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November 14, 2022

Thailand Officially Opens New M&A Pathway—Plus Eight Other Notable Changes in the Amended CCC

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On November 8, 2022, the Act Amending the Civil and Commercial Code B.E. 2565 (No. 23)—which Tilleke & Gibbins wrote about last month as the law was poised for enactment—was published in the Government Gazette, completing a lengthy process that had been under scrutiny for over two years. The act is expected to come into effect on February 6, 2023 (i.e., 90 days after the date of publication).

New M&A Option

The new amendments contain a number of important changes, but perhaps the most notable is the introduction of a new type of business combination. The Civil and Commercial Code (CCC) previously only allowed “amalgamation,” which is a consolidation of two or more companies resulting in the formation of a new entity, with all the amalgamating companies being dissolved.

The amended CCC provides more options by introducing “merger” as another possible type of business combination. A merger occurs when two or more companies merge and one of the companies continues to exist while the others companies are dissolved. Like the newly created company in an amalgamation, the surviving entity in a merger assumes the property, liabilities, rights, obligations and responsibilities of all the dissolved entities.

Some important considerations for the merger process (which also apply to amalgamations) are specified in the amended CCC as follows:

  • Purchase of shares from dissenting shareholders. The amended CCC allows minority shareholders who disagree with the merger (or amalgamation) to sell their shares to the other existing shareholders at the agreed price. Alternatively, the price may be determined by an appointed valuer if the parties cannot reach an agreement on the purchase price. If the share purchase does not occur within 14 days of the offer date, the shareholder who rejects the offer will become a shareholder of the surviving (or newly created) company after the merger (or amalgamation). Rules for the appointment of a valuer will be set out in ministerial regulations.
  • Period for creditor objection process. Each merging (or amalgamating) company must send notice of the merger (or amalgamation) to any creditors listed in the accounts of the company and publish the resolution in a daily newspaper within 14 days of the resolution. Creditors can send an objection within one month receiving the notice. If an objection is raised, the company cannot proceed with the merger (or amalgamation) unless it has satisfied the claim or given security for it.
  • Quorum and voting requirements for corporate governance. The director must call a shareholders’ meeting to pass a resolution on the name, objectives, share capital, allocation of shares, memorandum and articles of association, selection of directors, appointment of an auditor, and other necessary matters within six months of the resolution to merge, unless shareholders have resolved to extend the deadline (up to one year). The quorum for passing the resolution is participation of shareholders holding not less than 50 percent of the total shares of all merging (or amalgamating) companies. Passage of the resolution requires a majority vote of the shareholders attending the meeting, unless agreed otherwise.

General Corporate Governance and Procedural Changes

The newly published amendments to the CCC make eight other major changes—all of which apply only to private limited companies:

  1. Number of shareholders for incorporation. The amended CCC reduces the minimum number of promoters who can establish a private limited company from three persons to two. This will facilitate the registration of the company and provide promoters with more options.
  2. Term of memorandum of association (MOA). Under the amended CCC, a founder needs to register the incorporation of the company within three years of registering the MOA. Previously, a registered MOA was valid for 10 years. For MOAs that were registered under the old provisions but the company has not yet been registered, the promoter will need to register the company within 180 days of the amended CCC entering into force.
  3. Share certificates. Under the amended CCC, every share certificate must be signed by at least one director and must bear the seal of the company (if the company has a seal). Prior to this amendment, there was no requirement for share certificates to bear the seal of the company.
  4. E-meetings for boards of directors. The amended CCC provides that board of directors meetings can be convened electronically, provided that the meeting is carried out in accordance with the laws applicable to electronic meetings. This means that a director can attend and vote in the meetings remotely, unless the company’s articles of association specify otherwise.
  5. Shareholders’ meeting notice. Companies are no longer required to publish a notice calling a general meeting of shareholders in a local newspaper, unless the company has issued share certificates to bearers. Under the amended CCC, a company can call a general meeting of shareholders by sending a notice by post with acknowledgement of receipt to every shareholder whose name appears in the register of shareholders. This must be done not less than seven days before the meeting date—or 14 days if the notice is for a special resolution. A company with share certificates issued to bearers is still required to publish a notice at least once in local newspaper or via electronic means, as prescribed by the relevant ministerial regulations.
  6. Quorum for shareholders’ meetings. Under amended CCC, a general meeting may not transact any business unless not less than two shareholders representing not less than one-fourth of the capital of the company are present, either themselves or via proxy.
  7. Payment of shareholder dividends. Under the previous version of the CCC, shareholder dividends had to be “made” within one month of being approved by a company’s shareholders or its board of directors. The amended CCC clarifies that the dividends must be “completely made” within one month of being approved by a company’s shareholders or by its board of directors.
  8. Dissolution by court order. Since the minimum number of promoters is reduced from three persons to two, the number of shareholders required to request a court-ordered dissolution of the company is reduced to one person. As amended, the fact that a company only has two shareholders will not cause a dissolution (though this was the case under the previous version of the CCC).

Doing Business under the Amended CCC

Taken as a whole, the amended CCC should be a positive development for the business environment in Thailand. It eases the process of company incorporation, holding director’s meetings, and issuing notices to shareholders. It also provides businesses with more options for integration, giving companies more options for their strategic M&A and transactional activities.

While some details of implementation remain to be seen, it is likely that the amended CCC will create a more conducive environment for investing and doing business in Thailand.

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