New rules for limited company in Thailand
New rules for limited company in Thailand: from March 2023, the Ministry of Commerce will reduce the minimum required shareholders for a Limited Company in Thailand from 3 to 2 shareholders.
On 14 September 2022, a bill to amend the Civil and Commercial Code was approved by Parliament (the “Draft Law”).
The changes were proposed in response to the obsolescence of a civil and commercial code devoid of functions supported by technology, effectively slowing down the country’s commercial development.
The most important of these changes relate to the provision setting the minimum number of promoters (3) for the formation of a private company, the absence of a provision to determine when a dividend payment is due, and the lack of ‘agility in company restructuring by missing the concept of merger as an alternative to amalgamation.
Section 1097 – Minimum number of promoters and shareholders is reduced to two persons
The bill reduces the minimum number of promoters from three physical persons to two individuals. This number will also automatically apply to the minimum number of shareholders. Hence, a corporation must continuously maintain two shareholders, and if the number of shareholders decreases to one person, it will be subject to dissolution by court order.
Section 1099 – The validity period of a Memorandum of Association for a limited company in Thailand is reduced to three years
Currently, the Memorandum of Association becomes void if the promoters do not register the incorporation within ten years. The bill reduces the validity period of the Memorandum to three years.
Section 1128 – Share certificates must be affixed with the company’s seal (if registered)
Under the current Section 1128 of the Civil and Commercial Code, each share certificate in the company simply needs to be signed by at least one director. It was once interpreted that it is no longer necessary to affix a company seal, even if the company has registered its seal. However, the bill aims to require that, if the company has registered its seal, it must put the company’s seal on the share certificate. If it has not registered its seal, the company is not required to put the seal on its share certificate.
Section 1162/1 – Board of directors’ meetings are eligible to be held virtually and in a hybrid format
Following the introduction of the telematic meeting referred to in the Royal Decree of 2020, and the recent amendment to the law on joint stock companies, the bill states that the board of directors of a joint stock company can be held by electronic means.
Directors who attend a meeting electronically will be counted in the quorum and will have the right to vote.
Section 1175 – Publication of notice in a newspaper is no longer required for a shareholders’ meeting
The bill abolishes the principle according to which the notice convening the meeting must be published in a local newspaper.
Therefore, the new practice under the bill provides that the notice of shareholders’ meeting should only be sent by post with acknowledgment of receipt to each shareholder.
In case a company has issued bearer certificate shares (which is a rare case), the company is still required to publish the notice at least once in a local newspaper along with sending the notice by mail as mentioned above.
However, the need for publication depends on what is defined in the Article of Association. It is therefore advisable for a company to consider changing its AoA to take advantage of this easing rule.
Section 1178 – Clarification of quorum for a shareholders’ meeting
The current Section 1178 of the Civil and Commercial Code does not specify the number of shareholders constituting a quorum, but only the minimum number of shares to be represented at the meeting, id est one quarter of the company’s share capital.
The bill provides that the quorum is composed of at least two shareholders (in person or by proxy) representing no less than a quarter of the company’s share capital.
By virtue of this, a single shareholder will no longer be able to constitute the quorum.
Section 1201 – Clarification of the deadline for dividend payment
The current Section 1201 of the CCC stipulates that dividend distributions must be “made” within one month of the date of the shareholders’ or board’s resolution. The bill establishes that the dividend payment process must be initiated and completed within one month of the date of the resolution to ensure that minority shareholders receive the dividend in due time.
Merger and Amalgamation Principles
Actually the only type of company consolidation currently recognized by the CCC’s M&A provisions is amalgamation. In this case two or more companies combining to form a new company will generate a new company assuming assets, rights and liabilities of the amalgamating companies.
The new Bill officially introduces the concept of “merger”.
One company (surviving company) absorbs one or more companies. Upon completion, those absorbed companies will cease to exist and all assets, rights and liabilities thereof will be acquired by the surviving company.
The Bill contains certain revisions and clarifications in connection with the procedures for mergers and acquisitions, including:
- buyout principles in case of objection by a shareholder to the merger;
- shortening of the objection period of creditors of the consolidating companies from sixty to thirty days;
- determination of the matters e.g. objectives, share capital, the MoA, in the joint meeting among consolidating companies.
Amendment to Act on Offences of Companies
The Corporate Offenses Act will be slightly amended to match the actual Bill, for example, failure to distribute dividends, failure to post notice of termination of a merger or merger, and failure to deliver business, assets, accounts, documents or register the merger or merger according to the new principles established by the bill.
As of now, the Bill and the draft amendment to the Act on Offences of Companies await the King’s Royal signature and publication in the Government Gazette.
Once signed, they will become effective after the lapse of ninety days from the date following the date of publication in the Government Gazette.