Duensing Kippen Tax and
Law
Do you think that you can make a decision in your company
without other shareholders? First of all it is important to note that the
Thai Civil and Commercial Code (“CCC”) Section 1237(4) requires every
private Thai limited to maintain at least 3 shareholders or risk court
ordered dissolution of the company.
Perhaps in your case, however, you structured your
company in a way that you have the majority of the voting rights in your
company. Therefore, you ensured that the other shareholders cannot outvote
you in shareholders’ meetings. You might now believe that you are able to
take any decision in your company without the necessity to consult other
shareholders. However, in order for the shareholders to vote the CCC
requires that they meet. Thus, what are the requirements for a shareholders’
meeting?
In order to hold a legally proper shareholders’ meeting
an invitation to all shareholders must be sent by registered post at least
seven days before the meeting and also by publishing the invitation in a
local newspaper at least seven days before the meeting. The invitation must
include a description of the subject matter(s) of the meeting e.g.
resolution(s) to be considered and voted on unless the meeting is to
consider a “special resolution” in which case the invitation must be sent
and published at least fourteen days before the meeting. Special resolutions
concern matters which generally require a higher majority vote to pass and
are matters defined by Thai law and in some cases also the “articles of
association” - the internal rules of the company itself.
After having performed in accordance with the above
mentioned regulations, however, what happens if on the day of the scheduled
meeting no other shareholder shows up; only you, with your voting majority
rights, attends the shareholders’ meeting. Obviously you hold the majority
of the voting rights, but is that enough to constitute conduct a legal
shareholder’s meeting?
The first hurdle is the quorum requirement. Under CCC
Section 1178, at least 25% of the capital has to be represented to form such
quorum. Let’s assume that you actually own more than this 25%. Can you then
hold that shareholders’ meeting by yourself? Remember, in our hypothetical,
you own more than 25% of the capital of the company and you also have the
majority of the voting rights. Interestingly, in 1965 the Council of State
has issued a legal opinion on this very issue. It discussed the term
“meeting” and its meaning. The Council of State argued:
“Regarding the word “meeting”, its definition under
general understanding means an assembly or conference of persons to discuss
certain issues. With reference to Thai Dictionary of The Royal Institute, it
provides the meaning of the word that “comes together, assembly of persons,
discussing together, and gathering”. Therefore, it is deemed that a meeting
for any matters whatsoever means gathering of two persons or more to
discuss. If there is only one person, it is not the meeting.”
The Council of State further argues that the actual
purpose of a shareholders’ meeting is to have a discussion between the
shareholders. Only a meeting between at least two individuals would enable
such discussion. Therefore, according to the Council of State at least two
individuals are required to constitute a meeting in accordance with the
“spirit of the law”. Whether a Thai court would concur with this legal
opinion is not entirely clear. In any event, in light of such opinion, if
you wish to be certain that your shareholders’ meeting is lawful, it would
be advisable to be sure to have at least two shareholders’ in attendance at
any formal meeting.
DUENSING KIPPEN is a multi-service boutique law firm
specializing in property and corporate/commercial matters and is also the
only such firm in Thailand that compliments its property and
corporate/commercial legal expertise with a core tax law practice. DUENSING
KIPPEN can be reached at: [email protected] or for information, visit
them at: www.dktaxandlaw.com.
