Strategic alliances and joint ventures can be key elements of a business strategy. In order to comply with the Thai ownership quota or to ease the startup, some foreign companies enter into joint ventures with Thai companies. On the other hand, Thai companies may need help to create new or to expand existing business projects and join other entities with similar objectives.
There are two forms of joint ventures:
1.Incorporated Joint Ventures
In Thailand, a joint venture can be a Thai private limited company that is owned by two or more companies or groups of shareholders. Joint ventures meet no specific conditions. Companies which are majority foreign-owned are treated as foreign and may face some restrictions.
It can be registered as a legal entity and the partners of the joint venture hold shares in an agreed proportion. The registration process and fees are similar to those in the formation of an ordinary limited company.
2. Unincorporated Joint Ventures
For a specific project, a company which cannot handle this alone can join another company, juristic partnership or individuals with similar objectives to finish it.
Is required that at least one of the joint venture partners be a juristic entity and the joint venture must have a joint investment and a sharing of profit or loss under the joint venture agreement. In addition, the partners have joint liability to third parties dealing with the joint venture.
The joint venture may engage in any business activities, but it cannot be registered as a legal entity. The Revenue Department, however, treats it as a standalone taxable entity.
A foreign company which participates in an unincorporated joint venture as a partner is required to obtain an Alien Business Permit and/or create a branch office in Thailand The foreign partner does not need to register for his own taxpayer identification card. Only the joint venture must apply for a taxpayer identification card and the registration process may take about 5-7 weeks to complete.
Joint Venture Agreements
Joint ventures are usually governed by legal agreements similar to those used in other countries (e.g., Memoranda of Understanding, Confidentiality Agreements, Joint Venture Partner Agreements).
A joint venture agreement will set out all the parties’ rights and obligations, the objectives of the joint venture, the initial contributions of the partners, the right to the profits and responsibility for losses. This may also contain provisions for technical assistance, intellectual property licensing, and shareholders’ loans to the company.