Thailand

4 Chapter M&A

    • Introduction

      The economy of Thailand continues strong although recent global economic malaise and political problem. This country experienced considerable growth in merger and acquisition activity both inbound and outbound. Now, Thailand and other ASEAN countries has launched the ASEAN Economic Community (AEC) which aims to increase the economy circumstance of each country by reducing tariff rate and so on. Thus, inbound and outbound investment of many countries are now promoting for foreigner to invest more in its country. Thai government is now aims to enhancing competitiveness in industrial, renewable energy section which responding to domestic resources to urge its domestic economy.

    • General M&A regarding to Corporate Law

       

      There are three main forms of M&A in Thailand. Full merger or Amalgamation, Share Acquisition and Asset Acquisition. Generally, the transaction of the first forms usually start with a share acquisition to acquire an entire entity and then continue to amalgamation or asset acquisition to acquire wholly or partly of the asset to get the entity of the target company. For Amalgamation is two or more companies are merge into a new company.

       

      ■Amalgamation/Mergers of Companies

      Under the Civil and Commercial Code (CCC), which governs the mergers of private companies, and under the Public Limited Company Act B.E. 2535 (PLCA), which governs the mergers of public companies, once two or more companies are merged, the merged company will become a new company and the merging companies will lose their juristic status. The new company will be entitled to all assets, liabilities, rights, duties and responsibilities of the merging companies.

      A major drawback of amalgamation is that the new corporation loses the opportunity to treat the net loss of the original corporation as an expense when computing net profit for tax calculation purposes. Furthermore, the transaction may involve several complicated, time-consuming legal procedures.

       

      Procedure for Mergers Involving Private Companies

      Prior to the recent amendments to the CCC, the mergers of private companies required the special resolutions of the shareholders of the merging companies, where two successive general meetings of shareholders needed to be held, and at the first and second meetings, three-quarters and two-thirds of the votes of all the shareholders were required, respectively. The merging companies were also required to publish such merger transactions in the newspaper and send notices to all of their creditors allowing a period of at least six months for creditors to object to the merger. The whole process under the former CCC took at least eight months to complete. As such, mergers under this method were unpopular. However, with the amendments to the CCC by virtue of the Act to Amend the Civil and Commercial Code (No. 18) B.E. 2551 (2008), which came into force and effect on 1 July 2008, a special resolution of shareholders in private limited companies currently requires only one shareholders’ meeting, resolving with an affirmative vote of at least three-quarters of the votes of all shareholders, rather than two successive shareholders’ meetings as previously applicable. In order to pass a special resolution for the merger of private companies, only one general meeting of shareholders is required with at least three-quarters of the votes of shareholders attending the meeting and entitled to vote.

      In addition, the amended CCC allows for a shorter period in which a private limited company is required to announce its merger. The amended CCC requires the publication of the announcement of the merger in local newspapers once, rather than seven times as previously applicable. Moreover, the creditors’ objection period is substantially reduced from six months to 60 days. With such developments in the CCC, the process will take about three to four months to complete - less than a half the time under the previous CCC. Note that if a company’s articles of association specify certain requirements in line with the previously applicable CCC that are more stringent than the amended CCC, the company must comply with its articles of association, unless the articles of association are changed to meet the latest CCC.

       

      Procedure for Mergers Involving Public Companies 

      The merger procedures for public companies are substantially similar to those of private companies. Both private limited companies and public limited companies require only one general meeting of shareholders with three-quarters of the shareholders attending the meeting and voting in favor of the merger proposal. Although the creditors have the right to object to the transaction, the maximum objection period in case of public limited companies is two months, while the maximum objection period in case of private limited companies is slightly different, i.e., 60 days. With regard to public company shareholders and the rights of dissenters, if there is any shareholder who objects to the proposed merger (a “Dissenter”), the merging company is required to arrange for the purchase of shares held by the Dissenter at the price last traded on the exchanges prior to the date of the shareholders’ resolution or, if there is no such trading price, the price determined by an independent appraiser. A Dissenter who refuses to sell his or her shares within 14 days of receiving the purchase offer shall be deemed to agree with the merger.

       

      ■Assets Acquisition

       

      Even though there were the recent amendments to the CCC, merger procedures are still considered complex and relatively time-consuming. Therefore, other forms of M&A transactions, such as the acquisition of shares or assets in the target companies are usually more popular in Thailand than merger procedures. In an asset acquisition, both the acquiring and the acquired entities survive. The acquired entity merely divests its assets or business and transfers them to the acquiring entity. After completion of the transaction, whether or not the acquired company is dissolved or is maintained to undertake another business, is a separate point of consideration.

       

       

      Procedures for Acquisition of Assets of a Private Company

      There is no specific clause in the CCC that requires a private company or its board of directors to obtain approval from the shareholders prior to any sale or transfer of all, substantially all or a major proportion of the assets of the company. As a result, there are two schools of thought on this issue. The first takes the view that since there is no specific legal requirement, no shareholders’ approval needs to be obtained. However, the second school of thought argues that since the acquisition is likely to have a significant impact on the interests of the shareholders, approval must be obtained from the shareholders prior to the transaction.

       

      Procedures for Acquisition of Assets of an Unlisted Public Company

      Unlike the CCC, the PLCA has a specific provision dealing with the sale or transfer of all or a major part of the assets of a public company. Section 107 of the PLCA clearly specifics that the sale or transfer of all or a substantial portion of the business of a public company to another person shall require a vote of not less than three-quarters of the total number of votes of shareholders who attend the meeting and have the right to vote.

      Nevertheless, there are some assets that are not transferable, including some governmental licenses, litigation claims pending in courts and land with a restriction of transfer. Therefore, special methods may be created on a case-by-case basis to overcome this obstacle.

       

      Assets Disposition Rules: Additional Requirements for a Listed Public Company

      In addition to the PLCA, a listed public company is also subject to the SEC Act and its amendments, which authorize the Capital Market Supervisory Board (“CMSB”) to promulgate any regulation and/or notification pertaining to the acquisition and disposition of assets by a listed company. The CMSB has promulgated a notification pertaining to the asset disposition rules (the “CMSB Notification”), which provides that every listed company is required to comply with the requirements on the assets disposition rules as prescribed in the notification stipulated by the SET when acquiring or disposing of its own assets or its subsidiary’s assets.

      A listed public company is required to report any incident that affects or is likely to affect the rights and interests of the securities holders of a listed public company or influence investment decisions by the general public, particularly the manner in which the assets of the listed company or its subsidiary are acquired or disposed of. Therefore, several requirements under the CMSB Notification and SET’s notification (collectively referred to as the “Applicable Notifications”) are imposed on a listed public company wishing to acquire or dispose of its assets or its subsidiary’s assets, depending upon the importance of the transaction contemplated. Nonetheless, due to the complex nature of the calculation method for determining the size or value of a contemplated transaction under the Applicable Notifications, consulting an accountant or financial or legal adviser is strongly recommended.

      Furthermore, the Applicable Notifications also include a number of other requirements, depending on the size of the disposed assets. In addition to the requirements under the Applicable Notifications, a listed company is required to submit a report to the Office of the Securities and Exchange Commission (Office of the SEC) with a copy sent to the SET disclosing its decision to enter into an acquisition or disposition of assets after making the decision to enter into such transaction. A “decision to enter into a transaction” means entering into or a proposal to enter into any contract, negotiation, agreement or understanding, regardless of whether direct or indirect, in order to cause an acquisition or disposition of assets and/or rights to acquire or dispose of the assets.

       

      ■Shares Acquisition

      A share acquisition is a transaction whereby a potential acquirer seeks to buy a majority share in the acquired company (or effect a takeover). In this case, both the acquiring and the acquired entities survive but the acquired entity becomes a subsidiary of the acquiring entity.

       

      Procedures for Acquisition of Shares of a Private Company

      Acquisition of shares in a private company is quite simple. A transfer of shares to an acquirer is valid only if made in writing and signed by the transferor and the transferee whose signatures are certified by at least one witness. The number of shares to be transferred must also be stated in the share transfer instrument. Such transfer is ineffective against the company and third persons until the share transfer and the name and address of the transferee are recorded in the share register book of the company If the shares in question are to be newly issued shares, the target company must increase its capital and issue the new shares to the acquiring company.

      However, under the CCC, any newly issued shares can be allocated only to existing shareholders in proportion to their Shareholdings; this is generally referred to as “preemptive rights.” Therefore, in practice, the acquiring company will usually acquire at least one share in the target company from the existing shareholders, so that it becomes a shareholder of the target company prior to the increase of capital. Upon the capital increase and the shares’ issuance, the existing shareholders will waive their preemptive rights and the acquiring company will then subscribe for that portion of shares. Although it is not legally required, it is normally recommend that the company prepare and submit to the Ministry of Commerce a new list of shareholders showing the transferee as the holder of the shares. The original of the share transfer document is subject to stamp duty at the rate of 0.1% of the sale price or the paid-up value of the shares, whichever is higher, while any duplicate is subject to the stamp duty at the field rate of THB.

       

       

       

      Procedures for Acquisition of Shares of a Public Company

       

      Under the PLCA, a transfer of shares to an acquirer shall be valid upon the transferor’s endorsement of the share certificate by stating the name of the transferee and having it signed by both the transferor and the transferee and upon delivery of the share certificate to the transferee. The transfer of shares will be effective against the company upon the company having received a request to register the transfer of the shares but it may be effective against a third party only after the company has registered the transfer of the shares in its share register book. As for acquisition of shares of a listed public company, additional regulatory requirements need to be meticulously considered. These include the regulations on the tender offer requirements (explained below); the assumption of liabilities, including those under the labor law; and regulations on shareholding limitations, which may be imposed on some types of regulated acquiring entities.

    • Summary of applicable Laws for M&A

      Public Company

                    1. Securities and Exchange Act B.E. 2535 (1992)

                    2. Public Limited Company Act B.E. 2535 (1992)

                    3. Rules and Regulations of SEC

      Private Company

                    1. Civil and Commercial Code (CCC)

                    2. Labour Protection Act

                    3. Bankruptcy Court Act

                    4. Foreclosure Act

                    5. Land Code     

                    6. Property Lease and Rights Act

                    7. Trade Competition Act

                    8. State Enterprise Corporatization Act

                    9. Accounting Act

    • Difficulty of business and corporate evaluation

      In order to merger or acquisition with other company, there are many factors that must be analysed to avoid some loss and to maintain the stable business operation. Following methods for valuation of asset are the most famous method which in many case of M&A apply this methods to valuate theirs asset in the preparation process for M&A.

       

      ■Net Asset Value Method

       Net Asset Value (NAV) represents the total value of assets that a fund has invested in at any specific period of time. The calculation of NAV is based on the mark to market (MTM) method which reflects the current market value of the funds' assets. For example, when a provident fund invests in common stocks listed in a stock market, the stocks’ closing price will be used to calculate the fund’s NAV. As a result, the fund’s value will change to reflect the market. Besides, provident funds in Thailand have now utilized the unitization system. Under this system, it would be easier for members to monitor funds' performance as their values are unitized into units.

       

      What is "Mark to Market"?

       "M to M" refers to accounting for the market value of assets or liabilities such as stocks, debentures and government bonds, etc. For example, If a fund wants to invest in Stock A traded in a stock market, the fund will have to buy it at the market price. If two months later the fund wants to sell the Stock A, it will also have to sell it at the market price. However, the price may increase, decrease, or remain stable when compared to the cost of obtaining the Stock A. 

       

      The followings are examples of market prices used to assess the market value of funds:

      • Stocks are assessed by the closing prices in the Stock Exchange of Thailand.

      • Bonds/Debentures are assessed by using the latest yields traded in Thai Bond Market Association.

      • Mutual Fund Units are assessed by the net asset values (NAV) per unit at the end of the day.

      • Deposits/Promissory Notes are assessed by using the sum of principal and accrued interests.

        1. To promote fairness in asset and benefit distribution of funds to all members

        2. To reflect the real performance of funds and the management companies

       

      ■Relative Valuation Method (Multiple Method)

       A Relative Valuation method compares a firm's value to that of its competitors to determine the firm's financial worth. Relative valuation models are an alternative to absolute value models, which try to determine a company's intrinsic worth based on its estimated future free cash flows discounted to theirs present value. Like absolute value models, investors may use relative valuation models when determining whether a company's stock is a good buy.

       For this method requires to identify comparable assets and obtain market values for these asset. Then convert these market values into standardized values, since the absolute prices cannot be compared which the process of standardizing creates price multiple. After that compare standardized value or multiple for the asset being analysed to the standardized values for comparable asset, controlling for any differences between the firms that might affect the multiple, to judge whether the asset is under or cover valued.

       

      ■Discounted Cash Flow method (DCF)

      The discounted-cash-flow approach in an M&A setting attempts to determine the value of the company (or “enterprise value”) by computing the present value of cash flows over the life of the company. Since a corporation is assumed to have infinite life, the analysis is broken into two parts: a forecast period and a terminal value. In the forecast period, explicit forecasts of free cash flow must be developed that incorporate the economic costs and benefits of the transaction. Ideally, the forecast period should equate with the interval over which the firm enjoys a competitive advantage (i.e., the circumstances where expected returns exceed required returns). In most circumstances, a forecast period of five or ten years is used.

      The value of the company derived from free cash flows occurring after the forecast period is captured by a terminal value. Terminal value is estimated in the last year of the forecast period and capitalizes the present value of all future cash flows beyond the forecast period. To estimate the terminal value, cash flows are projected under a steady state assumption that the firm enjoys no opportunities for abnormal growth or that expected returns equal required returns following the forecast period. Once a schedule of free cash flows is developed for the enterprise, the Weighted Average Cost of Capital (WACC) is used to discount them to determine the present value. The sum of the present values of the forecast period and the terminal value cash flows provides an estimate of company or enterprise value.

    • Foreign Investment Restriction

      Foreign Business Act B.E. 2542 (1999) (FBA) was effective on 3 March 2000. The purpose the regulation is to prohibit foreigners for doing some specific business in Thailand, also requires licenses for working in some kind of businesses. Thus, foreigner can be own a business wholly under the FBA unless that businesses are prohibited by other laws.

       “Aliens” or “foreigners” in this regulation are defined as a persons or juristic person who does not have Thai nationality. Also, a company are categorised to be a foreign if more than 50% of share held by foreigner.

      The restricted businesses under FBA can be categorised into three schedules. First one are businesses that foreigners cannot participate in these kind of businesses for specific reason which there is no exception for licensing foreigner allow in these businesses.             Foreigners may engage in these kind of business by granting a permission from a cabinet of Ministry of Commerce.

       

      ■Schedule One

      Businesses that foreigners are not permitted to do for special reasons are as bellows;

      (1) Newspaper undertakings and radio or television station undertakings

      (2) Lowland farming, upland farming or horticulture

      (3) Raising animals

      (4) Forestry and timber conversions from natural forest

      (5) Fishing for aquatic animals in Thai waters and Thailand’s Exclusive Economic Zone

      (6) Extraction of Thai medical herbs

      (7) Trade in and auctioning of Thai ancient objects or ancient objects of national historical value

      (8)  Making or casting Buddha images and making monk’s bowls

      (9)  Dealing in land

       

      ■Schedule Two

      Second one includes businesses which are considered to businesses concerning national security or safety with an adverse effect on Thai art and culture, customs or native manufacture/handicrafts, or with an impact on natural resources and the environment:

      Group 1 - Businesses concerning national security or safety;

      (1) Production, disposal (sale) and overhaul of:

      • Firearms, ammunition, gunpowder, and explosives;

      • Components of firearms, ammunition and explosives;

      • Armaments, military vessels, aircrafts or conveyances; and

      • All kinds of war equipment or their components.

      (2) Domestic transport by land, water or air, inclusive of the undertakings of domestic aviation.

      Group 2 - Businesses with an adverse effect on Thai art and culture, customs and native   manufacture/handicrafts:

      (1) Dealing in antiques or objects of art that are works of art, and Thai handicrafts

      (2) Production of wood carvings

      (3) Raising silkworms, producing Thai silk threads, and weaving and printing patterns on Thai silk textiles

      (4) Production of Thai musical instruments

      (5) Production of articles of gold or silver, nielloware, nickel-bronze ware or lacquer ware

      (6) Production of crockery and terra cotta ware that is Thai art and culture

      Group   3   -   Businesses that have an impact on natural resources or the environment:

      (1) Production of sugar from sugarcane

      (2) Salt farming, inclusive of making salt from salty earth

      (3) Making rock salt

      (4) Mining, inclusive of stone blasting or crushing

      (5) Timber conversions to make furniture and articles of wood

      4.5.3 Schedule Three

      Third one comprises businesses which are considered that Thai businesses are not prepared to compete with Foreigners;

      (1) Rice-milling and production of flour from rice and farm plants

      (2) Fishery, limited to the propagation of aquatic animals

      (3) Forestry from replanted forests

      (4) Production of plywood, wood veneer, chipboard or hardboard

      (5) Production of (natural) lime

      (6) Accounting service undertakings

      (7) Legal service undertakings

      (8) Architectural service undertakings

      (9) Engineering service undertakings

      (10) Construction, except:

      • construction of things that provide basic services to the public with respect to public utilities or communications and that require the use of special instruments, machinery, technology or expertise in construction and a minimum capital of the foreigner of at least THB500 million; and

      • Other categories of construction as stipulated in the Ministerial Regulations.

      (11) Brokerage and agency undertakings, except:

      • trading in securities or services concerning futures trading in agricultural commodities, financial instruments or securities;

      • trading in or the procurement of goods and services needed for production by, or providing the services of, an enterprise in the same group;

      • trading, purchasing (for others) or distributing or finding domestic or overseas markets for selling goods made domestically or imports as an international trading business, with a minimum capital of the foreigner of at least THB100 million; and

      • Other lines of business stipulated in the Ministerial Regulations

      (12) Auctioning, except:

      • international bidding that is not bidding in antiques, ancient objects or objects of art that are Thai works of art, handicrafts or ancient objects, or of national historical value; and

      • Other types of auction as stipulated in the Ministerial Regulations.

         (13)    Domestic trade concerning indigenous agricultural produce or products not prohibited by any present law

      (14) Retail trade in all kinds of goods with an aggregated minimum capital of less than THB100 million or a minimum capital for each store of less than THB20 million

         (15) Wholesale trade in all kinds of goods with a minimum capital for each store of less than THB100 million

         (16) Advertising undertakings

         (17) Hotel undertakings, except for hotel management services

         (18) Tourism

         (19) Sale of food or beverages

         (20) Plant breeding and the propagation or plant improvement undertakings

         (21) Doing other service businesses except for the service businesses prescribed in the Ministerial Regulations

       

      ■Treaty of Amity

      There are many restrictions of FBA that are not to be in-force to Americans. Since 1996, Thailand and United States had come into terms the Treaty of Amity and Economics Relations 1996. The Treaty allows US nationals and companies incorporated in the US or Thailand that are majority owned and controlled by US nationals, to largely conduct business in Thailand as would a Thai national. In cases of US companies incorporated in the US, they typically do business via their branch or representative offices in Thailand. In some other cases, they would take other forms of business entities such as incorporating an American majority owned company or acquiring majority shares in an existing company in Thailand. However, the Treaty still prohibits an American (either an individual or an entity) from undertaking any of six restricted businesses: transportation, carriage, fiduciary functions, banking involving depository functions, the exploitation of land or natural resources, and domestic trade in indigenous agricultural products.

      Before undertaking a restricted business as specified in the FBA (other than the said six restricted businesses), a US individual or entity must apply to the Director-General of the Department of Business Development, the Ministry of Commerce, for a foreign business certificate acknowledging the carrying on of such specified restricted business.

      There is some uncertainty surrounding the continued availability of exemptions for US nationals under the Treaty due to Thailand’s WTO obligations, since the WTO derogation allowing for the existence of the Treaty expired on 31 December 2004. There has been an extension for the submission of applications, for an unspecified period, and many U.S. investors have applied for protection under the Treaty during this period of extension. Technically, the Treaty requires one year’s notice for termination, but at time of writing, there is no official report confirming that such notice has been given either by Thailand or the US. In this connection, those Treaty exemptions are commonly believed to be valid. It should be noted further that the Treaty benefits for US nationals are currently on the table in the Free Trade Area Agreement (“FTA”) negotiations between Thailand and the US. While a conclusive FTA has not been signed, the Ministry of Commerce, from time to time, turns down Treaty applications by asserting its compliance with the informal direction of the government.

       

      ■Implications of FTA Agreements with Other Countries

      The FTAs Thailand has concluded and is currently negotiating with a number of countries are also gradually liberalizing certain restrictions under the FBA in order to further facilitate foreign direct investment. The FTAs with Australia, New Zealand and Japan are already in force and effect. Other FTAs are currently at various stages of discussion or negotiation, such as those with India, Bahrain, Peru and within BIMSTEC (Bhutan, India, Myanmar, Nepal, Sri Lanka, and Bangladesh). Currently, negotiations between Thailand and EFTA (Switzerland, Norway, Liechtenstein and Iceland) have been placed on hold.

      In addition, a very comprehensive FTA between ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and China is also in effect. Under the Thailand-Australia Free Trade Agreement (“TAFTA”) that came into effect on 1 January 2005, Thailand relaxed some of the ownership restrictions under the FBA. Subject to certain conditions and limitations, Thailand permits up to 60% -100% equity participation by Australian investors for certain business sectors and subsectors (e.g., communication, construction, distribution, education, tourism and travel, and recreational services) without having to apply for a license under the FBA. There may, however, be minimum registered capital requirements and other conditions, depending on the type of business.

      Under the Thailand-New Zealand Free Trade Agreement, effective from 1 July 2005, and subject to certain limitations, New Zealand investors are allowed equity participation of up to 100% in the manufacturing of machinery and mechanical appliances, basic chemicals, natural rubber, food processing using modern technology and certain other activities in Thailand.

      Under the Thailand-Japan Economic Partnership Agreement (“JTEPA”), the tariff on most industrial products will be eliminated within 10 years of implementation. Additionally, both countries will cooperate to promote the competitiveness of the auto and auto-components industry, as well as the development of the steel industry. Tariffs will be immediately eliminated on a number of Thai agricultural products including fruits, fishery and forestry products. In addition, JTEPA includes certain commitments on other issues such as trade in services and investment, customs procedures, government procurement, competition, intellectual property rights and movement of natural persons. It must be emphasized, however, that the extent to which the provisions of FTAs may apply to any particular transaction very much depends on the terms of the relevant FTA and the particular business sector or subsector in question and must be dealt with in detail on a case-by- case basis.

       

      ■Land Ownership

      The Land Code of Thailand generally provides that land may only be owned by Thai nationals or companies in which Thai nationals own 51% or more of the registered share capital and more than half the number of its shareholders are Thai nationals. A foreigner may acquire land in Thailand by virtue of the provisions of a treaty between Thailand and the country of that foreigner that gives the foreigner the right to own land in Thailand and subject to the provisions of the Land Code. However, there is no such treaty at present. Nonetheless, due to the current policy of the government to boost investment by foreigners in Thailand, the Land Code has been amended to allow foreigners who bring into Thailand not less than THB40 million for at least a five-year investment in government bonds, property funds, investment-promoted companies or business, to own land for residential purposes with an area of not more than 1 rai (equivalent to about 1,600 square meters). Apart from these provisions of the Land Code, foreigners may be granted permission to own land under particular laws. A foreigner may also own land if his or her businesses have been granted the investment promotion by the Board of Investment (“BOI”) or the land to be acquired is located in an industrial estate zone controlled by the Industrial Estate Authority of Thailand (“IEAT”). While it is possible for a company with non-Thai shareholders to own land, if there are any foreign shareholders in that company, the Thai shareholders will be required by the relevant land office to demonstrate that they have the source of funds to invest in such company and are not merely nominees of the foreign shareholders, and that the company has not been organized in an attempt to circumvent the prohibition against foreign ownership of land. There are significant penalties imposed on any person found to have acquired land as an agent of a foreigner or company. These penalties include a fine not exceeding THB 20,000 or up to two years’ imprisonment, or both. When considering the purchase of land in Thailand, a land due diligence should be carried out at the relevant land office and particular care should be given to the verification and examination of the title, the site, the likelihood of title revocation due to illegal issuance of title documents, overlapping with public land or forest reserves, the availability of utilities and access, zoning and building restrictions, and the encumbrances on the land.

       

      ■Condominium Ownership

      The above restrictions on foreign land ownership are relaxed with respect to condominiums or strata titles. Although the condominium owner has an ownership interest in the land on which the building rests, the Condominium Act B.E. 2535 (1992), as amended, specifics fie situations in which foreign individuals or juristic persons are entitled to own condominium units. However, the total condominium units owned by foreigners may not exceed 49% of the total flor area of all of the condominium units in each development. Condominium development, although not one of the restricted businesses listed in the schedules of the FBA, is also restricted as far as foreigners are concerned. The reason is that one of the criteria of condominium registration is that the project owner must own the land and building(s) which are intended to be registered as a condominium. This then reverts to the fact foreigners are prohibited from owning the land under the Land Code.

       

      ■Property Fund

      Since 1997, the SEC has allowed licensed fund management companies to establish immovable property mutual funds as another vehicle to mobilize both domestic and overseas funds for investment in immovable properties in Thailand. There have mainly been two types of property funds in Thailand, private and public property funds, depending on the required level of exposure to the public of the fund. Only public funds are now open for new applications, while new private property funds can no longer be established. Units in an existing private property fund may however be bought, but no new investment is allowed and all private property funds are required to be dissolved by August 2015 unless specific exemption has been granted by the SEC. According to the current regulation, the investment units of a newly established public property fund, which makes investment in land ownership, can be held by foreign unit holders (alone or in aggregate) up to 49%, subject to certain requirements (e.g., any unit holder cannot hold more than one-third of the total investment units in a public property fund). Furthermore, as a legal entity, the property fund can therefore invest in land, immovable property and other assets, such as bonds, deposits, as set forth in the relevant SEC regulations. All of the funds receive a wide range of tax privileges, including exemption of 23% corporate income tax, no specific business tax, no stamp duty and a lower registration fee for the fund’s purchase of immovable property

       

      ■Competition Aspects

       

      The Trade Competition Act B.E. 2542 (1999) (“Competition Act”) prohibits any merger or acquisition that would create a monopoly or lead to unfair competition, unless permission is fist obtained from the Trade Competition Commission prior to the merger or acquisition. Share acquisitions, asset acquisitions, and amalgamations all fall within the ambit of the Competition Act.

      Pursuant to the Competition Act, a merger is defied to include, among other things:

      • A merger between two or more manufacturers, sellers or service providers, causing one business to be terminated or causing the two businesses to be merged into a new business;

      • An acquisition of the whole or part of another business’ assets in order to control the business policy, administration or management; and

      • An acquisition of the whole or part of another business’ shares in order to control the business policy, administration or management. The commission has the full authority to prescribe the conditions of mergers that are required to obtain pre-merger permission, including the criteria regarding combined market shares, sales turnover, amount of capital/shares or assets. However, the Trade Competition Commission has yet to prescribe any conditions of this kind.

      To procure such permission, the applicant must submit an application for permission to the commission in accordance with its procedures, criteria and conditions, which will be published from time to time in the Government Gazette. At time of writing, no procedure, criteria nor conditions have been announced. Detailed regulations with respect to what constitutes a monopoly or unfair competition resulting from an M&A have not yet been laid down in the Competition Act. As a result, the provisions of the Competition Act, despite being enacted, are not yet implemented. Nevertheless, there was a proposal from the commission on the criteria of a monopoly or unfair competition caused by an M&A that should be subject to the pre-merger, as follows:

      • For all general businesses, except financial and securities businesses, any merger or acquisition with a business with more than one-quarter market share and a sales turnover of THB5 billion or more prior to the merger or acquisition, and after the merger or acquisition the market share will be one- third and the sales turnover THB5 billion

      • For financial and securities businesses, any merger or acquisition with any business with more than one-quarter market share and sales turnover of THB100 billion or more prior to the merger or acquisition, and after the merger or acquisition the market share will be one-third and the sales turnover THB100 billion. The prescription in regard to M&A does not require the approval of the Cabinet. The commission, by the signature of its chairman, can issue a prescription and announce it in the Government Gazette for it to become effective. Nonetheless, to date, the commission has not officially issued or announced this prescription. Therefore, at time of writing, no merger of any type need to obtain permission from the commission. It is worth to note, however, that if any M&A results in any business operator having a dominant position, that business operator is prohibited by the Competition Act from abusing its dominant position (i.e., imposing unfair prices for purchase and sale of goods or services, imposing unfair conditions towards customers, or ceasing, reducing or limiting service without reasonable cause). According to the Competition Act, the requirements of a “dominant position” will, from time to time, be determined and prescribed by the commission.

      In January 2007, the commission announced the prescription regarding the threshold on market dominance that effectively applies to all industries. A business operator is considered to have a dominant position if it is:

      • a business operator with 50% market share or more, and sales of THB1 billion or more in the previous year; or

      • any of the top three business operators in a particular business with a combined market share of 75% or more, and combined sales turnover in the previous year of THB1 billion or more, whereby all three would be classified as dominant players, except for the business operator which individually has a market share of less than 10% or a sales turnover in the previous year of less than THB1 billion. In addition to the Competition Act, there are prohibitions imposed under other laws against mergers or acquisitions that would create a monopoly or lead to unfair competition in some business sectors such as the energy business and the telecommunication business.

    • Taxation

       

       Amalgamations

      At present, for tax purposes, companies being amalgamated are not required to pay corporate income tax and the new company is entitled to take, for tax calculation purposes, the price of the properties according to those shown in the books of the companies being merged until those properties are later disposed.

      However, the amalgamation of companies is uncommon in Thailand due to potential tax problems and disadvantages. First, the two companies are deemed to be dissolved and may immediately be subject to a tax audit by the Revenue Department. Second, the losses of the companies being amalgamated cannot be utilized or carried over to be used by the new company.

      Regarding the tax consequences of the shareholders of the new company, it is now clear that the shareholders (both individual and corporate) of the new company do not have to pay tax on the capital gains arising from the amalgamation by having received the shares of the new company, subject to certain conditions imposed by the notifications of the Director-General of the Revenue Department. In addition, exemptions also apply in relation to specific business tax and stamp duty (including a land registration fee) on the receipts from the transfer of immovable properties as a result of amalgamation under certain conditions imposed by the Director-General of the Revenue Department.

       

      Note that a transfer of assets under an amalgamation is not considered a sale transaction for VAT purposes and is not subject to VAT.

       

      Asset Acquisition

      The sale of assets by a corporate entity is normally subject to corporate income tax on net profit. In general, all companies pay a flat rate of 30% of net profits. The Thai government has issued a royal decree to reduce corporate tax rates from 30% to 23% for year 2012, and to 20% in 2013. In addition, in case of a transfer of movable property, 7% VAT will generally be imposed, unless it is a transfer of the entire business and the transferee is in the 7% VAT system. In this case, there will be no VAT applicable on the transfer of movable property. However any VAT in the business transferred must be surrendered. Note that the VAT rate will be increased to the normal rate of 10% from 1 October 2012 onwards, unless there is further extension of such reduction of the VAT rate (i.e., reducing from 10% to 7% as currently applied). However, in cases involving the transfer of immovable property, the transferor will normally be subject to pay 3.3% specific business tax on the gross receipts from the transfer of immovable property, 2% transfer fee, and 0.5% stamp duty (stamp duty may be exempt if the specific business tax is paid). The sale of immovable property is also subject to a 1% withholding tax that can normally be used as a credit against corporate income tax.

      At present, for tax purposes, in the case of a transfer of an entire business transfer, the transferor is not required to pay corporate income tax and the transferee company is entitled to take, for tax calculation purposes, the price of the properties according to those shown in the books of the company being transferred until those properties are later disposed. However, the transferor company must be liquidated in the same fiscal year as the transfer of the entire business.

      Currently, the transfer of an entire business is exempt from specific business tax and stamp duty, as a result of the current government’s plan to encourage M&A. VAT does not apply to this transfer because the transfer of an entire business does not fall within the definition of “sale” under Section 77/1 (8) (f) of the Revenue Code. Normally, individual and corporate shareholders are also exempt from income tax on capital gains derived from the transfer of an entire business.

      The Revenue Department reserves the right to assess taxes based on the market price of any asset transferred, even if that asset was transferred at book value. The company can challenge such a reassessment if it can show a valid reason for selling the asset at book value. In many such cases, there are clearly justifiable reasons for transferring assets at book value, rather than at market price.

       

      Share Acquisition

      Normally, capital gains from the sale of shares by a corporate entity carrying on business in Thailand would be included into other income and subject to corporate income tax at the rate of 23% on the net profits. If the share seller company is not carrying on business in Thailand, 15% withholding tax would normally apply on the capital gains, unless exempt under a tax treaty. Where an individual is selling the shares, the capital gains received by the individual would be subject to tax at a progressive rate ranging from 5% to 37%, unless such shares are listed on the SET, in which case there is no tax on any capital gains. If the seller is a non-resident of Thailand, 15% withholding tax may apply on the capital gains, unless exempt under a tax treaty. No VAT is imposed on the sale of shares. The share transfer instrument is subject to stamp duty at the rate of 0.1% on the share purchase price or the paid-up value of the shares, whichever is higher. Certain stamp exemptions for such stamp duty are allowed under the Revenue Code.

    • Accounting Standard

       For the accounting year that began 1 January 2011 onwards, the Federation of Accounting Professions of Thailand (FAP) requires all companies in Thailand to use either the new Thai Financial Reporting Standards (TFRS) (all of which are based on the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB)) or the Thai Financial Reporting Standard for Non-Publicly Accountable Entities – NPAEs.

      Because the IFRS and by extension, TFRS, are intended for publicly accountable entities (stock exchange listed companies, etc.) and very complicated, especially applying the concept of “Fair Value” in preparing Financial Reports, it will be too costly and burdensome for SMEs or non-publicly accountable entities to adopt those standards. It is estimated that 95% of entities in the world are SMEs and SMEs often produce financial statements only for the use of owner-managers or only for the use of tax authorities or other governmental authorities.

       

      Therefore the IASB developed and published a separate standard intended to apply to small and medium-sized entities (SMEs), private entities, and non-publicly accountable entities. That standard is called the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). And Thailand’s FAP published the Thai Financial Reporting Standard for Non-Publicly Accountable Entities- NPAEs for the same purpose.

      A non-publicly accountable entity is an entity that is not one of the following:

      (a) Its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets),

      (b) An entity that holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses, such as financial institutions, insurance companies, securities brokers/dealers, mutual funds and Agricultural Futures Exchange of Thailand,

      (c) Public companies,

      (d) Other entities that may be specified in the future.

      Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organizations, co-operative enterprises requiring a nominal membership deposit, and sellers that receive payment in advance of delivery of the goods or services such as utility companies), that does not make them publicly accountable. F

      Therefore, it is worth noting that a subsidiary whose parent uses full TFRSs, or that is part of a consolidated group that uses full TFRSs, is not prohibited from using the Thai Financial Reporting Standard for Non-Publicly Accountable Entities – NPAEs in its own financial statements if that subsidiary by itself does not have public accountability. If its financial statements are described as conforming to the TFRS for NPAEs, it must comply with all of the provisions of this TFRS.

      If any non-publicly accountable entities choose not to adopt the Thai Financial Reporting Standard for Non-Publicly Accountable Entities – NPAEs, they have to comply with each and every TFRS.

      Tables below are the updated version on 2016 of Thai Accounting Standard (TAS) and Thai Financial Reporting Standard (TFRS).

       
      Thai Accounting Standard
      No.
      Thai Accounting Standard
      Public Companies
      Private Companies
      TAS 1
      Presentation of Financial Statement
      X
      X
       
      TAS 2
      Inventories
      X
      X
      TAS 7
      Cash Flow Statements
      X
       
      TAS 8
      Accounting Policies, Changes in Accounting Estimates and Errors
      X
      X
      TAS 10
      Events after balance sheet date
      X
      X
      TAS 11
      Construction Contracts
      X
      X
      TAS 12
      …
       
       
      TAS 16
      Property, Plant and Equipment
      X
      X
      TAS 17
      Leases
      X
      X
      TAS 18
      Revenue
      X
      X
      TAS 19
      Employee Benefits
      X
       
      TAS 20
       
       
       
      TAS 21
       
       
       
      TAS 23
      Borrowing Costs
      X
      X
      TAS 24
      Related Party Disclosures
      X
       
      TAS 26
      Accounting and Reporting by Retirement Benefit Plans
      X
       
      TAS 27
      Consolidated and Separate Financial Statements
      X
       
      TAS 28
      Investments in Associates
      X
       
      TAS 29
      Financial Reporting in Hyperinflationary Economics
      X
      X
      TAS 31
      Interests in Joint Ventures
      X
       
      TAS 33
      Earnings Per Share
      X
      X
      TAS 34
      Interim Financial Reporting
      X
      X
      TAS 36
      Impairment of Assets
      X
       
      TAS 37
      Provisions, Contingent Liabilities and Contingent Assets
      X
      X
      TAS 38
      Intangible Assets
      X
      X
      TAS 40
      Investment Property
      X
      X
      TAS 41
      Agriculture
      X
       
       
      Thai Financial Reporting Standard (TFRS)
      No.
      Thai Financial
      Reporting Standard
      Public Companies
      Private Companies
      TFRS 2
      Share – Based Payments
      X
       
      TFRS 3
      Business Combinations
      X
      X
      TFRS 5
      Non-current Assets Held for Sale and Discontinued Operations
      X
      X
      TFRS 6
      Exploration for and Evaluation of Mineral Resources
      X
      X
      TFRS 8
      Operating Segment
      X
       
      TFRS 10
      Consolidated Financial Statement
      X
       
      TFRS 11
      Joint Arrangement
      X
       
      TFRS 12
      Disclosure of interests in other entities
      X
       
      TFRS 13
      Fair Value measurement
      X
       
       

    • Securities and Exchange Act B.E. 2535

       

       Under the SEC, any person who has acquired securities up to the percentage that is significant to the management of a public listed company may be required to make a tender offer to purchase all securities of such company. Apart from the tender offer requirement, the SEC Act also provides certain provisions and notifications that can help alert target companies and shareholders of those target companies be aware of any attempts of acquirers to acquire securities up to the extent that could lead them gaining material voting rights. To that end, the SEC Act requires any person who has acquired or disposed of securities (including equity-linked securities) that reaches or passes through any multiple of 5% of the total number of voting rights of such business to report his or her acquisition or disposition to the Office of the SEC within three business days. This requirement can be considered an early warning mechanism that enables target companies and their shareholders to be aware of every 5% change in the percentage of the voting rights so that they can, in time, seek any preventive measures on a fair basis.

       

      Report on Acquisition/Disposition of Securities

      The SEC Act requires a person who acquires or disposes of securities in a public listed company that reaches or passes through any multiple of 5% of the total number of voting rights of such business to report such acquisitions or dispositions to the Office of the SEC. This provision provides important protection for investors by enabling them to be aware of changes in the percentage of voting rights in a particular company.

       

      For ordinary shares, the calculation of the 5% threshold is based on the following formula:

       

      Number of voting rights held x 100

      Total voting rights in the business (excluding treasury stocks)

       

      The calculation for convertible securities shall not be added together with ordinary shares for the purposes of the 5% threshold calculation. The following formula applies to the calculation of the convertible securities:

       

      Number of voting rights to be held after exercising all convertible securities x 100

      Total voting rights in the business

       

      (Excluding treasury stocks and those voting rights exercisable from the shares reserved for convertible securities)

       

      Acquisition Date

      Benchmarking the acquisition or disposal date is important because the report on the transaction must be submitted to the Office of the SEC within three business days from the date of acquisition or disposal. In relation to the existing shares, the acquisition date is the date of the transaction. For newly issued shares, the acquisition date is the date on which the company registers the increase in its paid-up capital with the Ministry of Commerce. As for newly issued convertible securities, the acquisition date is the date on which the company issued such convertible securities.

       

      Group Reporting

      Under SEC, two or more persons may collectively form or be deemed as a group for the purpose of reporting their acquisitions of securities in a business to the SEC if these two or more persons have intentions to acquire and/or hold the shares in a public listed company together. The duty to report will be based on the aggregate number of voting rights held by all persons in the group and their related persons.

       

      Acting in Concert

      Although the Office of the SEC had attempted to promulgate a new notification to set out the requirements for persons jointly acting for the purpose of business takeover or so-called “acting in concert,” such effort has turned out to be fruitful recently. At present, there is an official notification issued by the SEC prescribing the criteria for determining relationship or actions that constitute an act in concert, which has been in effect since 1 August 2009.

       

      Pursuant to the said notification, acting in concert is defined to mean a situation, whereby:

      • any person shares an intent with another person(s) to exercise their voting rights in a coordinated manner, or causes another person(s) to exercise his or her voting rights for the purpose of controlling the voting rights or jointly controlling the business; and

      • such person has relationships or coordinated his or her conduct with any person in any of the following ways, among others:

       

        - nature of agreements, such as having an agreement to act with respect to the exercise of voting rights held by the parties thereto in a coordinated manner, an agreement to allow any party thereto to exercise the voting rights on behalf of other parties, or any standstill agreement regardless of whether such agreement is made in writing or otherwise;

        - nature of particular relationships, such as becoming a partner in a partnership, or becoming a director or an officer of the company or any other juristic person, and representing or conducting himself or herself in such a way as to represent that he or she holds the securities of the business on behalf of or jointly with such partnership, company or other juristic person, or causing any person to exercise, on a regular and continual basis, his or her voting rights at the shareholders’ meeting of the business, regardless of whether such person is a shareholder of the business (but excluding the granting of authority to an independent director, custodian or proxy voting service to attend a meeting and to exercise voting rights on his or her behalf); or

             - nature of behavior, such as personally or through a designated person, soliciting any person for the purpose of acquiring or disposing of the securities of the business at the same time, or at approximately the same time, or having a common source of funds or doing any action through whatever means that constitutes assistance in acquiring a source of funding with the intent of using such funds to purchase or to otherwise act to acquire the securities of the business for any persons.

       

      Related Person

      Securities held by certain related persons are deemed to be held by the same person and thus must be taken into account when calculating the 5% threshold, or when determining the obligation to report the acquisition or disposal of securities and the obligation to make a mandatory tender offer for securities in a business. Related persons include those persons listed under Section 258 of the SEC Act, which include spouses and minor children; ordinary partnerships in which such person or his or her spouse or minor child is a partner; or limited partnerships and companies in which such person or his or her spouse or minor children or the ordinary partnership hold more than 30% of the total contribution or share capital. Under the current applicable SEC Act, the definition of a related person has been expanded to include the shareholding of the related person(s) in every shareholding level (both upward and downward shareholding levels). An analysis of the details and implications of these provisions must be taken into serious consideration prior to acquiring or disposing of any securities in public listed companies in order not to breach the share acquisition/ disposal reporting requirement and the tender offer requirement.

      Persons subject to the securities reporting requirements under Section 246 of the SEC Act are required to disclose any related person(s) and concert party of the immediate holding entities, the intermediate entities and all companies in the chain involved with the reported securities. In addition to the securities acquisition or disposal, persons that are obligated under Section 246 must report any change to securities holding that is caused by the beginning or termination of a relationship with concert party, or the beginning or termination of relationship with related persons that triggers the reporting obligation under Section 246 of the SEC Act.

       

      Non-Voting Depository Rights (“NVDR”)

      According to the current applicable regulation promulgated by the SEC, any person subject to the reporting requirements under Section 246 of the SEC Act is required to disclose in Form 246-2 the information pertaining to his or her holding of NVDRs (if any), of which the underlying securities are the reported securities, in addition to those reported securities acquired or disposed of which exceed or fall short of the 5% threshold. However, NVDR holdings to be reported on Form 246-2 are not required to be aggregated to other securities held by such person for the purpose of the threshold calculation.

      In addition to the reporting requirement on Form 246-2, under the prospectus of the Thai NVDR Company Limited, any person who acquires or disposes NVDRs or NVDRs together with the underlying securities (i.e., shares or convertible securities) and thereby increases or decreases the number of underlying securities and NVDRs representing such securities altogether reaching or through any multiple percentage of the total voting rights (either a listed or non-listed public limited company in the SET), is required to report to the Thai NVDR on Form 246-2 NVDR. Moreover, the reports to the Thai NVDR must be prepared and submitted separately between NVDRs representing shares and NVDRs representing convertible securities.

       

      Tender Offer Requirements

      The SEC Act requires any person, or person(s) acting in concert with others, who has acquired securities up to the percentage that is significant to the management of the target company (the trigger point) to make a mandatory tender offer. The rationale behind this requirement is to allow the existing shareholders to have an opportunity to sell their own securities when there is a significant change to the control of the company

       

      Trigger Points

      Previously, the trigger point was only based on the number of shares held by a person and its related person(s). This has been changed and the trigger point is now also based on the proportion of voting rights acquired by a person, related person(s) and any person with whom the acquirer acts in concert. The current trigger point is prescribed as:

      (1) either 25% of all issued shares of the business, or 25% or more of common shares of the business that has also issued preference shares representing less than 1 vote per 1 preference share. (An acquirer, however, may be exempted from the Tender Offer Obligation under this clause if the shares acquired by the acquirer are less than 25% of the total voting rights of the business);

      (2) 50% of the total voting rights; or

      (3) 75% of the total voting rights.

      Note that under current securities regulation, the following circumstances are regarded as grounds for exemptions from the requirement to make a mandatory tender offer:

      • Acquisitions of shares of non-listed companies

      • Shares acquired through inheritance

      • Acquisitions of additional shares that arise from payment of share dividends or by subscription to shares in proportion to existing shareholding ratio in a right offering

      • Acquisitions of securities that convey non-voting rights, e.g., Thai Trust Fund

      • Reduction of shareholding to an extent lower than the trigger point within seven business days from the date on which the obligation to report share acquisition or disposal is triggered pursuant to Section 246 of the SEC Act and such reduction is achieved through selling the securities on the exchange or through the transfer of such securities back to the transferor

      • Partial tender offer

      • Waiver of the obligation to make a tender offer as granted by the Office of the SEC

       

      Acquisition Through Chain Principle

      A tender offer is also required when any person acquires a significant degree of control of a juristic person with an existing shareholding in a business (immediate holding entity), either directly or indirectly through his or her shareholding in, or control of, other juristic persons (intermediate entities). In other words, a tender offer is required when a person controls a company through another company that he or she also controls, or through a chain of similar companies.

      If the aggregate shareholding of any person in control of such entity, intermediate entity and holding entity and any related parties, reaches or exceeds a trigger point as mentioned above, a tender offer must be made. Whether a person is in control of such entities is defined in two ways: by holding shares representing 50% or more of the total voting rights in the immediate holding entity (in the case of direct control) or in the intermediate entity (in the case of indirect control); or the power to control the management or operation of the relevant entity through the nomination of a substantial number of directors.

       

      Waivers

      Prior to the acquisition, the acquirer can seek a waiver from the Office of the SEC where:

      • the acquisition does not result in a change of control of the business so acquired;

      • the acquisition is made for the purpose of providing support to or rehabilitating the business;

      • an acquisition of newly issued securities is made pursuant to the resolution of a shareholders’ meeting of the business, authorizing the issue of such new securities to that person without the requirement to make a tender offer for all securities of the business (whitewash) in compliance with the rules prescribed by the Office of the SEC;

      • there exists any other circumstance pursuant to which a precedent has been set by the takeover panel (as elaborated further below); and

      • there exists any other reasonable and appropriate grounds.

      Note that the granting of the above waivers is within the discretion of the Office of the SEC. However, the granting of the waiver is within the discretion of the takeover panel where:

      • the acquisition of a significant degree of control of the immediate holding entity (under the chain principle) does not purport to make a business takeover; or

      • there is any other circumstance that, in the opinion of the Office of the SEC, should be considered by the takeover panel.

       

      Takeover Panel

      A takeover panel has now been created from a list approved by the SEC, with members appointed by the Secretary-General of the SEC.

      Appointment is based on qualifications to serve the panel, that is, knowledge, skills and experience. The takeover panel has a number of responsibilities, including considering and issuing orders in relation to the grant of waivers, determining the tender offer price and similar matters. The takeover panel also has the function of advising the Office of the SEC and the SEC on takeovers and related issues.

       

      Competing Bid

      A tender offer can be made at any time on a voluntary basis. Where there is a competing bid, the first offeror is able to improve the condition(s) of his or her tender offer, such as raising the tender offer price or extending the period of the tender offer (to a date not exceeding the final day offered by the competitor). This flexibility is intended to promote fairer competition for the benefit of investors and to enable the first offeror to remain in competition with its rivals.

       

      Tender Offer for Delisting Purpose

      There are additional detailed provisions that require the making of a mandatory tender offer and establish the minimum amount of such an offer should the acquirer wish to delist the target company. This is aimed at protecting the interests of the other shareholders.

       

      Tender Offer Price

      As a general rule, the tender offer price must not be lower than that of the highest price the offeror has acquired within 90 days. In cases of acquisition of only either common shares or preferred shares, the tender offer price of non-acquired shares must not be lower than a five-day weighted average market price before the acquisition date of acquired shares or fair value appraised by a financial adviser, whichever is higher.

      As for delisting, the tender offer price must not be lower than one of the following prices:

      • The highest acquired price within 90 days before the date on which the tender offer is submitted to the Office of the SEC commencement of the tender offer

      • The five-day weighted average market price before the board of directors approves the delisting

      • The net total asset that is marked to market

      • The fair price appraised by a financial adviser

       

      Opinions of the Target Business in Relation to Tender Offer

      When a tender offer is made, the target company must submit its opinion to the Office of the SEC, with copies distributed to the SET and all shareholders within 15 business days from the date on which the tender offer has been received. Additional opinions must be prepared for any revised offers, unless special circumstances apply. Such circumstances generally relate to the latest offer being more favorable and the company’s financial adviser having already expressed an opinion on the issue of acceptance.

       

      Frustration Action

      Under the latest amendment to the SEC Act, there is an adoption of the frustration action concept, which is applied particularly to takeover transactions. The SEC has promulgated a notification outlining the detailed specification of frustration actions that may affect a tender offer, and thereby have to be approved by the general shareholders’ meeting or otherwise waived by the Office of the SEC. Circumstances that may be regarded as a frustration action includes, among others, a significant increase of the registered capital, an issuance and offer for sale of convertible securities, an acquisition or disposition of material assets that are essential to the operation of the business, or an implementation of a stock repurchase scheme.

       

      Public Limited Companies Law

      The Public Limited Companies Act (No. 2) B.E. 2544 (2001) (PLCA) came into effect on 4 July 2001. Set out below are six major issues in the latest amended PLCA that benefit public limited companies, including those converted from private limited companies.

      • Share’s Par Value - There is no longer a minimum share’s par value requirement that was previously prescribed at not less than THB5 per share. However, all shares of a public company are required to be of the same par value.

      • Conversion of Debt into Equity - Generally, share subscribers or purchasers cannot set off their debts against the payment of shares issued by a public company. However, the amended PLCA allows the company to set off its debt by issuing new shares as payment to its creditors, pursuant to the conversion of debt into equity project. The process must be approved by 75% of the shareholders who attend the shareholders’ meeting and are entitled to vote.

      • Share Buyback - The company is entitled to buy back its shares from its shareholders who vote against a resolution of the shareholders’ meeting on the amendment of the company’s Articles of Association regarding the right to vote and receive dividends, and which the shareholders themselves consider unfair. The company can also buy back its shares for financial administration purposes when the company has retained earnings and liquidity surplus, provided that such share buyback must not cause the company a financial problem following the rules and procedures under the Ministerial Regulations.

      • Voting Rights of Preferred Shares - The company may fix the voting rights of preferred shares at less than one vote (e.g., one vote for every two preferred shares held).

      • Reserve - The amended PLCA allows the company, upon obtaining an approval from the shareholders’ meeting, to transfer its premium reserve, statutory reserves or other reserves to compensate for its accumulated losses.

      • Capital Reduction - The amended PLCA allows the company, with remaining accumulated losses after having transferred its reserves to compensate for the accumulated losses, to reduce its capital to less than one-quarter of the total capital.