From Allies to Adversaries: Unpacking Partnership Disputes in Thailand

Key Takeaways

Rising Conflict and Legal Complexity: Internal disagreements are increasingly destabilizing partnerships in Thailand.
Framework Under the Civil and Commercial Code: Thai partnerships are legally defined and regulated under the Civil and Commercial Code. This framework emphasizes elements such as the contractual nature of the partnership, liability that varies by type, and profit-sharing provisions that default to equal distribution in the absence of specific agreements.
Shift Toward Alternative Dispute Resolution: With traditional litigation proving resource intensive and slow, there is growing advocacy for alternative dispute resolution mechanisms.

Business Partnerships in Thailand

Internal conflicts between partners can destroy any business. Founded on trust and a shared business purpose, partnerships are increasingly experiencing conflicts that push their businesses to the brink and cause various legal issues.

A recent high-profile dispute among the leading family members of a major hospitality brand in Thailand has brought the issue of partnership disputes back into the spotlight of the local press.

As Thailand develops its legal framework, specifically the provisions within the Civil and Commercial Code (CCC), the country is seeking to modernize its legal system to reflect contemporary business practices and dispute resolution mechanisms. While this transformation poses both challenges and opportunities, it is essential that each partnership dispute be treated on its own merits.

To this end, the team at WSR Law has put together this brief overview of partnerships in Thailand.

What is a Partnership in Thai Law?

Partnerships in Thailand are primarily governed by the CCC, which sets out various legislative mechanisms and guidelines. According to Section 1012 of the CCC, a partnership is defined as follows:

“A contract for the organization of a partnership or company is a contract whereby two or more persons agree to unite for a common undertaking, with a view to sharing any profits derived therefrom.”

Breaking this down further, for a partnership to be considered valid under Thai law, it must satisfy the following elements:

Contractual Relationship: Partnerships are formed through a contractual agreement, either oral or written, between the parties.
Liability: A partner’s responsibility is determined by the type of partnership. In general partnerships, partners are subject to unlimited liability, whereas in limited partnerships, liability is confined to the predetermined boundaries.
Profit Sharing: Partners are entitled to receive their share of the profits based on the provisions of the partnership agreement. In the absence of such terms, the profits are divided equally among all partners.

When Things Go Wrong: Alternative Dispute Resolution

Not every business partnership succeeds; some flourish, while others fail. When a partnership becomes irreparably compromised, it is crucial to evaluate legal recourse to protect the business and safeguard your financial interests.

Traditionally, partners embroiled in disputes have relied on conventional court litigation to reach a resolution. However, despite its effectiveness, traditional litigation can be protracted, resource intensive, and costly, especially in Thailand.

Reflecting global trends across various industries, parties involved in partnership disputes might consider alternative dispute resolution (ADR) mechanisms such as mediation, conciliation, and arbitration. While ADR has its drawbacks, it often offers a more efficient and cost-effective way to resolve disputes. In addition, ADR mechanisms typically ensure enhanced confidentiality.

In Thailand, partnership disputes may be heard by the Thailand Arbitration Center (THAC), an organization that provides ADR services, including both arbitration and mediation. It was established under the Arbitration Center Act, B.E. 2550 (2007).

How Can WSR Law Help You?

With significant experience representing parties in partnership disputes, WSR Law’s commercial and legal experts are well positioned to ensure that your financial and legal rights are protected throughout the dispute resolution process.

For a full overview of ADR, please see our guide on ADR mechanisms in Thailand.