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What are the rights and protections of minority shareholders in Thailand
20/12/2022
In a perfect world, foreign entrepreneurs want to own and operate a 100% foreign-owned company. However, this isn’t always possible due to the Foreign Business Act restrictions. While obtaining a foreign business license or BOI promotion would remove this issue, these aren’t always viable solutions for a business.
As a result, minority shareholding may be the most feasible option. However, minority shareholders may suffer from a lack of protection for their interests. In this article, we will look at the rights and protections they are entitled to.
Key points
- Articles of Association and Shareholders’ agreements can contain clauses that are drafted in order to grant certain shareholders special rights.
- Preference share structures can also be used which carry additional voting rights and dividend rights for the minority shareholders.
- The blocking minority is 25% of the shares.
What are the rights of a minority shareholder?
Since minority shareholders do not have a controlling stake in the company, they have no control but are entitled to several “fundamental rights” which give them powers to protect their investment.
In order to receive their rights, shareholders must be listed in the Register of Shareholders and must have paid at least 25% of the shares’ par value.
Shareholders’ management rights
Shareholders can wield a lot of power as the board, which are authorised through shareholders’ resolutions, is given the power to represent the company. Accordingly, the shareholders, through these shareholder resolutions play a key role in the management of the company.
Participation in shareholders’ meetings
Thai law states that apart from the board of directors, only shareholders representing at least one-fifth (1/5) of the company’s total voting rights can call for a meeting and set the agenda.
However, Thai law also protects the rights of minority shareholders and allows them to participate in the shareholder meeting through three different means:
- Sufficient information (the notice): The mandatory notice for the meeting shall provide detailed and relevant information to allow the shareholder to be aware of all the issues to be discussed. As part of this process, Thai law requires a formal notice to be sent to the shareholders (no more than seven days before the meeting, 14 days for a special resolution). Companies are also required to publish the details of the meeting in a local newspaper (soon to be removed as a requirement due to an amendment to the Thai CCC). The non-compliance with these rules could nullify all the decisions taken in the shareholders’ meeting.
- Proxy voting: Thai law gives the shareholders the right to vote in meetings even when they cannot physically attend.
- Shareholders also possess the right to propose an agenda for the meeting. Typically, the issues that are to be discussed in the shareholders’ meetings are offered by the management; Thai law allows shareholders to make proposals for the agenda (provided that the number of shareholders meets the legal criteria).
Voting rules
Depending on the total amount of shares owned, the shareholders’ influence on a shareholders’ resolution will be as follows (based on the assumptions that no special articles of association or shareholders agreement grant additional rights to minority shareholders):
- Shareholder representing more than 75% of the voting rights: Absolute control over all the decisions to be made at shareholders’ meetings due to the capacity to pass ordinary and special resolutions on its own (such as capital increase, liquidation or winding up);
- Shareholder representing more than 50% of the voting rights, but less than 75%: Power to pass any ordinary resolutions at shareholders’ meetings, but the agreement of other shareholders is needed to pass special resolutions;
- Shareholder representing more than 25% of the voting rights, but less than 50%: Right to require the company to convene an extraordinary meeting and power to block special resolutions;
- Shareholder representing 20-25% of the voting rights: Right to require the company to convene an extraordinary meeting but not able to influence the decision to be taken;
- Shareholder representing less than 20% of the voting rights: This Shareholder on its own is not able to require the company to convene a shareholders’ meeting and cannot influence the passing of any special resolution or ordinary resolution.
Minority shareholders’ participation in the appointment of board members
The Civil and Commercial Code does not specify a specific number of directors, therefore, private companies can have a minimum of one director (without a maximum number). The appointment and also removal of a Director requires an ordinary resolution (simple majority of votes), therefore shareholders have a say in this issue.
Additional shareholders’ rights
All shareholders are entitled to the following additional rights:
- Every shareholder, regardless of the number of shares held, has the right to inspect the minutes and records of the company’s meetings. Furthermore, they are also entitled to obtain a copy of a company’s balance sheet for a fee not exceeding THB 20.
- The company is also required to send out the financial statements to all shareholders at least three days prior to the Annual General Meeting and also to disclose a copy of the financial statements at the meeting as well. During the Annual General Meeting, every shareholder has the right to ask questions regarding the financial situation and the business of the company.
Shareholders’ rights under the articles of association, shareholders’ agreement, and preference share structure
Apart from the illegal use of nominee shareholders, Thai law does not restrict the granting of additional rights to minority shareholders through the articles of association or a shareholders’ agreement.
Articles of association can contain clauses that are drafted to grant certain shareholders special rights.
Preference share structures can also be used, which carry additional voting rights and dividend rights for the minority shareholders.
Proprietary rights of shareholders
The right to share the profits
As per Thai law, the board of directors and the shareholders’ meeting are empowered to issue dividends. Minority shareholders are entitled to receive a prize as part of this process.
Furthermore, preferential shares can allow minority shareholders to receive higher dividend rights for the minority shareholders.
Protection of the initial investment
Minority shareholders are entitled to the protection of their investment through specific clauses included in the company’s articles of association or a shareholders’ agreement.
Examples include:
- Right of First Refusal: the right to purchase any existing shares to be sold on a pro-rata basis to maintain one’s ownership percentage;
- Pre-Emptive Rights: the right to purchase any newly issued share;
- Put/call option: compulsory sale or purchase of the shares upon the occurrence of defined situations;
- Piggy-back Rights: should a shareholder sell its shares, the piggy-back clause requires that anyone considering the purchase shall be able to buy 100% of the outstanding ones;
- Capital Expenditure Approval: approval is required before any significant expenditure of capital.
- Reserved matters: approval is required for a nseveralcisions (approval of the budget, salary increase etc.).
Remedies available to minority shareholders
Derivative actions
As an alternative to direct lawsuits, shareholders, regardless of the number of shares held, have the to attempt derivative actions, i.e. actions intended against directors by shareholders on behalf of a corporation.
The CCC allows any shareholder to bring an action against directors for a breach of their duty (if the company refuses to do so). Please note, the shareholder who brought the action must not have approved the acts of the directors in question and must submit its action within six months after the date of the general meeting on which such acts were approved.
Directors, therefore, have the duty to ensure the following:
- that payment for shares by the shareholders is actually made;
- the existence and regular keeping of books and documents prescribed by law;
- the proper distribution of dividends and interest as prescribed by law;
- the proper enforcement of the resolutions of general meetings.
Moreover, without the consent of the shareholders’ meeting, a director cannot undertake activities similar to or compete with the ones carried on by the company.
Revocation of resolutions
Any shareholder, regardless of the number of shares held, may challenge the calling of a meeting or passing of a resolution contrary to the provisions of the CCC or the company’s articles of association.
The claim must be made in Court. The action could cancel the resolution or any resolutions passed at such irregular general meetings. The application is filed within one month after the date of the resolution.
Winding up of the company
In certain situations, a shareholder may petition the court for the company to be wound up.
Such situations include:
- If the default is made in filing the statutory report or in holding the statutory meeting;
- If the company does not commence business within a year from the date of registration or suspends its business for a whole year;
- If the business of the company can only be carried on at a loss and there is no prospect of its fortunes being retrieved;
- If the number of shareholders is reduced to less than three.
How can Belaws help?
If you need more information about shareholder rights in Thailand, why not talk with one of our experts right now?
Please note that this article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
Do expats pay income tax in Thailand?
Thailand imposes an income tax on any income earned in Thailand for both resident and non-residents individuals. This tax will be imposed regardless of whether such income is paid in or outside of Thailand.
Do Thai citizens pay taxes?
Yes, Thai citizens are subject to tax.
What happens if you dont pay tax in Thailand?
You will be subject to Imprisonment for a term up to 1 year; or a. Fine up to 200,000 Baht; or. Both.
What’s the average cost of living in Thailand?
On average, $1,500 a month is accepted as a suitable income for a comfortable life in Thailand.
How can I avoid tax in Thailand?
It is not recommended to avoid paying tax in Thailand.
Do expats pay tax?
Thailand imposes an income tax on any income earned in Thailand for both resident and non-residents individuals. This tax will be imposed regardless of whether such income is paid in or outside of Thailand.
How is income tax calculated in Thailand?
Thailand makes use of a progressive tax system for personal income tax, the rates of taxation can be seen below:
| Taxable Income | Tax Rate |
| 0 – 150,000 | Exempted |
| 150,001 – 300,000 | 5% |
| 300,001 – 500,000 | 10% |
| 500,001 – 750,000 | 15% |
| 750,001 – 1 million | 20% |
| 1,000,001 – 2 million | 25% |
| 2,000,001 – 5 million | 30% |
| 5,000,001 or more | 35% |
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