Additional Changes to Civil and Commercial Code Proposed

By  Piyawannee Watanasakolpunt and Sudthapa Thanathanya

The Thai Office of the Council of State has made further proposals to simplify corporate administration by proposing a bill to amend the Civil and Commercial Code (CCC), the main statute governing the incorporation and management of Thai private limited companies. The bill also ratifies amendments to the CCC under an order from the National Council for Peace and Order approved earlier this year.

The bill is not yet law, however, as it is still subject to legislative approval.  A summary of the major proposals in the bill is as follows:

Minimum of two shareholders and promoters 

Currently, a private limited company must have at least three shareholders, and at least three promoters are required to incorporate (before 2008, the minimum was seven shareholders and promoters).   In a nod towards smaller organizations with fewer individuals, the bill allows a private limited company to have as few as two shareholders and promoters.  These changes may also help facilitate partnerships planning to reorganize as private limited companies.

Minimum of two shareholders to constitute a quorum

The Office of the Council of State issued order no. 9/2508 proposing that at least two shareholders are required to constitute a quorum at any meeting.  The bill confirms this earlier order, provided that the two shareholders hold sufficient shares as required under the CCC (which is 25% of the total share capital), unless the company’s articles of association provide otherwise.

Company must be incorporated within three years after registration of memorandum of association (“MOA”)

Currently, there is no time limit to incorporate a private limited company after registration of its MOA.  The bill includes a proposal requiring incorporation to occur within three years from the date registration of MOA.

Electronic meetings of board of directors (“BOD”) recognized

BOD meetings can now be held by video conference, teleconference or other electronic means. Any director attending the meeting by such electronic means is regarded as forming part of a quorum and has the right to vote at the meeting. However, the method of holding electronic means must comply with terms and conditions to be prescribed under ministerial regulation which is not yet to be issued.

Notice of shareholders’ meeting not required to be published in local newspaper

Notice of a special resolutions of shareholders are currently required to be published in a local newspaper and delivered to the shareholders by registered mail.  The new proposal would eliminate the publication requirement for private limited companies that have not issued bearer shares.

Penalty for late dividend payment

Private limited companies which pay dividends later than one moth from the date of declaration would be subject to a fine not exceeding Baht 20,000 under the new proposal.  Directors will also be liable for this fine.