Hughes Krupica: Avoiding fly-by-night companies in Thailand

In a world of information, the opportunity to check out a company you plan to do business with ought to be straightforward. However, companies and individuals who are experts in acting in good faith, cheating investors and consumers, are generally also very good at controlling the information disseminated about them.

On the flipside, some good companies suffer cyber-attacks in a completely unjustified manner, due to a disgruntled employee or through extortionate and shakedown behaviour which can often be underpinned with “I will set up a website attacking you” or “I will post negatively about you on Facebook etc.”

How can a foreigner planning to do business with Thais in Thai companies, or with foreigners involved in Thai companies, or with individuals, conduct sensible due diligence and make appropriate enquiries into the standing of those entities? There are some practical and legal checks that can be carried out and it is recommended that neither are missed.

Can I just conduct a high level online search and learn everything I need to for a small administrative fee?
No. You will find when you conduct this search through an online agent that many of the search results will be blank or out of date for the smaller private companies. It may be the records haven’t been updated, or the company has filed its accounts late. Further, a lot of the information you will get through such a company can also be sourced very quickly through local searches and checks.

What sort of local checks should I make?
You should check if there is any litigation in the courts lodged against the Thai company you plan to deal with. You should further check if there is any litigation lodged against their directors or their shareholders – each and every one of them.

The check should reveal any civil or criminal cases filed. Often some interesting results might come up such as: civil litigation regarding dispute between investors; cheque fraud; failure to pay credit card bills; gambling or drug cases; filing of false documentation with the authorities.

Clearly if a search reveals any such activity, you should seek advice on whether to inform the other party, or simply walk away from doing business with them. The principle of ‘innocent until proven guilty’ must be applied in many cases, and it should be noted that other parties can file vexatious cases quite easily, which in itself can damage a reputation even if there is no truth in the case or claims made.

You should also check the basic details of the company online through the Department of Business Development (DBD) website and obtain from the offices of the DBD the latest shareholders list, or even all historical shareholders lists, so you can track the changes in the company, and the filed accounts of the company as far back as you wish. You should also obtain a copy of the constitution documents of the company and pass these to a lawyer to check and comment on.

How important is a place of business?
This is still an important aspect of business even with the rise in use of serviced office space and temporary co-located space. Some business people choose not to splash out on grandiose office space simply because they are wise with their money and focused on the real aspects of their business. Further, trends in certain sectors mean that too much office space is wasteful and illogical – such as the IT sector where business people often utilise space in a clever manner. However, for many, the substance of a company is supported by its presence and roots in countries where it operates. It is so easy now to place a map on a location page on a website and simply represent a wide cover of jurisdictions to make a company seem more successful or more well-established than it really is. Try telephoning the offices on their land lines, try to contact managers or owners of the business and see what kind of communications you encounter. This will be crucial for you doing business with these companies and people in the future. The location of a business can also be a giveaway – offices on the corners of red light districts are not particularly confidence inspiring.

Which practical checks should I make?
This is one of my favourite topics. You should never stop checking the status of parties you plan to do business with, and you should continue to check even after you are already doing business together.

You should ask who their main business contacts are, and see what sort of businesses they are connected and associated with. If the answer you receive cites some very well established and large businesses you should take care to obtain names of the individuals in such a large organisation. You should also test to see whether it would be considered OK for you to talk to such contacts. If the reaction if negative, ‘flaky’ or hesitant, it may be the contacts are contrived, made up or a lot less substantive than is being represented.