Doing Business in Thailand: Forming a Thai Private Company Limited is Easier

doing business in Thailand

Since 7 February 2023, forming and operating a Thai private company limited for doing business in Thailand has been made simpler with recent amendments to Thailand’s Civil and Commercial Code (Thai CCC).  These changes should make it easier for entrepreneurs to start a business in Thailand, as well as streamline and modernize the process for handling and executing corporate governance procedures.

This article will cover the amendments that have the most significant impact on establishing and managing a Thai private company limited.

Establishing a Thai private company limited

Minimum shareholders

Previously, a business would need a minimum of three promoters (ostensibly, shareholders) to hold at least one share each in the company-to-be and sign the Memorandum of Association to begin the registration process. Now, only two promoters are needed.

Memorandum of Association

Once a Memorandum of Association (MoA) was registered, a company’s promoters used to have ten years to register the company’s incorporation. To expedite the process and encourage better planning and preparation, the ten-year period has been cut to three years.

Share certificates

Share certificates must now be stamped with the company’s seal (if any), along with a director’s signature. The addition of “if any” suggests that a company seal is no longer a requirement for its establishment.

Managing a Thai private company limited

Minimum shareholders

As with establishing a company, the minimum number of shareholders required to maintain a company has been cut from three to two. Failure to meet the minimum puts the company at risk of a court-ordered dissolution.

Board of director meetings

During the pandemic, an emergency decree allowed companies to convene board of directors (BoD) meetings remotely, through video conferencing and online. The amendment updates the law to no longer restrict BoD meetings to in person events. They can now be held electronically.

Notice for shareholders meetings

Companies previously had to publish a shareholder meeting notification in a local newspaper, as well as send every registered shareholder such notification by registered mail at least seven days before the meeting. Now, companies only need to mail shareholders notification. Unless the company has issued bearer certificates, then the company must publish the notification in a local newspaper or electronic media at least seven days before the general meeting and 14 days for special resolutions.

Quorums for shareholders meetings

Before the amendments, the quorum for a shareholders meeting was only that at least a 25% shareholding was represented, which could be just one person. Now, the 25% still applies, but at least two shareholders, either in person or by proxy, must also be present.

Dividends

Any dividends declared in a general or BoD meeting must be paid within one month of that meeting. Previously, there was no prescribed deadline for dividend payments once declared.

Dealing with deadlocks

Companies must now include in their Articles of Association (AoA) procedures for dealing with deadlocks among BoDs and shareholders. Before, there was no legal requirement to do so.

Let GPS Legal help you establish your Thai private company limited

GPS Legal has a team of experienced professionals well-versed in incorporating and managing private companies limited in Thailand, as well as companies and business structures for foreigners interested in investing in Thailand. If you are interested in doing business in Thailand, or need assistance with your already established business in Thailand, contact us today.

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Cannabis Law Thailand

While cannabis for medical use has been legal in Thailand since 2018, the real boom in Thailand for cannabis commerce was when it was decriminalized on 9 June 2022. Specifically, Thailand’s Food and Drug Administration removed cannabis (and hemp) from the list of Category 5 narcotics. However, while cannabis and hemp plants are legal, cannabis and hemp extracts with a THC content greater than 0.2% (note that hemp extracts can exceed this THC level) by weight, and any products containing them, are still categorized as narcotics.

Since then, there have been other regulations put into place regarding the growing, selling, buying, and consuming of various cannabis and hemp products. This includes categorizing the flower (or bud) or the cannabis plant as a controlled herb, meaning that licenses are necessary for research and commercial ventures related to that part of the plant. However, there has yet to be an overarching law passed regarding cannabis and hemp, and with elections looming at the time of writing, it may be a while before the government drafts a law that can be enacted.

Entrepreneurs across Thailand and from around the world are not waiting and are investing, or are looking to invest, in the Kingdom’s burgeoning cannabis sector. But, as the regulatory environment is in flux, investors and business operators should pay close attention to what rules and requirements they must comply with and even do their best to anticipate upcoming legislation and regulations as much as possible to avoid future complications.

This article offers an overview of cannabis-related businesses, in an effort to clarify the current situation in Thailand. However, please note that there may be some specific scenarios not covered as this article is for informational purposes only and should not be construed as legal advice or assistance in any way.

Please note that the information presented here is current as of 25 April 2023.

Cannabis products for consumers

Although the Thai government continues to claim that the decriminalization in June 2022 was in furtherance of promoting medical marijuana use, there has been a surge in recreational cannabis consumption.

Smoking cannabis privately is legal, but it is prohibited in public, punishable by three months in jail or a 25,000 baht fine.

Smoking cannabis generally refers to the flower, as it is rare for people to smoke the other parts of the plant. These other parts (leaves, stems, seeds, etc.) can be consumed without restriction. However, obtaining and consuming oils and extracts containing more than 0.2% THC requires a prescription from a licensed medical professional.

With a recent rule requiring cannabis retailers to track their inventory, there have been discussions about requiring shops to record buyers’ identification information. Currently, it seems this would only apply to Thai citizens; however, it is unlikely that transactions will be tracked, at least for the time being.

Cannabis businesses in Thailand must be majority Thai-owned

For all intents and purposes, almost all cannabis businesses must have a majority Thai shareholding. Thai law essentially excludes all foreign companies as well as foreign majority companies incorporated in Thailand from producing, selling, importing, exporting, and processing cannabis (except for seeds). These restrictions are considered an effort to protect local businesses from an onslaught of foreign actors with better resources and access to more modern technology. Furthermore, many of the underlying activities (e.g., farming and selling food and beverages) are already restricted by Thailand’s Foreign Business Act.

The one exception, as mentioned above, is the importation and sale of seeds, but there are still licensing requirements to undertake such a business.

Growing cannabis

Technically, only Thai nationals can grow cannabis plants. There are currently no restrictions on how many plants an individual can cultivate. However, the government urges people to register their plants through the plookganja (“grow cannabis”) website or application for a license to grow. For businesses that want to farm their own cannabis, the entity currently cannot register, but a stakeholder can. Nevertheless, the form has a section to declare the purpose for growing cannabis, and there is a “commerce” option. Only Thai individuals can register.

Although it is not required now, it is highly recommended for any person or business planning on growing marijuana to register with this site, as it will most likely be mandatory under any new legislation enacted.

Selling cannabis

Products containing cannabis

To sell food, drink, or cosmetics containing cannabis extract, you must make sure that the product does not contain more than 0.2% THC. This also applies to the manufacture of such products.

You can use cannabis plant components, except for the flower, instead of extract. If you do use stems, leaves, etc., it is currently unclear if you must guarantee that the THC content is under the 0.2% threshold. The non-flower parts of a cannabis or hemp plant can contain more than 0.2% THC, and technically, cooking or processing these parts could be construed as “extraction”, which then becomes a problem if the THC limit is broken.

While businesses manufacturing or selling (wholesale / retail) the above-mentioned products do not require a cannabis-related license, there are other licenses and requirements that must be complied with, such as a food production license from the Thai FDA.

Cannabis flowers

Cannabis flowers, as a controlled herb, cannot be sold to:

  • Students
  • People under the age of 20
  • Pregnant or breastfeeding women

Furthermore, cannabis flowers cannot be sold through online platforms or vending machines, and any advertisements for cannabis products are strictly prohibited. There are also prohibitions on selling cannabis in temples and places of worship, hostels, public parks, and amusement parks.

Cannabis flowers can only be sold at brick-and-mortar businesses, and such purchases cannot be consumed on the premises. For example, at a cannabis coffee shop, patrons can consume edibles (which must contain less than 0.2% THC), but they cannot smoke marijuana there as the coffee shop is considered a public space.

There are businesses investing in “private” smoking areas, but this could be problematic since they would have to be open-air spaces that would not disturb the public.

Businesses licensed to sell cannabis flower must also keep records that they must submit to the Ministry of Public Health, including such information as how much cannabis they have in inventory, where the cannabis came from, and their intended use.

Both wholesale and retail cannabis flower sales require a cannabis distribution license from the Thai FDA.

Importing cannabis

As mentioned earlier in this article, the only part of the cannabis plant that can be imported is the seed. This requires approval under Thailand’s Plant Propagation Act and Plant Quarantine Act.

Exporting cannabis

There is a cannabis export license available for cannabis flower from the Thai FDA. The criteria are strict and limited to medical marijuana. Furthermore, considering the legal landscape in other countries, even with cannabis being removed from Schedule IV of the UN’s Single Convention on Narcotic Drugs, exporting cannabis flowers may a complicated undertaking.

Exporting seeds, stems, and other derivative products (with less than 0.2% THC) will also require approvals from the Department of Agriculture and FDA.

Find out more about cannabis businesses in Thailand from GPS Legal

By some estimates, there are currently over 4,000 cannabis dispensaries in Thailand, but how many of them are in compliance with the current rules and regulations is hard to tell. This is a hot-button issue, and government authorities are cracking down. Regardless, many foreign investors and entrepreneurs still see Thailand’s emerging cannabis culture as a potential gold mine.

GPS Legal has assisted in establishing several cannabis-related ventures, from dispensaries to seed imports and sales. We have been closely monitoring the situation so that we can guide clients through the ever-changing regulatory landscape overseeing Thailand’s cannabis industry.

We would like to end this article with a word of caution. We want to emphasize again that almost all cannabis businesses in Thailand (except for the importation of seeds) are only open to Thai nationals and that nominee structures (where a foreigner pays a Thai national to act as a shareholder) are illegal in Thailand, although companies are not strictly scrutinized for such during registration. If you are a Thai national, have a Thai national as a partner, or plan on investing in an established Thai business and would like to learn more about cannabis businesses in Thailand, please contact GPS Legal to find out how we can assist you.

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An extended discussion on this topic to follow.

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Minimum wage hiked for 17 skilled professions

Verified Law Firm

During this election period, you may have noticed some discussions regarding minimum wage. If your business is in certain industries, you should be prepared for the minimum wage hike for 17 types of skilled employees, including backhoe operators, nutritionists, and bartenders. The rule was announced on 10 January 2023, which means it comes into force on 11 May 2023.

The full list:

  1. Transmission worker THB495
  2. Pump and valve worker THB515
  3. Steel structure fabricator THB500
  4. Mechanical fitter THB500
  5. Robotic welding system controller THB520
  6. Robotics technician THB545-715
  7. Farm tractor mechanic THB465-620
  8. Backhoe loader operator THB585
  9. Excavator operator THB570
  10. Towing trailer operator THB555
  11. Wheel loader operator THB520
  12. Nutritionist: THB500-600
  13. Hydrotherapy specialist THB500-600
  14. Aromatherapy specialist THB500-600
  15. Bartender THB475-600
  16. Early childhood care THB530
  17. Disabled-aid technician THB520-600

If you have employees are skilled workers under any of these categories, you should make sure that you comply with the minimum wage increases as required.

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Working from home in Thailand

On 18 April 2023, work-from-home options in Thailand will now be legislated under the Labor Protection Act (No. 8). While the law does not make work-from-home options mandatory, it does provide guidance as to WFH agreements between amenable employers and employees.

More information about this development to follow. The law (in Thai language) can be found here: https://ratchakitcha.soc.go.th/documents/140A020N0000000005600.pdf

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New Interest Rules for Loans in Thailand

interest tules in thailand

To help ease the burden of repaying loans in Thailand, the Thai government issued an emergency decree (link in Thai) (Decree) amending the Thai Civil and Commercial Code (CCC) regarding interest rules for loans.

From April 11, 2021, interest rates for certain financial agreements will change under Sections 7 and 224 of the CCC as follows:

Statutory Interest Rate Decreased

Under the amended CCC Section 7, the statutory interest rate drops from 7.5% to 3% per annum. The Decree also sets out that the Ministry of Finance should review this rate every three years and adjust it according to current deposit and loan interest rates offered by Thai commercial banks.

Please note that this only applies if an agreement does not specify an interest rate in its clauses. If, however, there is a specified interest rate, it cannot be more than 15%. So, even if a signed agreement stipulates an interest rate over 15%, only 15% interest can legally apply. Nevertheless, financial institutions are subject to different laws where higher interest rates on agreements with credit card companies and other debts still apply.

Statutory Default Interest Rate Decreased

The Decree amends CCC Section 224 regarding interest on debt defaults. Previously, the rate on loan defaults was 7.5%. The new CCC Section 224 sets the interest rate at 2% plus the rate set in Section 7 for a total of 5%. Furthermore, the section states that the default interest rate applies only to the principal and not to the interest to be paid on the principal – to be clear, interest may not be compounded (e.g. charging interest on interest).

There is potential relief for creditors in the amended law stating that they can demand higher rates. However, they must prove “legitimate grounds”, which is not specified by the law.

Default Interest Applies Only to Unpaid Principal

A new CCC Section 224/1 now details on what parts of principal a creditor can apply default interest. Previously, creditors were able to charge the default interest rate on both the amount in default as well as the unpaid principal (meaning not yet due or in default). Section 224/1 now prohibits default interest being applied on unpaid principal. So, only that portion of the principle that is in default qualifies for this interest. Also, the law voids any clause in any agreement that applies a default interest rate to unpaid principal to take a stand against loan sharks and predatory lending practices.

It bears noting that Thai law generally does not allow compound interest on loans, except under specific criteria. For example, commercial banks may charge compound interest on most of its accounts and transactions.

Other Points of Interest

As mentioned above, there are different interest rates for other types of debt. Nevertheless, the Bank of Thailand has recently done its part to help debtors by lowering various other interest rates. For example, credit card interest rates cannot be higher than 16% (down from 18%), and personal loan interest rates from commercial banks are now a maximum 25%.

GPS Legal Knows Contracts and Loans

These changes apply as of April 11, 2021 to calculations and payments retroactively as well as prospectively. This means that any new agreement must comply as well as any calculations for interest or default for existing agreements signed prior to that date. But as outlined in this article, there are other types of financial transactions where different rates and possible rules apply.

If you are unsure about the repayment terms for an agreement you entered or are about to enter and would like to ensure the terms are legally compliant, contact GPS Legal today for a free 30-minute initial consultation.

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Real Estate Due Diligence in Thailand

Real Estate Due Diligence Thailand

Completing a thorough real estate due diligence is an essential undertaking before contemplating the purchase, long-term lease, or acceptance as collateral of any immovable property in Thailand. You will want to make sure that the house, condo, commercial property, or other real estate is free from any underlying issues. This applies whether you are acting as an individual or as a company and whether the current owner of that real property is likewise a company or individual.

Conducting a thorough due diligence is an effective way to help you decide if a potential investment is worthwhile. Most importantly, it serves to identify any adverse legal or financial issues you may encounter if you were to enter a transaction.

What is real estate due diligence?

Due diligence, in general, is an investigation to confirm specific facts or details. In real estate, it is a comprehensive survey of a target property, gathering all the knowledge and information that is useful for a buyer to know before proceeding with the purchase.

In Thailand, this includes determining:

  • The seller offering the property is the rightful owner who has a legal right to sell.
  • The status of any liens, mortgages, or other encumbrances registered against the property at the Thai Land Department.
  • If there are bankruptcy, asset seizure, or other court proceedings filed or in process against the seller.
  • The land and structures comply with zoning, building, and environmental regulations.
  • The property in question has no restrictions that would prevent the buyer from using it as they intend.
  • The Thai Land Department’s assessed value per square meter of the property in relation to transfer fees and certain taxes based on the assessed value.
  • If the property has free and clear access to public roads.

If the property is a condominium or commercial office space, it is also important to confirm that the current owner is not in arrears for management or common area fees. Also, if you are a foreign individual or company, you must ensure that the sale will not exceed any foreign ownership quotas.

GPS Legal can help with buying real estate in Thailand

GPS Legal has extensive experience helping clients buy and sell real estate in Thailand. We understand the intricacies of Thailand’s land laws and can investigate properties and their owners thoroughly. If you are interested in investing in real estate in Thailand as an individual or a company, contact GPS Legal today for your free initial 30-minute consultation.

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Land Ownership in Thailand: Title Deeds

Land Ownership in Thailand

Land ownership in Thailand is not a readily available option for foreign individuals. Foreign companies may have opportunities to own land, particularly through BOI certifications, subject to qualifying business activities and a rigorous application process. Nevertheless, it is still relevant to understand the various title deeds in use in Thailand, as it is significant for lease agreements as well as land ownership.

Three main types of title deeds in Thailand

In Thailand there are several different levels of land rights as set out by the Land Department (link in Thai), beginning with an individual’s limited rights to farm an area of land to full ownership rights to a delineated parcel.  Here, we will go over the main types you are most likely to encounter.

N.S.2 – Temporary land rights reservations

From time to time the Land Department will announce opportunities for individuals to claim land parcels for use. If you receive this right, you may be able to upgrade to a more permanent title as long as you begin developing the land within six months and complete within three years of obtaining the rights. If not, the Land Department can revoke the rights. Furthermore, these rights do not entitle the holder to mortgage or transfer to any other party except through inheritance. Also, if you do not use the land during the specified time, the Land Department can revoke your rights.

N.S.3 – Right to full land rights

The N.S.3. does not entitle the holder to full land rights, but rather the right to full land rights (i.e., one level below full land rights). There are three sub-levels in this category. The first, N.S.3, recognizes the application to full ownership. Issued by the District Chief, this certification is limited in that it does not delineate the land’s boundaries. You can sell, transfer, or mortgage this land, but there needs to be a land survey and an officially announced 30-day period during which others may contest the transaction. The second, N.S.3a, indicates that the land has been surveyed and delineated through aerial photography. The third, N.S.3b, means that there are land boundaries and there is no need for a petition period for selling, transferring, or mortgaging the land.

N.S.4 – Chanote, or full land ownership rights

This is a full title deed that bequeaths full ownership rights to a plot of land that is precisely surveyed and mapped out. The owner can use the land as they see fit, including selling, leasing, or transferring, as well as protecting the property against interlopers.

You can still lose your land rights with a title deed

Under Thai law, if you do not put the land to use, you risk losing your rights to that land. For a chanote, you cannot let the land fallow for more than ten years. For other deeds, it can be anywhere between one to five years before the Land Department repossesses the parcel. This is to encourage development and to maintain or increase land value for that plot and surrounding parcels.

GPS Legal wants you to remember “chanote”

While you may not be in the position to own real property in Thailand, you or your company may enter into a lease, superficies, or usufruct, or you may be involved in a transaction where land is put up as collateral. In all these cases, only land with a chanote qualifies under Thai law.

If you are about to or are considering a transaction involving land ownership in Thailand, you must do your due diligence to protect your interests. If you need assistance with such real estate matters, please contact GPS Legal for a free initial consultation to discuss your options.

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Mediation in Thailand: Settle Disputes Before Litigation

Mediation in Thailand

Going to court in Thailand or anywhere in the world can be a daunting process. It may seem like the only option when parties cannot reach an agreement, be it over a business contract, a payment dispute, an inheritance, or property issue. Even so, after spending considerable time and money on legal fees, you may still end with an unsatisfactory result when the courts take over the process. Of course, you can appeal a judge’s decision, but that means more time (and money) in court.

In Thailand there are existing alternative dispute resolution (ADR) options such as arbitration and mediation, but even those avenues can be costly, complicated, and challenging for all parties involved. Thai lawmakers have been working on strategies to encourage parties to pursue ADRs instead of getting caught up in a seemingly never-ending court process. To this end, they published an amendment to the Thai Civil Procedure Code (link to Thai version) in September 2020 that modifies and simplifies the current mediation process, allowing disputing parties to defer costs and more easily avoid a drawn-out litigation process.

Mediation is not arbitration

Many people think that mediation and arbitration are the same thing. They are not. Mediation, unlike arbitration, is generally a more informal process during which a mediator oversees and facilitates communications that will hopefully reach an agreed upon resolution. The mediation process itself is non-binding until and unless the parties reach and enter into a settlement agreement.  Arbitration is more structured and can be likened to a private court procedure in that arbitrator(s) judge and decide a case, which is generally binding on the parties.

Mediation in Thailand can occur outside court proceedings or as part of a court-supervised process. Of course, if mediation breaks down irrespective of where it originated, the parties can choose to proceed with a lawsuit in court.

We will focus specifically on developments in court-supervised mediation in this article.

What is pre-litigation mediation in Thailand?

Previously, mediation could only occur after a party filed a formal complaint in court against another party. Also, being part of the lawsuit process and subject to the court’s trial docket, months might easily lapse before the mediation hearing is scheduled.

The new amendment allows a complainant to file a motion requesting a mediator without having to file a complaint first, thus allowing the parties to defer or skip the costs associated with drafting and/or responding to a complaint. Upon acceptance, the court will summon involved parties and appoint a mediator with the court-supervised mediation process ensuing. Typically, the mediator has 60 days to resolve the dispute and can call for information, evidence, and meetings between parties as required. If the mediation ends in a settlement, the parties will present the agreement to the court. If accepted by the court, it is final and binding.

Why is this pre-litigation mediation a good thing?

Since the settlement of this type of mediation is final and binding (appeals are only possible on the grounds of fraud or illegality), it can be enforced through the court system. Also, disputing parties avoid costly, drawn out litigation. There are no court fees for this process, and legal fees will be comparatively less compared to litigation costs.

Furthermore, even though pre-litigation mediation is a court-supervised process, it is still not part of a formal court proceeding. Negotiations during a mediation are considered “without prejudice”, meaning facts presented, statements made, positions ceded and offers proposed cannot be held against you in a later trial (if mediation fails) and remain non-binding until a settlement is agreed.  If all parties enter pre-litigation mediation in good faith, any positive, beneficial relationships could be salvaged if they avoid a contentious litigation and ultimately resolve disputes together.

GPS Legal wants to help you resolve your legal disputes in Thailand

If you are in a dispute in Thailand or with a party in Thailand, GPS Legal can assist you. We understand that you most likely would want to resolve any conflict without going to court. So, we will discuss your various mediation and arbitration options available in Thailand that will best work for you. Contact us today for an initial consultation.

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New Guidelines Protecting Restaurants Using Online Delivery Platforms

Online Delivery Platforms

Restaurants and food outlets are a popular investment for foreign businesses in Thailand and the numerous online delivery platforms have allowed many restaurants to keep going during the COVID-19 crisis. The convenience and new customer potential have helped businesses that could not afford to organize a delivery service on their own. Nevertheless, concerns arose that these online platforms were taking advantage of their market position regarding their fees and services charged to the F&B vendors.

At the end of 2020, the Trade Competition Commission of Thailand (TCCT) published a notification on Guidelines on Unfair Trade Practices between Online Food Delivery Platforms and Restaurants (link in Thai) (Guidelines). In force as of 23 December 2020, these Guidelines offer restaurants and similar businesses certain explicit protections when dealing with online delivery platforms.

What do the Guidelines do?

The Guidelines are specific in their scope and purpose. The TCCT wanted to make it clear that online delivery platforms must offer clear, reasonable, and non-discriminatory services for clear, reasonable, and non-discriminatory charges. It defines an online food delivery platform as a business that provides an online or electronic interface between restaurants, delivery persons, and end consumers. Restaurant businesses here include any business that makes or sells food and/or beverages.

Specifically, in Clause 3, every agreement between a restaurant business and an online food delivery platform must be in writing and follow understandable “normal business practices”.

The four prohibitions for online delivery platforms

The Guideline’s focus is Clause 4. Clause 4 outlines the following unfair, obstructive conduct:

  1. Unreasonable or unjustifiable fees or increases in fees. This includes charges for advertising, promotion, or other add-ons that the restaurant business did not specifically request or agree to. It also includes charging different rates for businesses with the same offerings, menu prices, locations, etc. Any changes to fees must follow prior written notice with clear explanations.
  2. Preventing restaurant businesses from using other services. An online food delivery service provider cannot demand exclusivity. It must allow restaurant businesses to sell their products on other platforms as well.
  3. Employing forced bargaining or payment terms. Online food delivery services cannot use their position to force restaurant businesses to change their prices without appropriate justification. Nor can they dictate unreasonably long payment terms to restaurants after a transaction is over. Online platforms also cannot remove a restaurant or amend agreed terms or conditions without reasonable grounds or notice.
  4. Any other practices that may be considered unfair, limiting, or obstructive to a restaurant business that uses the online food delivery platform.

How can a restaurant make a claim?

Online food delivery service providers that fail to comply with the Guidelines could face severe fines. Fines include up to 10% of annual revenue in the year of the offense as well as having to cease operations until they are fully compliant.  Of note, the Guidelines are not specific as to what is “unreasonable”.   Since these are new rules, it remains to be seen how the TCCT will rule. GPS Legal is monitoring any developments and can assist any online food delivery platform that wants to check its compliance or any restaurant business that believes they have grounds to make a claim. Contact us today for a free initial consultation.

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