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Issues to Consider When Buying a Thai Amity Treaty Company

Transcript of the above video:

As the title of this video suggests, we are discussing the US-Thai Treaty of Amity and specifically we are discussing it in the context of a purchase or an M&A if you will, a Merger and Acquisition between perhaps a foreign company, a company here in Thailand, or individuals. It could be a corporate takeover between individuals or a small group of people of a Thai Company that has Amity Certification. 

So just for some background, the US Thai-Treaty of Amity provides National treatment to an otherwise foreign-owned Thai Company that is deemed to be an American foreign owned Thai Company. So pursuant to the Treaty, American companies receive National treatment; that is they are treated as if they were a Thai company. The legal fiction created by the Treaty itself provides this benefit and this is not withstanding the Foreign Business Act in Thailand. So a Foreign Business License is not needed by such a business but in fact an Amity Treaty Certification is needed and once the Certification is approved, once that Company is considered an Amity Company or an American Company, it will be treated in much the same way a Thai counterpart would be treated under similar circumstances. This is very beneficial again because in a sense it sort of sidesteps the restrictions under the Foreign Business Act. It allows an American Business to operate without the need of obtaining a Foreign Business License and The Amity certificate, I won't say easier but it is somewhat more straightforward, compared to a Foreign Business License. 

Now what I am talking about in this video is purchase of an Amity Company by an outside buyer. Now pursuant to the provisions of the Treaty and the interpretations of the Ministry of Commerce here in Thailand, the Company needs to maintain its "Americanness" for lack of better term. That means that the Directors need to all be either American or Thai and the majority shareholding needs to remain American or Thai. There is some discrepancy with respect to minority shareholdings being another nationality. I am not really going to get into all of that in this video, but if the majority of the company's shares are being transferred to a non-Thai or American National, there could be issues maintaining American Treaty Certification. If one falls out of certification under the Treaty, the Company then comes under the Foreign Business Act of Thailand which can have rather stringent ramifications for those in violation of it. In certain cases there can be fines and legal liability including criminal liability which could be very negative for the new business owner. 

So those who are looking to buy an Amity Treaty Company here in Thailand, it is probably a good idea to seek a legal professional’s assistance in providing due diligence services to ascertain the exact posture of the Company and to provide advice and strategy for taking over such an enterprise here in the Kingdom of Thailand.