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Types of shares for companies in Thailand
13/06/2023
When establishing or investing in a Thai company, it’s essential to understand the various types of shares available clearly. In Thailand, companies typically issue two primary types of shares: ordinary and preference. Both have distinct rights and privileges, which can significantly impact shareholders’ roles and financial interests.
In this blog post, we will explore the differences between common shares and preferred shares.
Key points
- Thailand permits two types of shares for companies, ordinary and preference shares.
- Ordinary shareholders possess specific rights within a company, including attending general meetings, exercising one voting right per share owned, and are entitled to receive their share of profits proportionate to the amount paid for each fully paid share.
- Preference shareholders have the right to attend annual general meetings, and priority rights to receive dividends, and their voting rights and dividend rights may be the same as, less than, or greater than those of ordinary shareholders, as specified in the company’s articles of association.
- Once issued, preferences shares cannot be canceled (unless with capital decrease)
What types of shares are available to companies in Thailand?
As per Thai legislation, shares in companies are divided into two distinct categories:
Ordinary Shares: Ordinary shares, or common shares, represent a company’s most common form of ownership.
Preference Shares: Preference shares, commonly known as preferred shares, possess priority rights to dividends, meaning dividends shall be first paid to preference share holders, and the parties can decide to grant more or less rights to preference shares.
Ordinary shares
Ordinary shareholders possess specific rights within a company. These rights include attending general meetings and exercising one voting right per share owned.
Regarding dividends, ordinary shareholders are entitled to receive their share of profits proportionate to the amount paid for each fully paid share. However, dividends are distributed to preference shareholders first, and ordinary shareholders receive their portion afterward.
In the event of the company’s dissolution and after the creditors have been paid, ordinary shareholders can expect to receive a share of the remaining assets from the company. This return is based on the proportion of shares held when the company’s assets exceed its debts and liabilities. However, it should be noted that priority is given to preference shareholders before any distribution is made to ordinary shareholders.
Preference shares
Preference shareholders hold distinct rights within a company structure. They have the right to attend annual general meetings, and their voting rights may be the same as, less than, or greater than those of ordinary shareholders. The weight of the voting rights for the preference shares will be specified in the company’s articles of association.
It is important to note that the use of preference shares must be stated in the company’s Articles of Association. Furthermore, they cannot be removed once the preference shares have been issued unless a capital decrease is performed.
Regarding dividend distribution, preference shareholders have priority over ordinary shareholders.
In the event of the company’s dissolution, preference shareholders are entitled to receive their payment before the ordinary shareholders upon the payment of the creditors.
Can I use nominee shares?
Nominee shares, or bearer shares, are a share ownership arrangement where the shares are registered in the name of a nominee or bearer rather than a specific individual. In this arrangement, the identity of the actual shareholder, or the person who truly owns and controls the shares, is not disclosed publicly.
The holder of nominee shares, known as the nominee or bearer, is a representative or custodian who holds the shares on behalf of the beneficial owner. The beneficial owner, the true owner of the shares, remains anonymous and is not recorded in the official company or share registry.
In Thailand, using nominee shareholders is illegal as per The Foreign Business Act (FBA).
The Thai government has implemented the FBA to regulate foreign investment and business activities. The FBA sets out specific restrictions and requirements for foreign individuals and entities seeking to engage in certain business sectors in Thailand. These restrictions are in place to protect national interests, promote fair competition, and ensure compliance with legal and regulatory frameworks.
For more information about the Foreign Business Act, please click here.
Can you transfer company shares?
As mentioned above, preference shares cannot be removed or transferred once issued. Therefore, the following applies to ordinary shares only.
When transferring ordinary shares, certain requirements must be met for a share transfer to be legally recognized.
Firstly, the transfer must be documented in writing using a share transfer instrument. This instrument should be signed by the transferor and transferee and attested by at least one witness.
It’s important to note that the share transfer instrument does not need to be prepared in Thai and does not require submission to the Ministry of Commerce. However, it should include essential details such as the names of the transferor and transferee, the relevant share numbers, and the number of shares being transferred.
To ensure the validity of the share transfer against the company and third parties, the transferee’s name and address must be recorded in the shareholder’s register. This step ensures that the transfer is officially recognized and that the transferee assumes the rightful ownership of the shares. By following these procedures, shareholders can ensure a smooth and legally binding transfer of shares within the company.
For more information about transferring shares, please review our blog post here.
What are share certificates?
Upon the completion of the share transfer, Private Limited companies in Thailand are required to issue share certificates to the transferee.
Each share certificate must be signed by one of the company directors and contain the company seal.
Share certificates must include the following:
- The name of the company.
- The number of shares to which the certificate applies.
- The amount of each share.
- If the shares have not been paid in full, the amount paid on each share.
- The name of the shareholder or a statement that the certificate is issued to a bearer.
How can Belaws help?
For more information about company shares in Thailand, why not talk to one of our experts now?
Please note that this article is for information purposes only and does not constitute legal advice.
Our consultations last for a period of up to 1 hour and are conducted by expert Lawyers who are fluent in English, French and Thai.
Consultations can be hosted via WhatsApp or Video Conferencing software for your convenience. A consultation with one of our legal experts is undoubtedly the best way to get all the information you need and answer any questions you may have about your new business or project.
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Frequently asked questions
What are the two primary types of shares available for companies in Thailand?
The two primary types of shares in Thailand are ordinary shares and preference shares.
What rights do ordinary shareholders have in a company?
Ordinary shareholders have the right to attend general meetings, exercise one voting right per share owned, and receive a share of profits proportionate to the amount paid for each fully paid share.
What rights do preference shareholders have in a company?
Preference shareholders have the right to attend annual general meetings, priority rights to receive dividends, and their voting rights may be the same as, less than, or greater than those of ordinary shareholders, as specified in the company’s articles of association.
Can preference shares be canceled once issued?
Preference shares cannot be canceled unless a capital decrease is performed.
Are nominee shares allowed in Thailand?
No, the use of nominee shares is illegal in Thailand under The Foreign Business Act (FBA).
Can ordinary shares be transferred in a company?
Yes, ordinary shares can be transferred, and certain requirements must be met for a share transfer to be legally recognized.
What is required for a valid share transfer of ordinary shares?
A share transfer instrument must be documented in writing, signed by the transferor and transferee, attested by at least one witness, and the transferee’s name and address must be recorded in the shareholder’s register.
What are share certificates in Thailand?
Share certificates are issued by Private Limited companies in Thailand upon completion of a share transfer. They contain the company seal and include details such as the company name, number of shares, amount paid on each share, and the shareholder’s name or a statement indicating issuance to a bearer.
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