In June 2020, Thailand’s government approved the proposed amendments to the Civil and Commercial Code (“CCC”). The two sets of amendments were passed by the cabinet on 9 and 23 June 2020, respectively. The draft amendments aim to improve and update the current Thai business laws and regulations and to facilitate and promote the company incorporation by easing the company incorporation process and the burden of registration fees and costs. The proposed amendments are expected to be enacted by the end of 2020 or early 2021 after obtaining approval from the National Assembly of Thailand.
The proposed amendments are as follows:
- Establishment of partnerships and private companies: Under the draft amendments, applicants who wish to set up private companies or partnerships are allowed to file applications at any Department of Business Development (“DBD”) registration office as prescribed by the Minister of Commerce. Previously, the submission of application was limited to the DBD which the company or partnership’s registered office is located It should be noted though that prior to this amendment, the National Council of Peace and Order (“NCPO”) No. 21/2560 had already imposed similar provisions for the application for incorporation of both partnerships and companies.
- Reduction and waiver of registration fees: The Minister is entitled to reduce or waive the fees for registration, inspection of documents, requests for copies of documents, together with certification or other partnership or private companies-related fees. It should be noted that prior to this amendment, NCPO No 21/2560 had already imposed the authority of the Minister in a manner similar to this amendment.
- The expiration of Memorandum of Association (“MOA”): Under the draft amendments, the company needs to register for incorporation within three years commencing from the date of MOA registration or else the registered MOA will expire. The registration of a MOA serves as a reservation for the company’s name. It is expected that this will benefit other companies who wishes to use the same company name that have been reserved via registration of the MOA but have yet to be incorporated as there is now an expiration period.
- Company meetings: In response to the COVID-19 pandemic and Thailand 4.0 economic model, shareholders meeting and board of director meeting are allowed to be conducted via electronic means. The physical presence of shareholders and directors at the meeting is no longer required unless prohibited by the Articles of Association. It should be noted that such meeting must comply with rules and regulations determined by the Minister of Commerce.
- Notification for shareholders meeting and quorum: Currently, the CCC provides that the notice of the summoning of every general meeting shall be published in a local newspaper and sent by post with acknowledgement of receipt to every shareholder. Under this amendment, the publication of the notice in a local paper is no longer required unless the company has bearer shares, in such case, the publication in a local newspaper is still required.The current CCC does not explicitly specify the required number of attendance to the shareholders meeting. This has been amended in the draft to clearly specify that at least two shareholders or proxies must be present at a shareholders meeting to constitute a quorum.
- Mergers: The current CCC only recognises the concept of amalgamation, which is the combination of two or more companies forms a new company. Other types of mergers are not recognised by the current CCC. The draft amendment incorporates another concept of merger into the CCC, whereby one or more companies are merged into another existing company. Under this type of merger, a new company is not formed. With the introduction of the amendment, companies will have the option to undergo either an amalgamation or a merger.
- Number of company promoters and shareholders: The current CCC requires at least three promoters to promote and form a limited company. Under the draft amendments this has been reduce to only two promoters to incorporate a company. As a consequence, a company is obligated to maintain at least two shareholders at all time. The purpose of this amendment is to support small businesses, startups and foreign companies as these people usually perceive a requirement of at least three promoters as burdensome.
- Dissolution of the company: As a consequence of a change in number of company promoters and shareholders, a company may be dissolved by the Court in the case that the number of shareholders is reduced to one or there is any other cause that makes it impossible for the company to continue.
- Dividend payment: The current CCC does not set up a timeframe for the payment of dividends to shareholders. The draft amendment proposes that the dividend payment must be made within one month commencing from the date the resolution of shareholders meeting or board of director meeting is passed. The reason for this amendment is to comply with international standards for small investor protection. It should be noted that prior to this amendment, NCPO No 21/2560 imposed the requirement of dividend payment that “[p]ayment of dividends shall be made within one month from the date of the resolution of the general meeting or of the meeting of the board of directors, as the case may be”. As a consequence of this change, the Act Determining Offence Relating to Registered Partnership, Limited Partnership, Limited Company, Association and Foundation B.E. 2499 will be amended to impose civil penalty for failure to comply with the determined dividend payment timeframe.
The amendments to the CCC simplifies the process of incorporating and conducting business in Thailand. Such changes are welcomed as it provides additional clarity and ease in doing business in the country which should be practical and useful for most investors.
If you have any questions or require any additional information, please contact Threenuch Bunruangthaworn, Archaree Suppakrucha or Panwadi Maniwat, Jutiporn Wongwaitayakul of ZICO Law Thailand or the partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.