Transfer of shares in a Thai Company Limited
Secrets of share ownership in the Co., Ltd.
SPA: A share sale and purchase agreement includes all rights and obligations of the parties, the share purchase price, the list of warranties, and other details of the share purchase. Typically, it does not contain the information necessary for the transfer of the shareholder position. This is done in a separate agreement, the share transfer instrument.
Share transfer instrument: Thailand has the concept of registration of an accomplished share transfer, not of a share transfer through registration. Shares are transferred by agreement, not by the registration at the company or the company register at the Ministry of Commerce (DBD). The transfer of shares is void unless it is properly made in writing and signed by the transferor and the transferee whose signatures shall be certified by at least one witness. If there is more than one witness, each witness has to be present when both parties sign the transfer agreement together. To use one witness only to testify the signature of the seller and another witness, testifying that the seller signed the paper at another time and/or another place, makes the whole transfer invalid. The formal registration of such share transfer with the company or the DBD does not heal such voidness.
Blank share transfers: A blank share transfer instrument is a written agreement to transfer the shares, signed by the current (typically Thai) shareholder, but without mentioning the name of the acquirer (assignee) and the date of the share transfer. Such a document is usually deemed to grant to the foreign investor protection against a no longer cooperative Thai majority shareholder. Under the law, such a blank document is void because it does not meet the minimum formal requirements for a share transfer instrument. Unfortunately, it is even void under the laws of Thailand, after it has been completed and the missing information is added to apparently meet all formal requirements. It might also have criminal implications.
Preference shares grant deviating rights in the portion of the corporate property, in the corporate profits, in the voting rights at the shareholders’ meeting, or otherwise. A preferred shareholder may have less, more, or different company rights than an ordinary shareholder. Under a reverse preference share structure, the holder of the preference shares holds more rights as the common shareholder. This is advertised as “golden shares”. If the reverse preference shares are used for foreign investment, this is typically a violation of Thailand’s foreigner legislation. In the famous Shincorp case, the Ministry of Commerce (DBD) took the view that it does not make any sense from a commercial perspective for the Thai investors who actually owned the majority shares to agree to accept fewer voting rights than foreign shareholders without preferential (guaranteed) dividends.
Shareholder book: The Co., Ltd. must keep at its registered office a register of shareholders. Such a share register book (aka. shareholder book) contains the list of share certificates and shareholders, as well as details of all share transfers. A shareholders list, reflecting the register that is kept by the company’s directors, has to be sent at least once a year to the company register at the DBD. The register of shareholders is presumed to be correct evidence of any matters directed or authorized by law to be inserted therein. However, a share register book that is prepared and backdated for previous years to replace proper share transfer instruments that had not been prepared in the past, is no such valid piece of evidence.
AP: Void share transfers can be replaced by the concept of “adverse possession” (AP) under Thailand’s squatter’s rights provision. Although such a concept is primarily existing for real estate transactions, the Supreme Court of Thailand (e.g. decision no. 2970/2522) ruled that it is possible to acquire shares in a limited company by adverse possession. This requires a peaceful and open possession of the shares for an uninterrupted period of five years with the intention to be the owner. The three requirements are (i) possession in the shares as an intangible asset, (ii) a specific qualification of that possession, and, (iii) an undisturbed lock-up period of five or more years. The registration as shareholder alone is no form of possession of the shares, possession of the share certificates is.
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