After a long wait, Thailand’s Parliament approved the draft Act Amending the Civil and Commercial Code (the “Amended CCC”) on September 14, 2022. The Amended CCC (which had previously been approved by the cabinet in 2020) introduces changes to corporate governance and transactional rules, as well as processes for the merger of private limited companies.
Corporate Governance and Transactional Rules
The changes introduced by the Amended CCC in relation to corporate governance and transactional rules include the following:
- Currently, incorporation requires at least three promoters. Under the Amended CCC, only two promoters are necessary.
- Under the Amended CCC, a notice calling a general meeting of the shareholders is no longer required to be published in a local newspaper—the updated law only requires the notice to be sent to existing shareholders via post. However, if a company issues bearer certificates, a notice calling a general meeting of shareholders must still be published either in a local newspaper or via electronic media.
- To pass any resolution during a general meeting of shareholders, at least two shareholders, whether in person or via proxy, representing at least one-fourth of the capital of the company, must be present.
- Distribution of dividends must be completed within one month of a shareholders’ meeting or the directors passing a resolution on dividend payment.
- A company may be dissolved by the court if, among other circumstances, the number of shareholders decreases to one, or there are other reasons that the company can no longer exist.
The current Civil and Commercial Code only recognizes the concept of “amalgamation” of companies (i.e., the formation of a new company by amalgamation of at least two companies, resulting in the dissolution of the amalgamating companies). It is not possible for one of the amalgamating companies to be a surviving entity. In other words, the amalgamation of company A and company B will result in the formation of a new company C, which automatically assumes the rights and liabilities of both company A and company B.
The Amended CCC adds “merger” as another possible form of business combination. Under a merger, one company is merged into another company, and the merged company will be dissolved while the other will survive. Conceptually, this means that if company A is chosen as the surviving company and company B is the merged company, then at the end of the merger process, company B will be dissolved while company A will maintain its status as a juristic person, automatically assuming the assets, liabilities, rights, obligations, and responsibilities of company B.
If no further amendments are made by the Senate, the Amended CCC will be proposed for endorsement by the king and become effective 90 days after its publication in the Government Gazette.
For more information on the Amended CCC, or on any aspect of corporate governance and merger rules in Thailand, please contact any member of the Tilleke & Gibbins M&A team, including Charunun Sathitsuksomboon at [email protected], Gvavalin Mahakunkitchareon at [email protected], and Thammapas Chanpanich at [email protected].