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Minority shareholders’ protection in Thailand
The legal landscape for doing business in Thailand is constantly evolving, offering countless opportunities for both domestic and international investors. However, these opportunities also come with their challenges for minority shareholders in Thailand seeking to protect their rights within the Thai companies.
Minority shareholders have a vital role to play in the Thai economy, influencing the level of transparency, corporate governance, and fairness within companies operating in the country. However, certain factors continue to make them vulnerable, including a lack of information, potential conflicts of interest, and difficulties in accessing legal remedies.
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Who is considered a minority shareholder?
In Thailand, minority shareholders encompass individuals or legal entities holding less than half of a company’s shares. These investors have acquired shares in a company, whether through public or private listings. In contrast to majority shareholders, who control over half of the company’s capital, minority shareholders in Thailand wield comparatively less influence over company decisions. However, some minority shareholders in Thailand are able to join forces by forming groups or alliances to influence the company’s management and assert their views and interests.
What rights do minority shareholders have in Thailand ?
In Thailand, minority shareholders are protected by various legal rights to guarantee their interests in companies. The main rights of minority shareholders in Thailand are as follows:
- The right to information : Minority shareholders in Thailand have access to essential financial and operational information, including financial statements, annual reports, and meeting minutes, enabling them to make informed investment decisions.
- Voting rights : Minority shareholders in Thailand can attend and vote at Annual General Meetings, with their votes carrying equal weight to those of majority shareholders, typically one vote per share, unless otherwise specified in the company’s articles of association.
- The right to fair representation : Minority shareholders in Thailand are entitled to fair representation on corporate governance bodies like the Board of Directors, ensuring their voices are heard in significant company decisions.
- The right to dividends : Minority shareholders in Thailand are entitled to dividends in proportion to the shares they hold in the company, which are voted on at the Annual General Meeting.
- The right to protection against abuse : Thai law provides protections to minority shareholders in Thailand against any abuse that may harm their interests.
- The right to external and independent audit : Minority shareholders in Thailand have the right to request an external audit to verify the transparency of financial transactions and operations.
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What powers do minority shareholders have within the company ?
Participation in shareholders’ meetings:
Governed by Thai law, it stipulates that, with the exception of members of the Board of Directors, only shareholders representing at least one-fifth of the company’s total voting rights can call a meeting and set the agenda. However, the Thai law also offers protections to minority shareholders in Thailand, allowing them to participate in the general meeting in three distinct ways:
- Adequate information (convening notice) : Shareholders must receive a formal notice containing all meeting details, ensuring they’re informed about discussion topics. Thai law mandates this notice to be sent no later than seven days before the meeting (14 days for special resolutions). Additionally, companies must publish meeting details in a local newspaper, although this requirement is set to be abolished. Failure to comply with these rules could invalidate any decisions taken at the general meeting.
- Proxy voting : Thai law grants shareholders the right to vote at meetings even if they are unable to attend in person.
- Proposing an agenda : Shareholders also have the right to agenda items for the meeting. While management typically proposes topics to be discussed at the meetings, Thai law permits shareholders to make agenda suggestions, provided they meet certain legal criteria
Decision-making rules:
Depending on the number of voting rights held, the shareholder’s influence on the resolutions of other shareholders will vary:
- Holding more than 75% of voting rights : total control, with the power to impose all decisions at Annual General Meetings, thanks to its ability to adopt ordinary and special resolutions (capital increase, liquidation, dissolution, etc.).
- Holders of more than 50%, but less than 75% : Ability to pass ordinary resolutions alone, but the agreement of others is required for special resolutions;
- Holders of more than 25%, but less than 50% : Right to call an Extraordinary General Meeting and power to block special resolutions;
- Holders of between 20% and 25% : Right to call an Extraordinary General Meeting, but no real power to influence decisions;
- Holders of less than 20% : Inability to convene a General Meeting on their own, and no influence on the vote on ordinary or special resolutions.
The protection of minority shareholders in Thailand is of paramount importance in the business legal landscape. However, navigating this area requires a thorough understanding of the laws and mechanisms of corporate governance, which may seem complex at times. Therefore, it’s advisable for both in Thailand and the companies embracing them to seek guidance from a corporate lawyer at our firm, Benoit & Partners, to clarify any technical aspects.