Legal Due Diligence Before Buying a Business in Koh Samui

Legal due diligence is not simply a review of the seller’s company registration documents. Instead, it is a structured investigation into the company, assets, premises, licences, employees, contracts, debts, disputes, taxes, and regulatory position of the target business. This article provides general educational information about business acquisitions under Thai law. It does not replace legal, tax, accounting, engineering, or case-specific advice.

Why Legal Due Diligence Matters in Koh Samui

Koh Samui has an active tourism and hospitality market. Consequently, businesses are frequently advertised for sale as operational packages that include a company, lease, equipment, online accounts, customer goodwill, licences, and employees. The difficulty is that these components do not necessarily belong to the same person or legal entity. For example:

• The seller may own the shares in the operating company but not the land.
• The premises may be held under a lease signed by a different company.
• A hotel licence may have been issued to a particular licence holder and may not automatically follow the sale.
• Buildings or extensions may have been constructed without complete approvals.
• Restaurant, alcohol, entertainment, signage, or tourism permissions may be registered in another name.
• Online booking accounts and intellectual property may belong personally to the founder.
• Employees may have accrued statutory benefits or unpaid entitlements.
• The company may owe taxes, social security contributions, suppliers, landlords, or lenders.

A buyer who checks only the revenue and physical appearance may therefore acquire a company that cannot legally continue its main activity.

Asset Purchase or Share Purchase?

One of the first legal questions is whether the buyer will purchase the business assets or acquire shares in the company that operates the business. Crucially, the choice affects the buyer’s exposure to liabilities, the documents required, the treatment of employees, the tax consequences, and whether contracts or licences must transfer. This decision often sits at the heart of any Thai business acquisition and M&A transaction.

Buying the Company’s Shares

In a share purchase, the buyer acquires shares in the existing Thai company. The company itself continues to own its assets and remains a party to its contracts, which can make operational continuity easier. Nevertheless, the company also keeps its historical liabilities. These may include:

• Unpaid corporate income tax, VAT, or withholding tax
• Employee claims and accrued benefits
• Contractual debts, loans, and guarantees
• Regulatory violations and civil litigation
• Undisclosed related-party transactions
• Penalties arising from conduct before completion

Thai private limited companies, their shares, directors, meetings, accounts, and liquidation are principally regulated by the Civil and Commercial Code. A share purchase therefore requires a detailed review of the target company’s full history, not merely the assets the buyer intends to use.

Buying Selected Business Assets

In an asset purchase, the buyer instead selects particular assets and rights, such as equipment, stock, furniture, branding, customer databases, vehicles, or contractual rights. An asset acquisition may help isolate the buyer from some historical company liabilities. However, the buyer must first confirm that each asset is owned by the seller and can legally transfer. In practice, the buyer may also need:

• A new lease or the landlord’s consent
• New operating licences
• Assignment or replacement of supplier contracts
• Transfer of employees with the required legal arrangements
• New tax and social security registrations
• Transfer of domain names, vehicles, and other registered assets

The tax treatment of a share sale and an asset sale can differ materially. Thai Revenue Department guidance confirms, for example, that instruments transferring shares are generally subject to stamp duty calculated under the statutory schedule. Therefore, the transaction structure should be settled only after both legal and tax review.

1. Verify the Seller and the Target Company

The buyer should first confirm exactly who is selling the business and whether that person or entity holds authority to do so. For a Thai limited company, the investigation normally includes the company affidavit, memorandum and articles of association, registered capital, shareholder lists, share register and certificates, director appointments, authorised-signatory conditions, registered-office information, historical filings, annual financial statements, and meeting minutes and resolutions.

Next, the buyer should compare the information registered with the Department of Business Development against the company’s internal corporate records. Differences between the official shareholder list, share certificates, share register, and actual funding arrangements require careful investigation. The buyer should also confirm whether any shares are pledged, disputed, held under side agreements, or subject to purchase options. Where the seller is an individual claiming to sell a business operated through a company, the buyer must determine whether that individual owns the relevant assets personally or is merely a shareholder or director.

2. Examine Foreign Ownership Restrictions

Foreign investors must assess whether the business activity is restricted under the Foreign Business Act B.E. 2542 (1999). A company may be treated as foreign under that legislation when foreigners hold half or more of its capital. Certain activities are prohibited or restricted, while others may require a Foreign Business Licence, a Foreign Business Certificate, investment promotion, or treaty-based protection. Importantly, the analysis must focus on the target company’s actual activities, because the broad objectives written in its registration documents do not by themselves prove that every activity is legally permitted. The buyer should therefore examine:

• The nationality of direct and indirect shareholders
• The origin of shareholder funding
• Voting rights, reserved matters, and director-appointment rights
• Loan arrangements and profit-distribution rights
• Control exercised under shareholder or side agreements
• Any Foreign Business Licence, Certificate, or Board of Investment promotion
• Whether the company operates outside its approved scope

Thai authorities actively investigate illegal nominee arrangements used to circumvent foreign-business restrictions. A structure is not compliant merely because Thai nationals hold 51% of the registered shares; those Thai shareholders must be genuine investors rather than persons holding shares on behalf of a foreigner. The enforcement landscape around nominee shareholding and landholding continues to tighten.

3. Investigate Land, Buildings, and the Business Premises

Real-estate risk is particularly important for Koh Samui businesses, because the commercial value of a resort, restaurant, villa project, or beach venue may depend almost entirely on its location. Foreigners are generally restricted from owning land in Thailand, subject to limited statutory exceptions. Accordingly, a foreign buyer should never assume that purchasing the operating company automatically confers a lawful right to control or use the underlying land.

Land Title Review

Where land is owned by the target company or seller, the buyer should obtain an official title search and inspect the relevant title document. The review should identify the registered owner, the type of land title, boundaries and area, and any mortgages, servitudes, leases, usufructs, superficies rights, court orders, attachments, or restrictions affecting access or use. In addition, a physical survey may be appropriate where boundaries, road access, encroachment, coastline issues, or adjoining construction create uncertainty.

Lease Review

Many businesses in Koh Samui operate from leased premises, so the buyer should not rely only on the remaining lease period stated by the seller. Instead, the lease must be reviewed for the identity and authority of the landlord, the description of the premises, commencement and expiry dates, rent and adjustment provisions, deposit and key-money arrangements, permitted use, assignment restrictions, change-of-control clauses, renewal rights, construction and alteration rights, repair and insurance obligations, early-termination and default provisions, and ownership of improvements at expiry.

Under the Civil and Commercial Code, a lease of immovable property for more than three years generally must be registered in writing with the competent Land Office to be enforceable beyond three years. A seller’s promise that “the landlord will approve the buyer later” is not an adequate substitute for written landlord consent or a replacement lease executed as a condition of completion.

4. Check Construction and Building Compliance

Possession of land or a lease does not prove that the buildings can lawfully be used for the target business. Due diligence should therefore examine building permits, approved architectural plans, construction approvals, occupancy permissions, modification permits, zoning restrictions, environmental requirements, fire-safety systems, wastewater arrangements, public access, parking, pool and structural compliance, and any coastal or protected-area restrictions.

Above all, the actual building should be compared with the approved plans. Extensions, additional floors, rooftop structures, kitchens, pools, staff accommodation, or converted rooms may have been added without approval. A corporate acquisition does not cure an existing building-control violation. Consequently, technical inspection by a qualified architect, engineer, or surveyor may be necessary in addition to legal document review.

5. Verify Every Material Licence and Permit

A business may require several approvals depending on its activities. The buyer should prepare a licence matrix identifying each approval, the licence holder, the issuing authority, the expiry date, the operating location, the conditions, and the transfer process. Potential approvals include:

• Hotel licence and tourism-business licence
• Restaurant or food-sale permission and alcohol-sale licence
• Entertainment-place licence and spa or health-establishment licence
• Factory licence, signage permission, and local public-health permission
• Fire-safety and environmental approvals
• Work permits for foreign staff

Under the Hotel Act B.E. 2547 (2004), hotel operation is a licensed activity, and the statutory process considers the location, size, nature, facilities, and standards of the operation. A buyer should not assume that a licence automatically transfers with the shares, premises, brand, or physical assets. Some approvals attach to a specific company, operator, manager, building, or location, so a change in any of these may require prior approval, amendment, notification, or a new application. For accommodation businesses in particular, the review should confirm whether the property is legally operating as a hotel or qualifies under an applicable exemption. A listing on an online booking platform is not proof of regulatory compliance.

6. Review Material Contracts

The buyer should examine every contract that is important to the business’s continued operation. These may include leases, hotel-management and franchise agreements, supplier and booking-platform contracts, tour-operator agreements, loans and equipment leases, insurance policies, utility agreements, construction contracts, marketing agreements, intellectual-property licences, and customer deposit arrangements.

Particular attention should go to change-of-control and assignment clauses. A share sale may trigger a termination right even when the company remains the same contracting party, whereas an asset sale may require formal assignment and the counterparty’s consent. In addition, the buyer should identify contracts that can be terminated on short notice, contain unusually high penalties, require minimum purchases, are in default or unsigned, depend on personal relationships with the seller, include director or shareholder guarantees, or cannot be assigned without consent. Where an important contract cannot continue after completion, the purchase agreement should make replacement or counterparty consent a condition precedent.

7. Conduct Employment and Immigration Due Diligence

Employees can represent both operational value and significant legal exposure. Therefore, the buyer should review employment agreements, employee lists, positions and commencement dates, wages, service charges, bonuses and benefits, work rules, payroll records, leave and overtime records, Social Security Fund registration and payments, workers’ compensation compliance, disciplinary records, pending complaints, accrued severance exposure, and foreign-employee visas and work permits.

The Labour Protection Act regulates wages, working time, holidays, leave, termination, severance, and employer obligations. In a share purchase, the employing company normally continues to exist, but its existing employment liabilities remain with it. In an asset transaction involving a transfer of employment, the buyer must analyse employee consent and continuity under the applicable labour provisions. Foreign staff require separate verification, because holding shares or becoming a director does not itself authorise a foreign national to work in Thailand; appropriate immigration status and work authorisation may still be required.

8. Examine Tax and Accounting Records

Legal due diligence and financial due diligence should proceed together. The buyer should request and reconcile audited financial statements, corporate income tax, VAT and withholding-tax filings, payroll tax records, social security payments, tax invoices, fixed-asset registers, bank statements, shareholder and director loan accounts, related-party transactions, tax assessments, Revenue Department correspondence, outstanding penalties, and property-related and signboard taxes where applicable.

Critically, the investigation should determine whether the company’s reported revenue matches its bank deposits, booking-platform records, point-of-sale records, and tax filings. Unexplained cash transactions, personal expenses recorded as company costs, undocumented shareholder loans, or incomplete VAT records can create substantial exposure. Thailand imposes VAT on taxable supplies unless an exemption applies, while certain specified activities fall under specific business tax instead. Because the sale of shares, individual assets, land, buildings, goodwill, and an entire business may produce different tax results, the buyer should obtain transaction-specific tax advice.

9. Search for Litigation, Debt, and Security Interests

The seller should disclose all existing and threatened disputes. Even so, the buyer should investigate independently where possible. The review may cover civil proceedings, criminal complaints connected with the business, labour and tax disputes, administrative proceedings, land and boundary disputes, landlord and customer claims, construction and intellectual-property disputes, enforcement proceedings, and bankruptcy or rehabilitation issues. The buyer should also confirm whether company assets are mortgaged, pledged, leased, financed, attached, or subject to third-party ownership claims.

Thai procedural law governs civil claims, evidence, judgments, interim measures, and enforcement against assets. Criminal complaints may also arise where documents, assets, or representations are allegedly fraudulent, although commercial non-performance does not automatically constitute a criminal offence. Unresolved shareholder disputes in particular can disrupt a sale and should be investigated early.

10. Confirm Ownership of Intellectual Property and Digital Assets

Many Koh Samui businesses depend heavily on digital goodwill. Due diligence should therefore establish ownership and control of trade names, trademarks, logos, websites, domain names, social-media and booking-platform accounts, customer databases, photography and video, marketing materials, telephone numbers, email accounts, and software subscriptions.

Frequently, the founder has registered these assets personally, even when the company paid for their development. The transaction documents should clearly identify which digital and intellectual-property assets will transfer. In addition, customer and employee data must be handled in compliance with Thailand’s Personal Data Protection Act. Disclosure of personal data during due diligence should be limited, secured, and supported by an appropriate lawful basis.

Red Flags When Buying a Koh Samui Business

A buyer should proceed cautiously where any of the following appears:

• The seller refuses to provide company or tax records.
• The business depends on a verbal lease, or the landlord has not approved the transaction.
• The company’s shareholders did not fund their own shares.
• Foreign ownership is concealed through nominee arrangements.
• The building differs materially from approved plans.
• The business operates without a current licence, or a licence belongs to another company or individual.
• Revenue presented to the buyer does not match tax filings.
• Employees are paid partly off the payroll.
• Key assets are registered personally to the seller.
• Large deposits must be paid before document review.
• The seller insists that compliance problems are normal or never enforced.
• The purchase price is allocated without tax advice, or the agreement contains no meaningful warranties or indemnities.

One red flag may be capable of correction. However, several connected red flags may indicate that the buyer is not acquiring the lawful and transferable business the seller has represented.

Protecting the Buyer in the Purchase Agreement

The findings from legal due diligence before buying a business in Koh Samui should feed directly into the transaction documents. A properly structured purchase agreement may include a clear identification of the shares or assets being purchased, conditions precedent, required landlord and regulatory consents, seller and tax warranties, indemnities for identified liabilities, completion deliverables, escrow or retention arrangements, price adjustments, restrictions on the seller before completion, non-compete and non-solicitation provisions, employee-transfer arrangements, allocation of taxes and fees, post-completion cooperation, termination rights, and governing-law and dispute-resolution clauses.

Warranties should not replace due diligence. They provide contractual protection, yet their practical value depends on the seller’s financial ability to meet a future claim. For high-risk issues, the safer approach may therefore be to require correction before completion, retain part of the purchase price, or exclude the liability from the transaction altogether.

Checklist: Legal Due Diligence Before Buying a Business in Koh Samui

Before completing the acquisition, the buyer should be able to answer the following questions:

1. Who legally owns the company, assets, brand, and premises?
2. Is the seller authorised to complete the transaction?
3. Is the proposed foreign ownership structure lawful?
4. Is the lease valid, registrable where necessary, and transferable?
5. Do the buildings comply with approved plans and permitted use?
6. Are all material licences current and usable after completion?
7. Will important contracts continue after the acquisition?
8. Are employee records and statutory payments complete?
9. Are visas and work permits valid for foreign personnel?
10. Are tax filings consistent with the business’s actual revenue?
11. Are there undisclosed debts, securities, disputes, or guarantees?
12. Can the intellectual property and digital accounts be transferred?
13. Does the purchase agreement allocate each identified risk?
14. Have legal, accounting, tax, and technical findings been reconciled?

Frequently Asked Questions

Premises, Licences, and Liabilities

Buying a villa marketed as a rental business? First check whether a rental villa requires a hotel licence in Thailand.