Amendments to Thailand’s Civil and Commercial Code introduce new corporate governance regimes
An amendment has been made to the Thai Civil and Commercial Code which introduces new provisions for mergers and acquisitions transactions and will also change certain requirements for corporate governance and the formation of private companies. This includes provisions concerning minority shareholders, the period of validity of the articles of association, as well as the number of shareholders required to form a quorum at general meetings.
The amendment, which was signed into law at the end of September 2022, is expected to come into effect later this year.
Companies can now merge
Once the amendment comes into force, Thai companies will have two options to consolidate companies, one being a merger, where the merging companies will be dissolved to form a new entity at the end of the process, and another being a merger , where the consolidated entities are merged with only one of the merging companies surviving the process. Prior to the amendment, companies seeking to consolidate were only allowed to merge, as mergers were not a legally viable option.
Once the companies are merged, all property, debts, rights, obligations, liabilities and duties of each of the merged companies will automatically transfer to the surviving company in the event of a merger or to the newly formed company in the event of a merger. .
The new merger introduced by the amendment will be considered as an alternative option for M&A transactions in the Thai market. Under this regime, it is expected that the closing of transactions involving business transfers will be easier when certain operating licenses are not transferable.
Minority shareholders who disagree with any proposed merger or amalgamation of their company will have the option of selling their shares to the buyer. If a price cannot be determined, an appraiser will determine the sale price. If the dissident shareholder rejects a purchase offer proposed by the expert after 14 days, he will automatically become a shareholder of the merged or new entity.
What other changes to corporate governance does this amendment bring?
Besides introducing mergers as a consolidation option, the amendment will also reduce the minimum number of promoters required to incorporate a company from three to two. Similarly, memorandums of association registered with the Department of Business Development can be used to incorporate a company for up to three years from the date of registration. However, the amendment will require that the share certificate be affixed with the corporate seal.
Furthermore, unless otherwise prohibited by the company’s articles of association, directors’ meetings may be held electronically, provided that the electronic platform meets the minimum standards set by law for the holding of such meetings by electronic means. Publications in the newspapers are no longer necessary when convening a general meeting of shareholders, except for meetings where share certificates must be distributed to holders; although notices of meetings should always be sent to all shareholders of a company by registered mail. This means that meetings still need to be arranged in advance.
To achieve a quorum at a general meeting of shareholders, at least two shareholders must be present, and those representing at least 25% of the total share capital must be present for a resolution to be passed.
What to pay attention to
Companies, directors and shareholders should keep abreast of any regulations regarding procedures for assessing the purchase price of shares owned by shareholders who do not wish to be merged or consolidated.
The tax authorities will probably publish a guide indicating whether there will be new tax provisions for transactions under the new merger regime or whether those relating to mergers will apply. Further updates will be provided on this.