Changes to the Civil and Commercial Code

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Thailand has passed an amendment to the Civil and Commercial Code. The changes will become effective as of February 2023. In this summary, we will focus on the major implications. 
   

Reduction of Promoters and Shareholders

Currently, a Thai Company Limited (comparable to the German GmbH) requires at least three shareholders (and three promoters during the setup phase). The passed amendment changes section 1097 of the Civil and Commercial Code, so that only two shareholders and promoters will be required in the future. 
The impact of the change will probably be rather minor in practice for foreign investors, but it certainly makes the setup of an entity a little easier. Note that this change does not affect the requirement to obtain permits under the Thai Foreign Business Act if the company is foreign-owned in majority. 
  

Introducing Mergers

Up until now, the Civil and Commercial Code only has provisions to facilitate amalgamations of companies, meaning that company A and company B can form a new company C, with companies A and B being dissolved in the process. Now, the amendment introduces the process of a merger, meaning that company A and company B can merge, while company A survives and company B is dissolved in the process. In the past, a similar effect could also be achieved, but required so-phisticated structuring and advisory. Thus, we assess this change as a significant (and most welcomed!) simplification of M&A transactions in Thailand. 
 

Electronic meetings of the Board of Directors 

During the Covid crisis, Thailand issued a Royal Decree permitting to hold Board of Director meetings via electronic means. Now, the passed bill will add section 1162/1 to the Civil and Commercial Code, stipulating that Board of Director meetings in a Thai Company Limited may be held through electronic means. The change is wel-comed and correctly acknowledges that in the modern, globalized world, many meetings and discussions can and should be held online. However, companies still need to comply with the general rules on electronic meetings. Thus, simply scheduling a Teams call will not be sufficient to pass a Board of Directors resolution.
  

Notifications of Shareholder Meetings

Section 1175 of the Civil and Commercial Code prescribes that notice of an Annual General Meeting of the shareholders has to be published in a local newspaper. Under the amendment, such publication will no longer be required. Henceforth, it is sufficient to inform a shareholder by mail, unless a Company Limited has issued bearer certificates to their shareholders (which is a rather rare type of share certificate in practice).
  
We consider this change to be very reasonable since the notifications in the newspaper have been of rather limited practical value or relevance in the past.  Please note that an announcement may still be necessary if required by the company’s Articles of Association which may have to be amended accordingly.

Dividend payments

The amendment clarifies that a dividend payment has to be completed within one month after passing the shareholder resolution to make a dividend payment.
   
We understand that this means that the shareholder actually has to receive the dividend within one month. Thus, distribution of dividends needs to be carefully planned to have funds available to make the payment in due time.  

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