M&A Monthly Report : July 2018


Retirement and severance pay

Prior to the amendment of the Labor Protection Act, if company’s work rules or employment contract did not stipulate a retirement age, in case, employees who work until they feel unable to continue to work and resign, they may not receive severance pay because it would be considered as a voluntarily resignation.


However, with the amendment of the Labor Protection Act B.E. 2560 (Issue 6), Section 118/1  was added to enforce the mandatory retirement age in case it was absent from the employer’s work rules or employment contract by stipulating a “default or deemed retirement age” of 60 years old. With this amendment, the employees now have the ability to retire when they reach 60 years of age or at later date and with the right to receive the severance pay.


This default retirement age will not prevent employer from rehiring employees who retire upon reaching the default retirement age.  Employer can rehire with new conditions of work after paying severance. However, after the rehired period is completed and the employees do not wish to continue working, they are not entitled to receive retirement pay as they are eligible for retirement benefits at one time only.


Please note that failure to comply with this Article 118/1, may face a jail term up to 6 months or fine up to 100,000 Baht.


Foreign Business

Price adjustment contract by a foreign company

Q: A foreign company registered in Thailand is operating a BOI promoted business to manufacture metal stamping parts for sale to auto parts manufacturers. To operate this business, the company buys steel at a price set by both automobile manufacturer and steel manufacturer. In the event of automobile manufacturer and steel manufacturer are not able to quote the steel

prices on schedule, the company will use the estimated price. Once the actual price of the steel is known, there may be a refund or an additional charge for the difference.

In this case, the company understands that such a business is not considered as doing the service according to the Annex List of the Foreign Business Act B.E. 2542, as the company has only entered into a contract of steel price adjustment under the agreement between the company and automobile manufacturer, and does not provide any services on risk prevention or risk management of steel price. Thus, the company would like to confirm whether the understanding is correct or not.

A: The execution of such price adjustment contract is deemed as the cost stability management of the steel price and it is also considered as providing business benefit to the counterparty. Therefore, such a business is considered as doing the service business under Annex List III (21) of the Foreign Business Act B.E. 2542, the foreign company is required to obtain the Foreign Business License prior to operation.


Work permit for general company

This year, Ministry of Labor at Din-Daeng has implemented new internal regulations to apply the work permit as follows:


  1. Applicant with NON-B visa obtained from outside of Thailand, must apply work permit within 15 days after the first day of entering Thailand with new NON-B visa.
  2. Applicant who fails to comply with item no. 1 will receive work permit book which is valid until the expiration date of the NON-B visa (3 months).  Then, applicant may extend work permit again.
  3. The shareholder list (BOJ.5) which indicates “has not issued a share certificate” is currently unacceptable for new or renewal of work permit cases.

Please note that these internal regulations are only practise by Ministry of Labor at Din-Daeng, One Stop Service does not implement these regulations.