Business Contracts

In Thailand, business contracts must clearly define the rights and obligations of both parties, outlining terms and expectations. The contract must have lawful intent, meaning it cannot involve illegal activities or violate public policy. Certain agreements, such as those related to land or leases over three years, must be in writing to be enforceable. Compliance with local regulations regarding language, jurisdiction, and stamp duty is essential. Contracts should typically be written in Thai or another mutually agreed-upon language. The jurisdiction clause determines where legal disputes will be handled, and stamp duty may apply depending on the agreement’s nature. Thai law ensures that business contracts are legally binding and provides protection for both parties. These requirements help avoid legal complications and ensure enforceability under Thai law.

Startups and SMEs in Thailand often require a variety of business contracts to structure their operations and safeguard their interests. Some essential contracts include:

These agreements help businesses manage risks, define clear operational guidelines, and ensure the protection of intellectual property and financial interests.

A Shareholders’ Agreement is essential for Thai companies as it clearly defines the relationship between shareholders and sets out rules for corporate governance. It addresses critical aspects such as voting rights, outlining who has the authority to make decisions and how votes are counted. The agreement also regulates share transfers, specifying the conditions under which shareholders can sell or transfer their shares. Additionally, it determines how dividends will be distributed among shareholders and provides mechanisms for dispute resolution to handle conflicts between shareholders effectively.

Having a Shareholders’ Agreement in place helps prevent potential disruptions in business operations by establishing clear guidelines for exit strategies, including how to sell or liquidate the company. Without such an agreement, disputes between shareholders could negatively affect the company’s stability and long-term success. Therefore, it is highly recommended for companies to establish a Shareholders’ Agreement to ensure clarity and prevent conflicts. For more details on corporate governance and shareholder agreements in Thailand, visit the Thai Ministry of Commerce.

A Partnership Agreement is essential in outlining the structure of the partnership and the relationship between partners. It includes key details such as the official name of the partnership and its business objectives. The agreement also specifies the capital contributions made by each partner, detailing the amount and form of contributions, whether in cash, assets, or services. Furthermore, it outlines how profits and losses will be shared among the partners, ensuring clarity in financial matters.

In addition to financial terms, the agreement defines the management structure, detailing each partner’s role and decision-making authority within the business. It also includes mechanisms for dispute resolution, such as mediation or arbitration, to resolve conflicts efficiently. Finally, the agreement should provide clear guidelines for the termination or dissolution of the partnership if necessary. A well-drafted Partnership Agreement minimizes misunderstandings and sets out a clear framework for the partners’ responsibilities and obligations.

A Non-Disclosure Agreement (NDA) is crucial for protecting sensitive business information, such as trade secrets, customer data, and proprietary technologies. It ensures that employees, contractors, or business partners do not disclose confidential information to third parties without prior consent. One of the primary protections in an NDA is confidentiality, which obligates the recipient to keep the shared information private. The agreement also specifies the duration of the confidentiality obligation, often extending beyond the end of the business relationship.

NDAs also outline legal remedies in case of a breach, including potential financial penalties or legal actions against the violator. In Thailand, NDAs are widely used during negotiations or partnerships where sensitive information is exchanged, offering protection for intellectual property and business secrets. A well-drafted NDA is an essential tool for ensuring the confidentiality of critical business information and safeguarding competitive advantages.

A Sales Contract in Thailand must cover several essential clauses to ensure that both parties are protected:

A Loan Agreement in Thailand typically includes several essential elements that outline the terms of the loan. These elements include the loan amount, which specifies the total sum being borrowed, and the interest rate, which indicates the rate at which the borrower will repay the loan, including any terms related to compound interest. The agreement also covers the repayment terms, detailing the frequency and duration of payments, as well as any collateral pledged as security for the loan.

In addition to the financial components, a Loan Agreement will specify penalties for late payments, highlighting the consequences of missing a payment or failing to repay the loan. The governing law section ensures that the loan adheres to Thai law, which is important for enforcing the agreement in the event of a dispute. It’s essential that loan agreements comply with local regulations, particularly those concerning interest rates, which must not exceed the legal limits in Thailand. For more information, you can visit the Thai Legal Portal.

Disputes arising from business contracts in Thailand can be resolved through various methods, each offering a different approach to conflict resolution. Negotiation is the first step, where the parties engage in direct discussions to resolve the issue amicably. If negotiations fail, mediation can be employed, where a neutral third party assists the parties in reaching a mutually agreeable solution. This method is often less formal and aims to preserve business relationships.

When mediation and negotiation do not succeed, arbitration may be used. In this more formal process, an arbitrator makes a binding decision on the dispute. As a last resort, the parties may pursue legal action through the Thai courts. Many business contracts in Thailand include a dispute resolution clause that specifies the preferred method, often mediation or arbitration, to save time and costs compared to litigation.

When mediation and negotiation do not succeed, arbitration may be used. In this more formal process, an arbitrator makes a binding decision on the dispute. As a last resort, the parties may pursue legal action through the Thai courts. Many business contracts in Thailand include a dispute resolution clause that specifies the preferred method, often mediation or arbitration, to save time and costs compared to litigation.

In conclusion, business contracts are fundamental to ensuring legal clarity and protecting the interests of companies in Thailand. Whether you’re a local or foreign business, understanding the key terms and requirements of contracts like Shareholders’ Agreements, Partnership Agreements, and Sales Contracts is crucial. Properly drafted agreements help minimize risks, avoid disputes, and ensure compliance with Thai law. Themis Partner offers expert legal services to assist with drafting, reviewing, and enforcing contracts, giving you the confidence to operate securely and efficiently. Don’t hesitate to reach out for professional legal support to safeguard your business interests.