Amalgamation – Combining Strengths to Form a New Entity

Unlocking Growth Through Amalgamation: What Businesses, Investors, and Legal Teams Must Know in Thailand 

Amalgamation is a unique legal process in Thailand that facilitates the consolidation of two or more companies into a new entity. This newly formed company assumes all the rights, obligations, and liabilities of the original entities. Applicable to both private and public limited companies, amalgamation serves as an important tool for business restructuring.  

Amalgamation of Private Limited Companies 

The amalgamation of private limited companies in Thailand involves a methodical approach designed to maintain transparency and protect creditors. The process begins with the approval of a special resolution by the shareholders of the companies intending to amalgamate. This is followed by a public notification stage, where the proposed amalgamation is advertised in a local newspaper, and creditors are informed. Creditors are granted a 60-day period to raise objections, during which the company must address any claims or provide adequate security to proceed. 

After addressing potential creditor objections, a joint meeting of the shareholders of the amalgamating companies is convened. During this meeting, decisions regarding the structure, governance, and operational framework of the new company are made. The process is finalized with the registration of the amalgamation at the Ministry of Commerce. Upon registration, the original companies are dissolved, and the new entity is officially established. This comprehensive procedure ensures that all stakeholders are informed and protected throughout the process. 

Amalgamation of Public Limited Companies 

The amalgamation process for public limited companies shares many similarities with that of private companies but includes additional safeguards for minority shareholders. As with private companies, the process begins with obtaining special resolutions from the shareholders of each public company involved. However, public limited companies must also address the rights of minority shareholders who object to the amalgamation. These shareholders have the option to require the company to purchase their shares. The share price is determined either by the last traded price for listed companies or by an independent valuation for unlisted companies. 

If minority shareholders choose not to sell their shares, they become part of the new merged company. Similar to private companies, public companies must notify their creditors and publish a notice in a local newspaper. Any objections raised by creditors must be addressed before moving forward. A joint shareholders’ meeting follows, during which key decisions regarding share allotment and the capital structure of the new company are made. The process concludes with the registration of the amalgamation, resulting in the dissolution of the original companies and the transfer of their rights and liabilities to the new entity. 

Foreign Direct Investment Considerations 

Foreign investors seeking to participate in or initiate amalgamations in Thailand must navigate additional legal and regulatory requirements. Thailand’s Foreign Business Act (FBA) restricts foreign ownership in specific sectors, and these restrictions apply equally to the new company formed through amalgamation. It is therefore crucial for foreign companies to assess whether the amalgamated entity will operate in a restricted sector and ensure compliance with the FBA. 

Moreover, if the amalgamation leads to the new entity exceeding the permissible foreign ownership thresholds, the company must apply for foreign business licenses or certificates, depending on the nature of the business. In certain cases, approval from the Board of Investment (BOI) may be required to secure investment incentives and exemptions. Foreign investors should also consider the tax implications of amalgamation, including the potential transfer of assets and liabilities that might trigger corporate income tax or value-added tax (VAT) obligations.  

Taxation 

When it comes to taxes, amalgamations and mergers in Thailand are treated differently under the Revenue Code, even though they are quite similar in legal terms under the Civil and Commercial Code (CCC). An amalgamation involves merging two or more companies into a new entity. However, the Revenue Department views a merger as an “entire business transfer,” which creates unique challenges for corporate registration and tax exemptions. 

According to Revenue Department Ruling No. GorKor 0702/1112 (dated February 21, 2024), a merger under the CCC is not considered an amalgamation for tax purposes. Instead, it is categorized as an entire business transfer. To qualify for tax exemptions in such cases, the transferor company must dissolve and begin the liquidation process within the same accounting year when the entire business transfer takes place. This requirement highlights the importance of timing and aligning the legal and tax aspects of the transaction. 

From a registration standpoint, it remains unclear whether a merger should follow the same process as an amalgamation, where all rights and obligations automatically transfer to the new entity. Alternatively, it may need to follow the tax perspective, requiring the dissolving companies to register separately to meet the criteria for tax exemptions. This uncertainty can complicate the process for businesses trying to comply with both legal and tax rules. 

Conclusion 

Amalgamation serves as a robust mechanism for business transformation in Thailand. The process is designed to facilitate business growth while safeguarding the rights of stakeholders. However, the legal and procedural intricacies necessitate expert legal guidance to ensure compliance and smooth execution. Businesses planning an amalgamation can leverage this process to achieve strategic goals while navigating the challenges it presents. 

How Our Firm Can Support Your Amalgamation Strategy 

Amalgamation offers powerful opportunities, but navigating the legal, regulatory, and tax landscape in Thailand requires precision and foresight. Our team of corporate and tax lawyers specializes in structuring seamless amalgamations for both local and foreign-invested companies. 

Whether you’re planning a strategic merger, assessing FDI restrictions, or seeking to ensure compliance with Revenue Department rulings, we deliver tailored legal solutions that safeguard your business and unlock long-term value. 

Contact us today to discuss how we can support your next step in corporate transformation.