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The rights of shareholders in Thai limited companies
25/11/2022
Company shareholders play an essential role in the running of a company. For example, a person who owns shares in a company is entitled to part of the company’s profits and also has the right to vote on how the company is controlled.
Furthermore, shareholders who hold a higher percentage of the company’s shares have more rights than shareholders who hold less percentage of shares.
In this article, we will explore the rights of shareholders in a Thai limited company.
Key points
- Shareholders can be either an individual, a corporate entity, or an organization that owns a share(s) in a company.
- The rights of a shareholder in a Thai limited company include the right to receive dividends, request an extraordinary shareholder meeting, control the company’s transactions, and sue for damages.
- Nominee shareholders are prohibited from use by foreign companies.
What is a shareholder?
Shareholders can be either an individual, a corporate entity, or an organization that owns a share(s) in a company.
Thai law requires limited companies to have at least three shareholders. However, should the recent amendments to the Civil and Commercial Code be approved, this requirement will be changed and only 2 shareholders will be required.
It is entirely possible for foreigners to fully own a private limited company. However, certain business activities are prohibited by the Foreign Business Act from being undertaken by a foreign owned company. In such cases, a limited company will require Thai nationals to hold the majority of shares in the company.
However, foreigners can own a majority or 100% foreign ownership and undertake restricted activities by obtaining a Foreign Business License, BOI promotion, or a Treaty of Amity promotion.
What are the rights of a shareholder?
The rights of a shareholder in a Thai limited company include:
- To receive dividends
- To request an extraordinary shareholder meeting
- To control the transactions of the company
- The right to sue for damages
- In every shareholder’s meeting, a shareholder has the right to:
- Access adequate information about the business to help make decisions
- Attend and vote on each agenda item
- Appoint and remove directors
- Appoint auditors
- Nominate directors
- Request information about their shares from the company
What voting rights do shareholders have?
The voting rights held by a shareholder depend on the number of shares held by that person or entity. The shareholders’ voting rights for resolution are as follows:
- Shareholders who own more than 75% of the voting rights: have absolute control over all decisions to be made at the shareholders’ meetings. Such shareholders have the ability to pass ordinary and special resolutions (ie capital increase or decrease, amending the articles of association or memorandum of association, passing a resolution to place the company in liquidation or to merge the company)
- Shareholders who own more than 50% of the voting rights (but less than 75%) can pass an ordinary resolution. However, in order to pass a special resolution they will need additional votes from other shareholders.
- Shareholders who own more than 25% (but less than 50%) can ask the company to hold an extraordinary meeting. Furthermore, such shareholders can block special resolutions from being passed.
- Shareholders who own 20-25% of the voting rights can require the company to hold an extraordinary meeting. However, they cannot influence any decisions made at the meeting.
- Shareholders who own less than 20% are not able to require the company to convene a shareholders’ meeting and cannot influence the passing of any special resolution or an ordinary resolution.
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.
What is the register of shareholders?
Limited companies are required to keep a register of shareholders as required by the Civil and Commercial Code. This register must contain the following information.
- The name and addresses, and occupations, if any, of the shareholders,
- A statement of the shares held by each shareholder,
- The amount paid or agreed to be considered as paid on the shares of each shareholder
- The date on which each person was entered into the register as a shareholder
- The date on which each shareholder ceased to be the shareholder
- The numbers and date of certificates issued to the bearer, and the respective numbers of shares entered in each certificate
- The date of cancellation of any name certificate or certificate bearer
Furthermore, the list of shareholders (Bor Jor 5) must remain up to date and any changes must be registered with the Ministry of Commerce. The updated list of shareholders can be filed online on the Department of Business Development (DBD) platform.
Failure to register the transferee into the shareholder’s register will invalidate the transfer.
Do minority shareholders have any rights?
Minority shareholders are made up of shareholders who own less than 50% of the company’s shares. Such shareholders have no control over the company.
The rights of a minority shareholder include:
- The ability to file a motion with the court to cancel any resolution passed at irregular general meetings
- To receive the notice of the shareholders’ meeting not less than seven days in advance or 14 days in advance for a special resolution
- To request in writing to the board to call for a shareholders’ meeting
- To request the competent officer to appoint an inspector to examine the business of the company
Can foreigners use nominee shareholders to maintain control of a company?
It is illegal for foreigners to use nominee shareholders in a Thai company under the Foreign Business Act.
For foreign shareholders to maintain control of their investment, issuing preference shares with additional voting and dividend rights is a common solution.
Preference shares give its holder the right to attend any annual general meeting and have the same, less or more voting rights as an ordinary shareholder. Preference shareholders are also entitled to receive dividends before ordinary shareholders when the company gains profit.
If a Thai national or juristic person is found to be acting as a nominee shareholder they may be subject to a fine of between THB 100,000 and THB 1 million.
How can Belaws help?
For more information about the rights of shareholders 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.
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Frequently asked questions
Can a foreigner open a company in Thailand?
Yes it is possible for a foreigner to open a company in Thailand. There are also options available which allow 100% foreign owned companies as well.
How much does it cost to set up a company in Thailand?
The official fees for registering a company in Thailand are THB 7,500.
How do I start a limited company in Thailand?
- Step 1: Choose and register a company name.
- Step 2: Draft and file the Memorandum of Association.
- Step 3: Call and hold a Statutory Meeting of the shareholders
- Step 4: Register the Company with the Ministry of Commerce.
- Step 5: Register the company for Value-Added Tax (VAT) and Income Tax
Is it good to start a business in Thailand?
Thailand is an attractive option for those wishing to start a business. Thailand has a great infrastructure in place and scheme such as the BOI provide great incentives for companies to take advantage of.
How much money do you need to start a business in Thailand?
Typically, it costs between THB 40,000 to THB 60,000 (excluding VAT and Government fees) to start a business in Thailand.The official fees for registering a company in Thailand are THB 7,500.
How can a foreigner start a small business in Thailand?
Yes, foreigners can start a business in Thailand. However, certain business activities are restricted by the Foreign Business Act and in order for businesses to undertake them they must obtain a Foreign Business Licence/Certificate which can be time consuming and complicated.
What is the biggest problem in Thailand?
The biggest problem facing foreign owned companies is being able to undertake their desired business activity as a 100% foreign owned company. Many business activities are protected by the Foreign Business Act and in order for a company to operate in these protected industries, they will be required to be majority owned by Thai Shareholders (unless a BOI promotion has been obtained).
Why is it hard to do business in Thailand?
The Foreign Business Act limits to the business activities a 100% foreign owned company can undertake. This means Thai Shareholders will need to be sought or a BOI promotion obtained in order for a company to legally operate.
Can I own a company in Thailand?
Yes, foreigners can start a business in Thailand. However, certain business activities are restricted by the Foreign Business Act and in order for businesses to undertake them they must obtain a Foreign Business Licence/Certificate which can be time consuming and complicated.
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