Nuanporn Wechsuwanarux
Chandler MHM Limited, Bangkok
nuanporn.w@mhm-global.com

Sawanee Gulthawatvichai
Chandler MHM Limited, Bangkok
sawanee.g@mhm-global.com

Pawee Jongrungrueang
Chandler MHM Limited, Bangkok
pawee.j@mhm-global.com

Introduction

On 7 February 2023, Thailand’s Act amending the Thai Civil and Commercial Code (the ‘Amendment') took effect. The act presents the key changes to the Thai legal landscape for M&A transactions by adding a new merger scheme and modifies certain requirements relating to the corporate governance of private limited companies to modernise the corporate formalities.

The new merger scheme

The Amendment redefines the Civil and Commercial Code by creating an additional type of consolidation between private limited companies. In addition to an amalgamation, where two or more companies combine to form a new entity and the amalgamating companies will be dissolved at completion, now there is the option to form a ‘merger’ for deal structuring purposes. This new merger scheme involves a merger of two or more companies, and any one of the merging companies can be the surviving entity. At completion, such a surviving company continues to maintain its status of a juristic person and absorbs the all rights and obligations of the other merging companies by statutory arrangement.

Approval requirements

Similar to an amalgamation, the merger requires a special resolution (ie, a majority consisting of no less than three-quarters of the total votes of the shareholders present at the meeting and entitled to vote) at the shareholders’ meetings of each merging/amalgamating company.

The joint meeting of shareholders is also required to consider the matters as prescribed in the Civil and Commercial Code including, among others, share allocation.

Accommodation of dissenting shareholders

To accommodate the minority shareholder(s) who object to the merger/amalgamation, the Amendment gives them an option to sell their shares to the purchaser, arranged by the merging/amalgamating company. Ultimately, those who reject the offer will automatically become a shareholder of the merging/amalgamating company if the arranged share purchase does not occur within 14 days from the offering date.

Balancing the shares in merging companies

The Amendment allows the joint shareholders' meeting of the merging/amalgamating companies to discuss and agree on the new registered capital, regardless of the earlier registered capital of the merging/amalgamating companies. It also exempts the restriction that a private limited company can only offer to its existing shareholders the ability to subscribe for new shares issued by such a company on a pro rata basis.

This would ease the allocation of shares in the surviving/amalgamated company by using this relaxed measure as a tool when faced with a hard-to-solve complex structure, which requires the consideration of differences in the valuation of the merging companies, and the shareholding ratio of the existing shareholders and new shareholders who used to hold shares in the disappearing company(ies).

In any event, further official guidelines from the Department of Business Development (DBD), an official company registrar, in respect of the new merger scheme have not yet been published.

Modification of the requirements relating to corporate governance

Certain requirements relating to the formalities of a private limited company have been disrupted by the Amendment. The key issues are discussed below:  

General formalities

• Reducing the minimum number of promoters: changed from three individuals to two individuals;
• validity period of the memorandum of association (MOA) registered with the DBD before incorporation of the company: within three years from the date of the MOA registration, the MOA can be used for the registration of the incorporation of a company;
• share certificate: the requirement to affix a company seal (if any) has been brought back after its removal in 2017;
• revisions to the grounds for company dissolution by a court order: previously, this applied where a company had less than three shareholders, however, this now applies where a company only has one shareholder; and
• dividend payment timeframe: payment of dividends shall be made within one month from the date of the resolution approving the dividend payment.

Meeting arrangements

• Electronic meeting of directors’ meetings: unless prohibited by the Articles of Association (AOA), directors’ meetings can be held electronically if the meeting platform meets the standards of the law on holding meetings via electronic means; and
• notice calling for a general meeting of shareholders: a newspaper publication is no longer required except in the case where share certificates are issued to the bearers (whether physical or electronic). If the AOA of a company, that issued only named share certificates, specifies a requirement for newspaper publication according to the earlier version of the Civil and Commercial Code before the Amendment, the company is still required to meet the newspaper publication requirement according to its AOA. If the company wishes to eliminate such a requirement, it must amend the articles relating to such a requirement in its AOA to align with the Amendment.

Other than streamlining the corporate regulatory regime, the Amendment will be beneficial to boost synergy creations in the reopening economy in Thailand, especially in respect of deals implementation, which is expected to enhance Thailand’s competitiveness in the global market.