It is common for foreign investors to do business in Thailand through a joint venture arrangement in which the foreign investors hold minority shares while the remaining majority shares are held by their respective Thai partners.

In this scenario, it is prudent to put in place a joint venture or shareholder agreement in writing so as to clearly spell out the rights and obligations of each investor.  In the absence of such written agreement, the foreign investors would need to rely upon Thai company laws for the protection of their minority interest.

This quick guide outlines statutory legal rights and protections generally afforded to minority shareholders under Thai laws as far as their minority interest in Thai companies is concerned.

Broadly speaking, the statutory minority protection rights for shareholders in private companies are different from those in public companies, certain key rights can be highlighted as follows:

Private Companies

For any shareholder regardless of the amount of shares held by them, they can:

• file a motion with the Thai court to cancel a resolution of the shareholders passed in breach of laws or the articles of association of the company;
• bring an action against the directors on behalf of the company for damage caused by the directors to the company, if the company refuses to do so;
• demand an inspection of the minutes of all resolutions of meetings of the shareholders and the board of directors.

For one or more shareholder(s) holding at least 20% of the total issued shares, the protections include:

• to request the company to convene an extraordinary general meeting to discuss certain agenda;
• to request the Minister of Commerce to appoint inspectors to examine and report on the affairs of the company.

For one or more shareholder(s) holding more than 25% of the total issued shares, they can veto a special resolution of the shareholders for matters requiring approval by a special resolution, which included the following key business issues:

• an increase or decrease of the registered capital of the company;
• an amendment to the articles of association or the memorandum of association;
• dissolution of the company;
• amalgamation with another company.

Public Companies

For 5 shareholders at least, they can request the court to cancel a shareholders’ resolution passed in breach of the articles of association or the Thai public company laws.

For 25 shareholders holding at least 10% of the total issued shares, they can require the board of directors to convene a shareholders’ extraordinary meeting.

For one or more shareholder(s) holding no less than 5% of the total issued shares, the rights to protections include:

• to request the company to take actions against any director who cause damage to the company and (if the company fails to do so) to claim for compensation on behalf of the company and to request the court to remove such director from the company;
• to file a motion with the Thai court to order the director to refrain from taking any action which is likely to cause damage to the company and/or to order the removal of such director from the company.

For one or more shareholder (s) holding at least 20% of the total issued shares, the protections include:

• the right to file a motion with the Thai court to cancel a shareholders’ resolution passed in breach of the articles of association or the Thai public company laws;
• the right to require the board of directors to convene a shareholders’ extraordinary meeting;
• the right to request the Company Registrar (Department of Business Development (DBD)) or the Ministry of Commerce to appoint an inspector to examine the operations and financial conditions of the company and the conduct of the board of directors.

For one or more shareholder(s) holding more than 25% of the total issued shares, they can veto a special resolution of the shareholders for matters requiring approval by a special resolution, which included the following key business issues:

• an increase or decrease of the registered capital of the company;
• an amendment to the articles of association or the memorandum of association;
• dissolution of the company;
• amalgamation with another company;
• the sale or transfer of the entire or important parts of the business;
• the purchase or acceptance of transfer of the business of another company.

This article is written as a general guide only and hopefully it will be useful for those minority shareholders in Thai companies.  Thus, it does not contain definitive legal advice and should not be regarded or relied upon as such.

Up-to-date specific advice should be sought in relation to the above matter so that you will be well informed of your legal rights for protection if things go wrong or major shareholders behave in a manner that could adversely affect your interest.

For more information, please do not hesitate to drop us a message to know how we can assist you in this matter.  SBC Interlaw is an international law firm with significant experience in foreign investments in Thailand and our teams of lawyers are committed to ensure the best quality customer services for you.

Office of The Council of State

Department of Business Development, Thai Ministry of Commerce