An Act Amending the Civil and Commercial Code (“Amendment”) by introducing changes to corporate governance and transactional rules in private limited companies, as well as by introducing a two-part merger concept to replace the former amalgamation concept, was published in the Government Gazette on 8 November 2022 and will come into effect on 7 February 2023.
For most people probably the most important of these changes, where Code provisions are being brought up to date and into line with modern commercial practice, are the following:
- Number of shareholders
- The minimum number of promoters or shareholders for private companies has been reduced from three to two.
- Share certificates
- Private company share certificates must now be stamped with the company’s seal if the company has one, in addition to being signed by at least one director.
- Validity period of registered Memorandum of Association
- A Memorandum of Association registered as part of a private company incorporation process will expire if the company has not been incorporated within three years.
- Boards of directors’ meetings
- Since Boards of directors’ E-meetings have been held under Emergency Decree on Electronic Meetings, B.E. 2563 (2020) during the Covid pandemic situation, E-meetings are now permitted for private company boards of directors, subject to the law in relation to electronic conferences. Further detail on what this may in practice mean is likely to emerge in the future.
- Notices of shareholders’ meetings
- Publication of notice in a newspaper is no longer required for shareholders’ meetings of a private company, unless the company has issued bearer shares. If bearer shares have been issued then advertising of the notice is still required, which now can be done either in a newspaper or via electronic media in accordance with procedures to be prescribed by Ministerial Regulations. No such procedures are yet prescribed.
- Shareholder meeting quorums
- The minimum headcount at a shareholders’ meeting is two shareholders or their proxies, who – unless the Articles of Association provide otherwise – represent not less than one-quarter (1/4) of the company’s total share capital.
- Dividend distributions must be completed within one month from the date of the board meeting or the shareholders’ meeting declaring the dividend.
- Introducing mergers
- Previously Thai law had provided only for amalgamations, in which company A combined with company B to produce company C (a new entity), but did not provide for mergers in which one of the joining companies survived. Under the amended law, there is now provision instead for two alternative types of merger:
– in one of which an integration of two or more existing companies results in one of them surviving while the other the others are absorbed into; and
– the other of which is virtually identical to the former concept of amalgamation.
- Under both types of merger the company established by the merger is automatically entitled to all properties and rights and is subject to all obligations, duties and liabilities of the other participating companies. In both types of merger all companies concerned must pass a special resolution of shareholders.
Following the coming into effect of the changes discussed, there may be inconsistency between a company’s Articles of Association and the amended law. In such cases the general rule is that the law will override the Articles of Association, except in any case where the law may provide otherwise. There is no legal obligation that a company update its Articles of Association to reflect the amended law. Past practice however suggests that the registration authority (Ministry of Commerce, Department of Business Development) may, if at any time in the future asked to register any amendment to a company’s Articles of Association, take the opportunity to require that the company also amend any other provisions of the Articles of Association that are no longer consistent with the law.
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This update is written for general information only. It does not constitute advice, and consultation with professional advisors is recommended.