Thailand

Part IX: Combination of Limited Companies

Chandler MHM

The Thai Civil and Commercial Code (“CCC”) came into force on January 1, B.E. 2468 (1925). It sets forth general and specific rules on a broad range of civil law issues affecting both businesses and individuals. For businesses, some of the CCC’s key areas include, company and partnership law, contracts, sales, obligations, wrongful acts (i.e. liability for negligence or intentional harm), property, mortgages, loans and related forms of security arrangements, leases and agency. The commercial business environment in Thailand has evolved over the years, and so has the CCC. The current amendments to the CCC are aimed at simplifying business processes and enhancing Thailand as a hub for doing business in Southeast Asia.

As the first in a series of descriptions of the key amendments to the CCC, this article focuses on Part IX: the Combination of Limited Companies, which is of great interest to investors doing business in Thailand.

Part IX: Combination of Limited Companies

This draft amendment to the CCC (Finished Matter Number 559/2560) was approved by the Council of State on May 8, 2017 and is now being considered by the Department of Business Development, of the Ministry of Commerce. If accepted, the draft will then be sent to the National Legislative Assembly to be promulgated before being published in the government gazette.

Previously, the only type of Merger and Acquisition (“M&A”) recognized by the CCC was an “Amalgamation”. Other types, e.g. share acquisition or asset acquisition, although available, were merely practices and not covered by the CCC.

Amalgamation can be summarized as a combination of two or more companies to form a new company. As a result of the combination, the former companies will no longer exist.

The draft amendment introduces another type of M&A called “Merger”. The concept for the “Merger” involves the combination of two or more companies with the cessation of one or more merged companies while one other company continues to exist, without resulting in the formation of a new company. This is the key difference between a “Merger” and an “Amalgamation”.

In contrast, an “Acquisition” occurs when a company is acquired, either through the purchase of its shares or its assets. If the acquisition is of assets, the dissolution of the acquired company is not mandatory unless the parties wish to enjoy potential tax advantages.

In an Entire Business Transfer (“EBT”), the acquired company must dissolve within the same fiscal year, and meet other requirements in order to obtain certain tax exemptions, deferrals and other benefits. (“Notification of the Director-General of Revenue Department Re: Tax Exemption for Amalgamation and EBT No. 3).

Section 1238 of the draft amendment prescribes that:

“A limited company may not combine with another limited company except by special resolution.

“Two or more companies may combine in any of the following ways:
(1) Amalgamate to become a new company, and the company so amalgamated ceases to be a juristic person, called “Amalgamation”.
(2) Merge, wherein any one company remains a juristic person and the other merged company ceases to be a juristic person, called, “Merger”.”

The properties, liabilities, obligations and responsibilities of the combined companies shall be assumed by the newly combined company pursuant to Section 1243 of the draft amendment.

As before, the decision to combine with another company must be approved by a special resolution of three-quarters (3/4) of the shareholders’ votes. Other processes, e.g. notice to the creditors, registration period, etc., are stipulated in this draft amendment.

This draft amendment to Part IX: Combination of Limited Companies is one of many to the CCC. It and other pending amendments will affect present practices in the M&A field. In providing more options for investors, this may be an appropriate time to review which type of M&A method best supports your business plans and objectives.

Key Contacts
 
Ratana Poonsombudlert
TEL: 66-2-266-6485 Ext 153
ratana.p@chandlermhm.com
 
Peangnate Sawatdipong
TEL: 66-2-266-6485 Ext 122
peangnate.s@chandlermhm.com

E.T. Hunt Talmage III
TEL: 66-2-266-6485 Ext 124
talmage@chandlermhm.com
 
Ubolmas Sathiensopon
TEL: 66-2-266-6485 Ext 221
ubolmas.s@chandlermhm.com

Athiwuth Phanprechakij
TEL: 66-2-266-6485 Ext 221
athiwuth.p@chandlermhm.com
 
Suphakorn Chueabunchai
TEL: 66-2-266-6485 Ext 115
suphakorn.c@chandlermhm.com
 
Supakan Nimmanterdwong
TEL 66-2-266-6485 Ext 148
supakan.n@chandlermhm.com
 
Kiratika Poonsombudlert
TEL 66-2-266-6485 Ext 168
kiratika.p@chandlermhm.com
 

 

 

Chandler MHM Limited
7th-9th, 12th and 16th Floors
Bubhajit Building
20 North Sathorn Road
Bangkok 10500, Thailand
www.chandlermhm.com

 

Tags: Civil and Commercial Code, Corporate M&A, Thailand
Related Articles by Firm
New regulation on the prohibition of sales of alcoholic beverages online
In line with evolving trends in technology, certain entrepreneurs and retailers have started using online channels to sell alcoholic beverages, which makes it difficult to ensure the sale of such beverages is in accordance with existing laws ...
Nok Air Rehabilitation Proceedings – Updates for Creditors and Lessors
As the global travel industry continues to grapple with the effects of COVID-19, many companies are now beginning to seek protections under various insolvency regimes ...
Thai data privacy act exemptions
A cabinet resolution has approved a draft Royal Decree on temporary exemption of PDPA enforcement for some organisations and businesses.
Procurement of power from community-based power projects
These projects are intended to help generate and distribute income to local communities and promote their participation in local power projects.
Updated standards for e-meeting security
The Emergency Decree requires that electronic meetings follow the security protocols set forth under a notification from the Ministry of Information and Communication Technology.
Waste to energy projects in Thailand
A brief overview of the legal issues related to the development of a municipal solid waste to energy project.
Scrutinising CP Group’s acquisition of Tesco
The decision of Thailand’s competition authorities will set a precedent regarding merger control and provide clarity on market definitions.
PPP projects in Thailand’s EEC
Thailand will continue to aggressively move forward with legislation that streamlines implementation of important PPP projects. This legislative trend presents new opportunities for foreign and local investors alike, with a focus particularly in Thailand’s infrastructure sector ...
Community-based power projects in Thailand
A feed-in tariff scheme for power generated by community-based projects has been approved.
Thailand Plus incentives under BOI
The two new incentives encourage companies to move from overseas to Thailand.
Thailand’s OTCC issues first industry-specific conduct guidelines
Guidelines on the conduct between wholesale and retail business operators and their trade partners announced by the Office of Trade Competition Commission.
Amendment to the Consumer Protection Act 
The Act strengthens the law relating to the safety of products and services.
Personal Data Protection Act published in the Government Gazette
Business operators should ensure that their businesses comply with the PDPA.
Amendment to Thai Arbitration Act
The Amendment expands the ability of foreign arbitrators and representatives to act in arbitral proceedings.
Update on Stamp Duty regulating electronic transactions
A new notification requires parties who enter certain electronic transactions to pay stamp duty in cash.
Ministerial Regulation removing back office services from the Foreign Business Operations Act announced
Certain back office service businesses will no longer require a foreign business licence.
Developments in Thai M&A
Corrupt practices, environmental breaches and merger filing are becoming more significant priorities for clients ...
Thailand: Projects and Energy
Commentary on the latest developments in the Thai projects and energy sector ...
Secondary laws under the Trade Competition Act BE 2560
The enactment of these five Notifications represents a significant leap of progress.
Thailand Update: Amendment to Work Permit Law
In response to criticism, the government decided to amend the Emergency Decree on Managing of Foreigners with relaxed penalties ...
Leasing of residential buildings − A contract-controlled business
The Contract Committee of The Consumer Protection Board recently announced a new Notification which designates the lease of residential property as a “contract-controlled business”.
New Mining Regulations for Thailand
On 30th January 2018, the Ministry of Industry issued a new notification regarding prohibited actions for foreigners ...
Mergers and acquisitions in Thailand
A number of factors are making Thailand a target of choice for international and regional investment ...
Thailand Anti-Corruption Update
National Anti-Corruption Commission Guidelines to Supplement Section 123/5 of the Organic Act on Counter Corruption ...
Thailand: Amendment to the Public Company Act
The National Council for Peace and Order has considered the lack of clarity on conditions, procedures and time limitations related to the laws governing business operations ...
Thailand: The Act on the Amendment to the Civil Procedure Code (No. 30) B.E. 2560 (2017)
There are a number of amendments to the current Civil Procedure Code (CPC) as part of its legal execution ...
Projects & Energy Special Report: Thailand: New Minerals Act
A new Minerals Act (BE 2560 (2017) was published on March 2, 2017 and took effect on August 30, 2017 (180 days after the publication date) ...
Thailand: ERC Announcement - Purchase of Electricity From Hybrid-Renewable Energy Small Power Producers
The Energy Regulatory Commission (ERC) issued an invitation to bid for the sale of electricity from Hybrid-Renewable Energy Small Power Producers (SPP) on 4 August 2017 ...
Thailand: New Amendment to the Labor Law
The Labor Protection Act B.E. 2541 (“LPA”) was first enacted in February 1998; the LPA has been amended several times ...
Thailand: Extension of the Reduced VAT Rate
Value added tax (VAT) is an indirect, non-cumulative, consumption tax levied on the supply of goods or provision of services in Thailand ...
Thailand: Ten year visa extension
Due to the rapidly increasing number of foreign senior-citizens seeking Thailand as a retirement destination, Thailand’s Cabinet recently approved the ten-year retirement visa extension ...
Thailand: The New Trade Competition Act
On 24 March 2017, the National Legislative Assembly (the “NLA”) in Thailand passed the final reading of the draft Trade Competition Act ...
Thailand: Amendment to BOI Act to create new BOI benefits
The Thai government has recently been promoting “Thailand 4.0”, which refers to creative and innovative industries ... as a master plan to pull Thailand out of the middle-income trap and toward becoming a high-income country ...
Energising Thailand’s M&A sector
With a focus on the energy and natural resources sector, Chandler & Thong-ek Partner Ratana Poonsombudlert answers our questions on Thailand’s M&A present and future
Related Articles
Who’s Afraid of AI? - Tech Tales with Paul Haswell
Join Paul Haswell, a partner at K&L Gates in Hong Kong, as he explores the transformative impact of technology on the legal profession in his new column for IHC Magazine. Paul offers insights into the challenges and opportunities for ...
Related Articles by Jurisdiction
Secondary laws under the Trade Competition Act BE 2560
The enactment of these five Notifications represents a significant leap of progress.
The Novel Coronavirus – Insurance Considerations
The Novel Coronavirus (Covid-19) is likely to represent a significant exposure for the insurance market ..
Latest Articles