Sets when issues must surface |
| Materiality | The level below which contracts and claims are summarised, not reviewed in full | Keeps time and cost in proportion |
| Lookback period | How many years of litigation, filings and contracts | Older issues may still be live |
| Reliance | Who may rely on the report: buyer, lenders, co-investors | Affects the engagement and the addressees |
| Format | Red-flag report, full report, comments on disclosure schedules | The deal team reads the summary first |
| Language | English report citing Thai documents | Key documents may need translation |
Put these in the engagement letter. If they change during the deal, for example because the structure moves from shares to assets, update the scope in writing.
2. What is in scope, and what is out?
| Area | Usually in legal due diligence | Usually outside (and who covers it) |
|---|---|---|
| Corporate: registration, shareholders, share register, minutes, articles | In | — |
| Foreign ownership and Foreign Business Act compliance | In | — |
| Material contracts: customers, suppliers, distribution, loans, leases | In, above materiality | — |
| Real property: title, leases, encumbrances | In | Surveys and environmental condition: technical advisers |
| Licences and permits: factory, BOI, FDA, sector licences | In | — |
| Employment: contracts, work rules, disputes, foreign staff | In | Payroll accuracy: accountants |
| Intellectual property: registrations and ownership | In | Freedom-to-operate opinions: specialist counsel |
| Litigation and enforcement | In, with searches listed | — |
| Personal data: policies, notices, transfers | In | IT security: technical advisers |
| Tax | Disputes and notices seen in documents | Tax exposure: tax advisers |
| Financial statements | — | Accountants (financial due diligence) |
| Valuation | — | Financial advisers |
| Foreign law: target's foreign subsidiaries, buyer's home law | — | Counsel in that country |
Write the exclusions into the engagement and repeat them in the report. Most disputes about a due diligence report are about what was never in scope.
3. What can a Thai legal due diligence report not tell you?
- No single litigation database. No one public register covers every court. The report should list each search made, its date and its limits, and rely on a written confirmation from the target for the rest.
- Documents as provided. Thai counsel reviews what is in the data room. Missing documents are listed as missing, not assumed to be in order.
- Officials' practice. Some questions, such as whether an authority will renew a licence or approve a change, can only be answered as a view on current practice.
- Facts on the ground. The physical condition of assets, actual operations and environmental matters need site visits and technical advisers.
4. Which red flags must reach the deal team before closing?
| Red flag | Why it matters | Typical response |
|---|---|---|
| Thai shareholders who appear to hold for a foreigner | Possible nominee offence under the Foreign Business Act; the structure may be unlawful | Restructure, obtain a licence or another lawful basis, or walk away |
| Land owned by a target that is or will become foreign | Land Code restrictions | Exclude the land, restructure, or move to a lease |
| Change-of-control clauses in key contracts | Customer, supplier or lender may terminate | Consents as a condition before closing |
| BOI promotion with conditions the buyer may not meet | Privileges may be suspended or revoked | Check the promotion certificate; seek BOI approval for the change |
| Licences issued in an individual's name | The licence may not stay with the business | Transfer or reissue before closing |
| Employee transfer in an asset deal | Employee consent needed; accrued rights carry over | Plan consents and accrued liabilities |
| Guarantees, mortgages and pledges given by the target | Assets may not be free | Releases at closing |
| Pending or threatened litigation above materiality | Exposure and management time | Specific indemnity, escrow or price change |
| Related-party transactions | Value leaking out; tax questions | End or regularise them |
| Missing or late statutory filings | Fines; problems approving accounts | Fix before closing, or indemnity |
| Personal data held without a lawful basis or notices | Exposure under the Personal Data Protection Act | Remediation plan |
The responses are commercial choices for the buyer and its advisers. Thai counsel's job is to make sure each issue is seen early and explained in plain terms.
5. Sample red-flag report (fictional)
The example below is entirely fictional. The project, the companies and the findings are invented to show the format.
RED-FLAG REPORT — PROJECT EXAMPLE (fictional)
Target: Example Manufacturing (Thailand) Co., Ltd. (fictional)
Prepared for: [instructing firm] Prepared by: Thai counsel
Data room as at: [date] Status: preliminary
A. ISSUES THAT MAY AFFECT WHETHER OR HOW THE DEAL PROCEEDS
1. Shareholding: two Thai shareholders, no evidence of own funding.
Risk: may be treated as holding for a foreign shareholder
(Foreign Business Act).
Needed: source-of-funds evidence; structure advice before signing.
2. Key customer contract: customer may terminate on change of control.
Needed: customer consent as a condition before closing.
B. ISSUES FOR PRICE, INDEMNITY OR CONDITIONS
3. Factory land: owned by the target; target becomes foreign-owned
after closing. Needed: Land Code analysis and options paper.
4. Factory licence: issued in a director's personal name.
Needed: transfer to the target before closing.
C. NOT YET REVIEWED
- Employment folder not yet uploaded.
- Litigation searches: [search] done [date]; [search] pending.
D. OUTSIDE SCOPE (for other advisers)
- Tax exposure, financial statements, environmental condition.
Keep the red-flag report short. If the deal team has to read the full report to find the deal-stoppers, the format has failed.
6. How should conflicts and confidentiality be handled?
- Conflicts. Thai counsel should check conflicts against the target, the seller and major counterparties before accepting the instruction, and say early if it acts or has acted for any of them. The Lawyers Council's rules of conduct restrict a lawyer from acting for the other side in a matter in which the lawyer has already advised or learned the facts.
- Non-disclosure agreement. The data room usually sits behind the buyer's NDA with the seller. Make sure Thai counsel is covered as one of the buyer's advisers and bound by it. Thai lawyers are also bound by professional confidentiality under the Criminal Code and the Lawyers Council's rules.
- Personal data in the data room. Employee files and customer lists contain personal data protected by the Personal Data Protection Act B.E. 2562. Ask the seller to redact or anonymise where possible and let Thai counsel review samples instead of full files.
International guidance such as the IBA International Principles on Conduct for the Legal Profession is a useful common reference, but each firm stays bound by its own regulator's rules.
7. How should the engagement and budget be set?
- Scope and exclusions as in section 2, with owners for excluded areas.
- Phases: red-flag report, full report, support on the sale agreement's warranties and conditions, closing deliverables.
- An estimate per phase, with a rule for re-estimating when the data room grows or the timetable moves.
- Reliance and addressees written down.
- Fees: if you are the instructing firm, check your own professional rules before agreeing any fee arrangement with Thai counsel. This guide gives no fee figures.
8. Checklist
- Define the target, structure, timetable, materiality, lookback and reliance in writing.
- Agree scope and exclusions, and name who covers each excluded area.
- Set a red-flag date well before signing.
- Ask for each search to be listed with its date and limits.
- Require deal-stopping issues on the first page.
- Check foreign ownership, land, change of control, BOI conditions and licences first.
- Clear conflicts and NDA coverage before the data room opens.
- Agree phases and budget approvals.
Further reading
- Buying a BOI-promoted company: due diligence before the share transfer
- Land due diligence for a project site in Thailand
- Referring a Thailand matter to local counsel: an intake checklist
- Minority shareholder rights in a Thai company
Agree the scope, threshold and red-flag rule before the data room opens, and make sure deal-stoppers reach the deal team before signing, not after it.
We review Thai companies, contracts, land and licences for buyers and investors, instructed by the client directly or through its transaction counsel. For an initial consultation, call +66 92 254 2045 or send us the details. See also joint ventures, buying or selling a business and business law.
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.
