Merging company

Thailand CCC 2022 Amendments – New Revised Merger Regime and Corporate Governance for Limited Liability Companies

An amendment to the Thai Civil and Commercial Code introduces a new M&A transaction regime in Thailand. The amendment also changes certain corporate governance requirements for private companies. This information session will provide an overview of the changes and their impact.

When will the amendment come into effect?

The Amendment to the Thai Civil and Commercial Code, BE 2565 (the “Amendment”) has been approved and will be presented to HM the King for final promulgation. The amendment will enter into force after the expiry of a period of 90 days from the date of publication in the Official Gazette.

Merger

Prior to the amendment, the only corporate consolidation permitted by the Thai Civil and Commercial Code was a merger. A merger is a consolidation of two or more companies where the merging companies will be dissolved and a new entity will be formed at the end of the process.

The amendment rewrites the Thai Civil and Commercial Code to create two types of consolidation for limited liability companies: (i) an amalgamation, as noted above, and (ii) the ‘merger’. This unprecedented merger in the Thai legal system is a consolidation where two or more companies merge and only one merged company survives.

Accordingly, all property, debts, rights, obligations, liabilities and duties of the merging/merging companies will be automatically transferred by operation of law to the surviving company (in the event of a merger) or to the newly incorporated company (in the event of merger) upon completion.

Shares of minority shareholders

The amendment includes a mechanism to accommodate the minority shareholder(s) who disagree with the merger/regrouping by giving them the option of selling their shares to the buyer. This would be arranged by the merging/merger company at the purchase price to be agreed. Alternatively, the price may be determined by an appointed appraiser if the parties cannot agree on the purchase price. A shareholder who rejects the offer will become a shareholder of the amalgamating company if the purchase of shares does not take place within 14 days of the date of the offer.

Other amendments to the Thai Civil and Commercial Code

Certain requirements relating to the corporate governance of a public limited company and certain formalities will be modified by the Addendum. The main issues are summarized below:

  • Minimum number of promoters: went from three people to two people
  • Period of validity of the Memorandum of Association (MOA) registered at the DBD before the incorporation of the company: within three years from the date of registration of the MOA, the MOA can be used for the registration of the incorporation of a company.
  • Share certificate: the requirement to affix a corporate seal (if applicable) has been added.
  • Electronic Meeting of Directors Meetings: unless prohibited by statute, directors’ meetings may be held electronically if the meeting platform meets the standards of the law on the holding of meetings by electronic means.
  • Notice of general meeting of shareholders: publication in a newspaper is no longer required except in the case where share certificates are issued to holders (whether physical or electronic).
  • The number of shareholders constituting the quorum at a general meeting: at least 2 shareholders and/or proxies must be present at a general meeting. In addition, the shareholders present at the meeting must represent at least 25% of the share capital to pass a resolution.
  • Revisions of the grounds for dissolution of the company in accordance with a court decision: previously this applied when a company had less than three shareholders, but now it applies when a company has only one shareholder

Other comments

  • The new type of merger under the CCC will be considered as an alternative option for M&A transactions in the Thai market by the private sector.
  • Under the new merger regime, similar to the existing business transfer regime, assets, obligations and liabilities will only remain with the surviving entity. Therefore, the new merger regime would facilitate the closing of transactions involving business transfers in cases where certain operating licenses are non-transferable. Indeed, the rights and obligations of the merging parties will be automatically transferred.
  • Investors and their advisors should also keep an eye on:
    • The ministerial regulations prescribing the criteria and procedures for the appointment of the appraiser in the event that the purchase price of the shares of the shareholders who did not agree with the merger/regrouping, cannot be agreed; and
    • clearer guidance or regulations from the Revenue Department as to whether there will be a new tax benefit for a transaction under the new merger regime or whether the existing tax benefits for the merger and entire business transfer regime (EBT) are available for a merger transaction as it is a category of business combination under the law.