Wiki Investment

Thailand

5 Chapter Corporate Law

5.1 Types of Thailand Business Structures
- Types of Thailand Business Structures
  
  There are many types of corporation presence in Thailand, for the most common structure are the Partnership, Limited Companies, Public Companies, Joint Venture and Representative Office. The details are as follow;
  
  Partnership
  
  Thai and Western concepts of partnership are broadly similar. Thailand provides for three general types of business structures:
  
  - Unregistered ordinary partnerships, in which all partners are jointly and wholly liable for all obligations of the partnership.
  
  - Registered ordinary partnerships. If registered, the partnership becomes a legal entity, separate and distinct from the individual partners.
  
  - Limited partnerships. Individual partner liability is restricted to the amount of capital contributed to the partnership. Limited partnerships must be registered.
  
  Limited Companies
  
  There are two types of limited companies, private companies and public companies. The first is entitled by the Civil and Commercial Code, the second by the Public Company Act.
  
  Private Limited Companies in Thailand have basic characteristics similar to those of Western corporations. A private limited company is formed through a process which the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws) are required, as its constitutive documents.
  
  Shareholders are limited to the remaining unpaid amount, if any, of the par values of their shares. The liability of the directors, however, may be unlimited if the liabilities are provided in the company’s memorandum of association or the articles of incorporation. The limited company is managed by a board of directors according to the company’s article of associations and by-laws.
  
  All shares must be subscribed to, and at least 25 percent of the subscribed shares must be paid up. Both ordinary and preferred shares of stock may be issued, but all shares must have voting rights. Thai law prohibits the issuance of shares with no par value. It also specified that only shares with par value of five baht or above may be issued. Treasury shares are prohibited.
  
  A minimum number of three promoters is required to set up the private limited company. A private limited company may be wholly owned by aliens. However, in those activities reserved for Thai nationals, aliens’ participation is generally allowed up to a maximum of 49 percent.
  
  Procedure to register private limited company
  
  1) Reserve your proposed company name: The Thai Limited Company name reservation must follow the guidelines of the Business Development Office in the Ministry of Commerce amongst other guidelines.
  
  2) File a Memorandum of Association: The Memorandum of Association of the Thai limited company must to be filed with the relevant Thai authorities.
  
  3) Convene a statutory meeting: The Thai limited company must convene a statutory meeting to make all the appointments.
  
  4) Company Registration: To establish the Thai limited company it has to be registered with the Thai government.
  
  5) Tax Registration: All companies in Thailand have to be registered for tax purposes.
  
  Public Limited Companies registered in Thailand may subject to compliance with the prospectus, approval, and other requirements, offer shares, debentures and warrants to the public and may apply to have their securities listed on the Stock Exchange of Thailand (SET).
  
  A minimum of 15 promoters is required for the formation and registration of the memorandum of association of a public limited company. The Board of Directors of a public limited company must have a minimum of five members, at least half of them are Thai nationals. Shares must have a face value of at least five baht each and be fully paid up. Restrictions on share transfers are unlawful except those protecting the rights and benefits of the company allowed by law, and those maintaining a Thai/foreigner shareholder ratio. Debentures may only be issued with the approval of three quarters of the voting shareholders.
  
  Joint Venture
  
  A joint venture may be described in accordance with general practice as a group of persons (natural and/or juristic) entering into an agreement in order to carry on a business together. It has not yet been recognized as a legal entity under the Civil and Commercial Code. However, income from the joint venture is subject to corporate taxation under the Revenue Code, which classifies it as a single entity.
  
  Representative Office
  
  In the case where a foreign company wants to conduct business within Thailand, a representative office may be set up through which a Thai Business License may be obtained. This would normally only be required where a foreign business is sourcing products for export from Thailand, but other requirements are set, and at least one of the requirements must be met.
  
  In order to set up a Representative Office in Thailand, certain conditions apply to those Thai representative offices which require an Alien Business License. It is important to clarify beforehand what constitutes income and subject to Thai taxes. In order to form a representative office, at least one of the following purposes would need to be sought for the purposes of limited “non-trading” activities.
  
  1) The business is to source goods or services in Thailand for the headquarters.
  
  2) To check the product ordered by the headquarters overseas
  
  3) To give advices to the headquarters about the goods to order
  
  4) To supply the information of the headquarters' products to the customers in Thailand
  
  5) To report the economic movement in Thailand to the headquarters
  
  6) To fully understand the conditions which pertain to a representative office in Thailand
5.2 Annual General Shareholders’ Meeting in Thailand
- Annual General Shareholders’ Meeting in Thailand
  
  Shareholders’ Meeting generally consists of 2 types as below:
  
  (A) Annual General Meeting of Shareholders (AGM) or Ordinary Shareholders’ Meeting
  
  AGM should be held at least 1 time per year having the following agendas:
  
  -  Approval of the Minutes of the previous AGM.
  
  -  The Board of Directors report to the meeting for an activities of the company during the past year.
  
  -  To appoint the new director replace the one who retired by rotation
  
  -  To approve financial statement of company for the past year.
  
  -  To consider Dividends payment and appropriated legal reserve amount.
  
  -  Appointment of an auditor and remuneration.
  
  -  Other matters
  
  (B) Extraordinary General Meeting of Shareholders (EGM)
  
  Other kinds of the meeting that may be not frequently or held on proper time. It is the meeting that require some specific issue during the year.
  
  Procedure of Meeting
  
  Shareholders’ Meeting: Normally, Shareholders’ Meeting will be held by the Board of Directors each year for at least 1 time by sending an invitation letter to all shareholders.
  
  EGM : Extraordinary Shareholders’ Meeting will be held at proper time by the Board of Directors, in case of shareholders will hold the meeting, they must be group of at least 20% of shareholders and inform the Board of Directors for the purpose of invitation for meeting (director must do follow the shareholder’s request).
  
  Invitation for AGM or Extra Ordinary Shareholders’ Meeting must follow and complete the following steps:
  
  To publish in local newspaper before 7 days (in case of Extra Ordinary Meeting for “Extra unanimously approval” must exceed 14 days).
  
  To invite all shareholders for holding of the annual meeting via post with advice of delivery service before meeting date 7 days (in case of Extra Ordinary Meeting for “Extra unanimously approval” must exceed 14 days).
  
  Meeting date
  
  On meeting date the meeting will be done when there is at least 25% of registered capital (sector 1178, Civil and Commercial Code) or depends on what is stated in the company’s Article of Association.
  
  The matters which were not declared in agenda cannot be attended and discussed in the meeting, in case of still discuss this agenda this will be invalid.
  
  Exact procedures of Annual General Meeting for Shareholders under Thai Law
  
  According to enforcement of the Civil and Commercial Code sector 1175 regarding the “Sending of Invitation Letter for annual shareholders meeting”, it’s effect to the approval for the financial statement of year ended December 31 therefore all company must send the notice (letter) to invite all shareholders for holding of the annual meeting by post with advice of delivery service and must publish in a local newspaper, both procedures require to be done at least 7 days before the meeting date (in case of Extra Ordinary Meeting for “Extra unanimously approval” must exceed 14 days).
5.3 Director and Board of Director
- Director and Board of Director
  
  Number of director
  
  Regarding to Civil and Commercial Code (CCC), the law does not require the minimum of director. So, a company can have at least one authorized director who responsible for a company activities. Moreover, a company can limit the authority of each director, for example, the power to sign with or without company seal in order to bind that action to the company. Anyway, the company has to set an annual general meeting of shareholder (AGM) in order to specify the number and authority of directors.
  
  ■ The residence of Director and nationality
  
  Directors of company is not limited only for Thai nationality only. Director can be foreigner and can be any nationality. Also, such director can work as long as the director has entitled to work in Thailand by having work permit and visa for business. Otherwise, the director has to notarize and legalize any documents that he/she signs to bind with the Company.
  
  ■The election and dismissal of director
  
  According to CCC, Article 1152 states that at the first annual general meeting in every subsequent year, one-third of the director must retire from office. Also Article 1155 states that if there is any vacancy occurring in the board of directors otherwise than by rotation may be filled up by the directors, but any person so appointed shall retain his office during such time only as the vacating director was entitled to retain the same. Moreover, it should be look into article of association of the company for the method of re-election
  
  ■The authorized person of a company
  
  Director is one of the Company’s organs who oversees the activities of the Company. In overseeing the activities of the company, the Director has the right and authority to act for and on behalf of a company. By the law, director is appointed and set a number of director on General Meeting of Shareholders by voting of shareholders, however, a company must have at least one director. A company which has more than one director can entrust each director for different responsibility. The acts of the Director are only in the interest of the Company and for the purpose of achieving the company’s objectives. In short, whether a Company’s objectives are achieved or not depends on the acts of the Director. This creates the fiduciary duties (a relationship of trust which gives rise to so a principle of responsibilities due to the duties and position entrusted to him) of the Director to the Company so that he can perform his duties with full responsibility.
  
  In performing his fiduciary duties, a Director must also have good faith. This obligation to oversee the Company’s activities in good faith is called the "Duty to act in good faith". The meaning of the Duty of good faith is as follows:
  
  1. act in the best interest of the company;
  
  2. not to put yourself in a position where your personal interest or a duty you owe to another conflicts with the duties you owe to the company;
  
  3. only use company property for the benefit of the company and not for your own benefit.
  
  In performing his duties in good faith, a Director must try his best to avoid any conflict of interest between his personal interest and obligation and the Company’s interest and his obligation to the Company, such as using the Company’s assets in his personal interest (duty of loyalty and duty of care).
  
  In addition to achieving the Company’s objectives, a Director’s fiduciary duties are also performed in order to apply the principle of Good Corporate Governance ("GCG") in managing a Company. In general, here are the principles of GCG that must be implemented by a Director in managing a Company:
  
  1. Fairness: in managing a Company, a Director must ensure equal treatment to all shareholders, including minority shareholders and majority shareholders. This fairness principle can be realized by making corporate regulations that protect the interest of the minority, making the company’s code of conduct, so that there will not be any gap in the Company.
  
  2. Transparency: Transparency is an important principle to avoid any fraud. This principle acknowledges that the shareholders have the right to get correct, accurate, and timely information about the performance if the company, its finances and operations, and information about the company’s objectives. This is in line with one of the Director’s fiduciary duties, i.e. the duty to disclosure;
  
  3. Accountability: The accountability principle contains the obligation to present and report any conduct and activity of the company in its financial administration to the shareholders. A Director is appointed by the shareholders, so actually the Director represents the shareholders. In applying this principle, a Director must make a financial report thoroughly. The financial report made by the Director has a tremendous impact on the Company not only for the purpose of distributing dividends to the shareholders, but also in the interest of the Company’s taxation.
  
  4. Responsibility: The responsibility principle covers matters pertaining to the fulfillment of the Company’s social responsibility as part of the society. In short, a Company must uphold the rule of law, among others, by following tax regulations, labor and safety regulations, health regulations, environmental regulations, consumer protection regulation, and prohibitions of monopolistic practices and unfair business competition. In the responsibility principle, a Director not only oversees the Company’s daily activities, make a financial report and follow all the prevailing laws, but also fulfill the society’s needs in its community and protect the interest of all the stakeholders.
  
  Besides the above matters, a Director, according to the Company Law, must also ensure that the Company has a harmonious and balanced relation with the environment, values, norms and culture of the local people. In particular, a Company whose business is in the sector of and/or related to natural resources must perform its Corporate Social Responsibility.
  
  Based on the above, it is clear that a Director has a tremendous responsibility for a Company’s success in achieving its objectives. Therefore, in appointing a Director, the shareholders must carefully pay attention to the capability and integrity of the nominee Director. In the company law, it is stipulated that those who may be appointed as Directors are individuals capable of performing legal actions, except those who in the 5 (five) years previous to their appointment have: (i) been declared bankrupt; (ii) been members of a Board of Directors or a Board of Commissioners declared to be at fault in causing a Company to be declared bankrupt; or (iii) been sentenced for crimes which caused losses to the state and/or were related to the finance sector. In practice, the nomination of a Director by a shareholder is often for the purpose of facilitating the shareholder’s objective (nominee director). A Director is often only asked for his signature for a transaction which he knows nothing about. Therefore, it is important for a Director to know that his every action results in legal liabilities for him.
  
  If a Director is at fault or negligent in carrying out his duties, then under Article 97 paragraphs (3) and (4) of the Company Law, it is stipulated that a Director shall be personally liable. If it involves more than 2 (two) directors, the liability shall be joint and several for each member of the Board of Directors.
  
  Often in practice, the shareholders appoint a Director only as a vehicle to protect their interest and wishes, without regard to the capability and integrity of the Director concerned, or do it quickly without any fit and proper test. Although the Company Law only explicitly stipulates the fiduciary duties for a Director and a Commissioner (Article 92 and Article 97), it is clear that all the components of the fiduciary duties must be performed by a Director. His role is so great in leading the Company to achieve its objectives, so that the Company can gain a profit and expand its business in the future. On the other hand, a Director must also remember that his every action carries legal consequences (including tax liabilities) for himself.
  
  Only with leadership by a Director with capability and integrity in overseeing its activities, will a Company be able to compete with other companies and eventually stand in the forefront and reap benefits for itself and the society.
  
  ■Board of Director
  
  A director may, at any time, call a meeting of the board of directors. The quorum for a board meeting is usually specified in the articles of association. If a quorum is not specified in the articles of association and the company has more than three directors, the quorum must consist of at least three directors. Resolutions of a board meeting are passed by majority vote. In the case of tied votes, the chair has the casting vote. According to the current interpretation of the law, it is not possible for proxies or alternates to attend meetings of the board of directors because a company’s directors have been appointed to act on the basis of their personal qualities, such as their qualifications, capabilities, trustworthiness, etc. In addition, the meeting must be physically assembled. This means that board meetings cannot be conducted by telephone or videoconference and nor can decisions be taken by means of a written resolution which is circulated to the directors capabilities, trustworthiness, etc.
  
  In addition, the meeting must be physically assembled. This means that board meetings cannot be conducted by telephone or videoconference and nor can decisions be taken by means of a written resolution which is circulated to the directors.
5.4 Auditor
- Auditor
  
  Public Company
  
  The Stock Exchange of Thailand (SET) stresses good corporate governance among public companies, especially regarding directors’ duties, roles and responsibilities. Directors are required to give first priority to the interests of the company and its shareholders. Consequently, SET has highlighted the importance of the audit committee as an oversight instrument for the Board of Directors, ensuring that financial reporting and internal control procedures are effective, to the benefit of all stakeholders.
  
  SET Board of Governors has issued regulations requiring firms to have an audit committee to maintain their listing:
  
  1. Listed companies must have an audit committee to govern their operations, and ensure that they meet required standards and best practice. A committee member should have the qualifications, and perform the duties and responsibilities stipulated in the SET notification: ‘Qualifications and scope of work of audit committees’. This requires listed companies to have audit committees with at least 3 members being directors.
  
  2. If the committee has fewer members than required, the companies shall, within three months of the shortfall, increase the number of members up to the level required.
  
  ■Appointing audit committee members
  
  1. SET recommends that listed firms establish a nominating committee to propose appropriate persons to be directors and/or audit committee members. This will ensure that companies maintain listing status and the Board of Directors maintains their oversight and management of listed companies.
  
  2. Each month, SET will publicly name firms that do not meet listing requirements regarding audit committees. This will ensure that shareholders and investors know a company’s listing status prior to making investment decisions.
  
  ■Qualifications and Method for election of CPA
  
  Certified Public Accountant (CPA) must get the license from Federation of Accounting Professions (under sector 38 of Accounting Professions Act B.E. 2547) obtaining, approval, and issue the CPA license must follow the conditions which were regulated by Federation of Accounting Professions.
  
  Rough qualifications of CPA in Thailand, as below:
  1. Graduate of bachelor degree in Accounting or case of study must pass the specific subject of accounting.
  2. Pass the examination of 6 subjects consist of Accounting 1, Accounting 2, Auditing 1, Auditing 2, Law related to auditing professions and Auditing by computer.
  3. Have experience in business auditing (training by auditor) with the continued period minimum 3 year and totaling at least 3,000 hours.
5.5 Shares
- Shares
  
  ■Shares
  
  Share and Par Value in Thailand
  
  The first thing to consider when the company has been set up is the “Share”; the share is divided to be an equal value called “Par”. Par value of each share was prescribed under sector 1117, Civil and Commercial Code that must be at least Baht 5 per share without any restriction on maximum value.
  
  Amount of Registered Capital did not prescribe in law for a minimum and maximum, normally should depend on proper capital of each company for doing business.
  
  According to Sector 1120, Civil and Commercial Code, the amount of share to be collected is at least 25 percent of par value, in case of the Attendee didn’t pay its share, they still have full responsibility until the registered amount was paid in full. Paid up capital can be done by collecting other monetary assets instead of cash, but except the Attendee whom be Creditor will not able to use credit/payable amount in account to be paid as capital (Sector 1119).
  
  ■Type of Shares
  
  Private Company
  
  1.      Ordinary Shares, the shareholders have rights against and owe duties to the company under the Civil and Commercial Co de. For example, they will get a share of any profits regarding those shares which are 100% paid up, in the form of dividends, and their initial investment in the company will be returned if they sell their shares or if the company are into liquidation and the assets over the debts and liabilities. Furthermore, ordinary shares carry voting rights at shareholder meetings and one share gives one vote.
  
  2.      Preference Shares, the Shareholders also have rights against and owe a duty to the company under the Civil and Commercial Code. However, these shareholders have some special rights. The preference shareholder’s position is like a half shareholder, half debtor. If the company are into liquidation, the company must first settle any debts and if there is any money left over to reimburse shareholders for their investment, the preference shareholders will be repaid before the ordinary shareholders. Therefore, if after the company has repaid the preference shareholders, there are insufficient funds to reimburse the ordinary shareholders then the ordinary shareholders may only be partly reimbursed or may receive no refund at all.
  
  Preference shareholders can receive an equal share of the profits whether their shares are paid up or not. Preference shareholders can have voting rights in shareholder meetings however their voting power depends on the content of the company regulations. The company can choose whether the voting rights of preference shareholders are equal to one vote for one share or they can increase voting power and may choose to give ten votes for one share.
  
  Public Company
  
  Public Limited Companies has to comply with the Public Company Limited Act B.E.2535.
  
  The Act permits companies to change the share types in a company whereas Private Companies have to follow the Civil and Commercial Code which does not permit this case.
  
  If a Limited Company needs to change its ordinary shares to preference shares so that the holders benefit from the favorable voting rights, it is possible. Although the foreign shareholders in Thailand will hold fewer shares, they are still able to control the company by passing resolutions in their favor by using their preferred voting rights.
  
  ■Issue of new shares
  
  How to change a Share Structure
  
  There are two ways to change the share structure:
  
  1.      Increase Registered Share Capital. This is the most common way of solving the problem of giving foreigners control of a Thai company. In order to increase the registered capital, the company must follow the Ministry of Commerce’s regulations. The change can be registered within a day.
  
  2.      Reduction of Company Capital. A company can reduce its capital by a quarter. This method is more difficult, takes longer and is more expensive. A company may be unable to do this if its creditors object. A reduction in capital will take about three to four months and the company must follow Ministry of Commerce regulations. First, the company reduces capital and reduces the number of ordinary shares proportionately. Then the company will increase its capital so that it is equal to the previous registered capital but it will issue preference shares in place of some of the ordinary shares.
  
  Example: company capital is 2,000,000 THB with 20,000 ordinary shares at a share value of 100 THB, one share equals one vote. Mr. A has 5,000 ordinary shares and Mr. B has 12,000 ordinary shares. Therefore, Mr. B has more authority than Mr. A. If the company wanted Mr. A to have more authority than Mr. B, the company can’t change Mr. A’s ordinary shares to preference shares instantly. However, the company can increase capital and issue preference shares. If the company increases its capital and issues 2,000 preference shares, Mr. A can have 5,000 votes via his ordinary shareholding and a further 20,000 votes through his preference shareholding (carrying 10 votes per share).
  
  However, the increase in capital may affect the company balance sheet or tax liability. So, if the company does not want to increase its registered share capital, an alternative is available.
  
  Before a company increases or reduces its capital, it must check the company articles of association. The company articles of association must permit such increase or reduction. If they do not, the company must amend the articles of association first by submitting certain documents to the Ministry of Commerce.
  
  By law, a Thai Limited Company cannot change ordinary shares to be preference shares. Therefore, the company must solve this problem by following one of the above methods. If the Thai company has only ordinary shares, it can increase or decrease capital in order to issue preference shares.
  
  ■Regulations of Increase and Reductions of Capital
  
  Section 1220. A limited company can by special resolution increase its capital by issuing new shares.
  
  Section 1221. No new shares of a limited company may be allotted as fully or partly paid-up otherwise than in money, except in execution of a special resolution.
  
  Section 1222. All new shares must be offered to the shareholders in proportion to the shares held by them.
  
  Such offer must be made by notice specifying the number of shares to which the shareholder is entitled, and fixing a date after which the offer, if not accepted, shall be deemed to be declined.
  
  After such date or on the receipt of an intimation from the shareholder that he declined to accept the shares offered, the director may offer such shares for subscription to other shareholders or may subscribe the shares to himself.
  
  Section 1223. A notice to any shareholder to subscribe for New Shares must be dated and Signed to the directors.
  
  Section 1224. A limited company may, by special resolution, reduce its capital either by lowering the amount of each share or by reducing the number of shares.
  
  Section 1225. The capital of the company may not be reduced to less than one-fourth of its total amounts.
  
  Section 1226 * When a company proposes to reduce its capital, it must publish once at least in a local paper and send to all creditors known to the company a notice of the particulars of the proposed reduction, requiring the creditors to present within thirty days from the date of such notice any objection they may have to such reduction. If no objection is raised within the period of thirty days, none is deemed to exist. If an objection is raised, the company cannot proceed with the reduction of its capital unless it has satisfied the claim or given security for it.
  
  Section 1226. When a company proposes to reduce its capital, it must be published seven times at least in a local paper and send to all creditors known to the company a notice of the particulars of the proposed reduction, requiring the creditors to present within three months from the date of such notice any objection they may have to such reduction.
  
  If no objection is raised within the period of three months, none is deemed to exist.
  
  If no objection is raised, the company cannot proceed with the reduction of its capital unless it has satisfied the claim or given security for it.
  
  Section 1227. If a creditor has, in consequence of his ignorance of the proposed reduction of capital, failed to give notice of his objection thereto, and such ignorance was in no way due to his fault, those shareholders of the company to whom has been refunded or remitted a portion of their shares remain, for a period of two years from the date of registration of such reduction, personally liable to such creditor to the extent of the amount refunded or remitted.
  
  Section 1228. The special resolution by which any increase or reduction of capital has been authorized must be registered by the company within fourteen days after its date.
  
  ■Treasury Stock
  
  Treasury Stocks are shares repurchased by listed companies for financial management purposes if, at the time of purchase:
  
  - The firm’s share price is below its fundamental value (P/BV < 1 time and/or P/E ratio < industry average)
  
  - The company’s retained earnings and financial liquidity are high and the company has no need for fund raising.
  
  Share repurchase/resale methods
  
  There are two methods available, as follows:
  
  1. Repurchase/Resale via the main board
  
  2. Repurchase/Resale via a general offer (GO)
  
  The company is able to resell its shares six months after repurchasing them. The resale procedure shall be conducted within three years.
  
  After three years, if there are still shares unsold:
  
  • Unsold shares must be reduced using capital reduction procedures and
  
  • The company must proceed with its capital reduction with the Ministry of Commerce.
  
  Benefits of treasury stock
  
  Company
  
  ·         Adds demand for the company’s shares, which could boost the company share price
  
  ·         Reduces the number of free float shares, consequently increasing earnings per share
  
  ·         Can be a financial instrument in giving returns to shareholders
  
  ·         Generates capital gain for the company. If the company’s management is confident of future performance and believes that the company’s share price is significantly lower than its fundamental value, share resale in a proper time will generate profitable returns.
  
  Shareholders
  
  ·         Boosts earnings per share. After the listed company repurchases shares, its number of free float shares will decline. The repurchased shares will not be counted in earnings per share calculation. The higher earnings per share may accordingly boost share prices, which may create the opportunity for shareholders to profit from stock trading without paying taxes.
  
  ·         Boosts dividends per share because repurchased shares are not included in dividend per share calculation.
  
  TIPS
  
  Repurchasing treasury stock can reduce conflict between shareholders and the company. If some shareholders are against the firm’s policy on voting rights or dividends, the company is able to repurchase shares from these shareholders in order to allow the firm to conduct smoother business operations.
  
  If there are several treasury stock programs, shares of all programs shall be combined in carrying out calculations.
5.6 Dividend and Legal Reserve
- Dividend and Legal Reserve
  
  Such declaration must be approved by the resolution of the Meeting of Shareholders (i.e. AGM/ EGM) and it can be paid only when the Company has earned profit. If the Company has incurred losses, the dividend cannot be declared unless such losses have been made good.
  
  However, the Board of Directors may pass a resolution and declare an interim dividend from time to time if it appears to the directors that the Company has the profits to do so. However, the articles of association of the Company may specify that the dividend declaration must be passed at a shareholders’ meeting.
  
  Please note that the Company must also appropriate a reserve fund (called “Legal Reserve”), at each distribution of dividend, being at least one-twentieth (5%) of the profit or more until such appropriation reaches one-tenth (10%) of the registered capital of the Company. In addition, payments of dividends are subject to withholding tax of 10% (except for a BOI Company or other tax exemptions).