conflict with thai shareholder director - how to go about

[jacklh]

question - i have a company with a 51% thai shareholder and 49% for me (foreigner).

 

thai shareholder never paid up actual money - but 'borrowed' from me - we have a sharepledge / loan agreement, which im not sure has any value

 

we are both directors. however i'm the only one with authority to make decisions or with bank access. thai director is not a nominee however and used to have a (semi-) active role in the company, though very part-time / occasional.

 

the thai shareholder director following a conflict wants money or threatens to 'make life hard'

 

I know it is possible for me to raise capital, give shares to a new thai shareholder I trust, to effectively dillute the share of current 51% shareholder and have the 51% on my side?

 

but

 

1. what's the best way to go about this quickly and quietly? do we need to announce / send registered mail? what happens if this is not done?

2. does current thai shareholder have first right to purchase shares? can company director decide otherwise?

3. am i able to remove Thai director after i have 51% on my side, to avoid this person from having control over my company?

4. am i able to mark certain shares as common / preferential afterwards to further reduce rights of current shareholder?

 

 

any help / thoughts are appreciated, fun running a business in .th like this

 

 

 

[Peterw42]

What does the company do, owns real estate, runs a profitable business, gives you a WP ? Its unclear, does the Thai guy now want to sell his 51% and no longer be part of the company? Wants 51% of the companies capital, assets etc

You cant create more than 100% shares, 100% of the shares are already accounted for. You cant sell/give another 51%. 

[Briggsy]

8 minutes ago, Peterw42 said:

You cant create more than 100% shares, 100% of the shares are already accounted for. You cant sell/give another 51%. 

You have authorised share capital and issued share capital but I think the OP understands that.

[notagain]

This should be a pinned topic. NEVER START A BUSINESS IN THAILAND.

[Peterw42]

21 minutes ago, Briggsy said:

You have authorised share capital and issued share capital but I think the OP understands that.

Doesnt that start to go into the definition of a (illegal) Thai nominee, owns 51% of the shares on paper but through structuring and controls doesn't own 51% of the shares.

[Briggsy]

1 minute ago, Peterw42 said:

Doesnt that start to go into the definition of a (illegal) Thai nominee, owns 51% of the shares on paper but through structuring and controls doesn't own 51% of the shares.

No, that is a separate issue that is usually achieved through having different classes of shares or ensuring certain key documents are under lock and key.

 

Authorised share capital is the maximum share capital that can be issued under the articles of incorporation. Issued share capital is the capital from shares currently issued. The OP says, "I know I can raise capital, give shares to a new Thai shareholder." It is possible that all the authorised shares have not been issued and that is why he states that. Alternatively he could get the articles of incorporation amended to increase the authorised share capital if it has already been issued.

[blackcab]

1 hour ago, jacklh said:

I know it is possible for me to raise capital, give shares to a new thai shareholder I trust, to effectively dillute the share of current 51% shareholder and have the 51% on my side?

 

That's not going to happen, for a number of reasons. The most obvious reason being that a limited company can only increase its capital by special resolution, and a special resolution requires 75 per cent of the shareholders to agree.

 

This rule is unchangeable as it is statute law (CCC Section 1220).

 

You would be better advised to consider CCC Section 1184 which states, “No shareholder is entitled to vote unless all calls due by him have been paid.”

 

This is a complex area of company law, and you should consider getting decent legal advice. In essence, though, if a properly constituted meeting is held, and the unpaid capital of a shareholder is demanded or "called", then that shareholder cannot vote until the capital is paid up.

 

This is quite significant, because a director can be removed if more than 50 per cent of the shareholders pass a motion during a properly constituted meeting. Another option would be to appoint a second director, but specify the signature of only one director is required to bind the company. Either way you would lose control of the company and the banking.

 

Who is the third shareholder, and what percentage of shares do they hold? If they hold 2 per cent or more, you only need to get them to vote in your favour and you will control the ordinary resolutions.

[AJBangkok]

Go see a reputable lawyer and get advice on how to proceed. I stress reputable as You don’t want to risk the lawyer teaming up with the 51% owner and ousting you which although unlikely is not unheard of.

[sjbrownderby]

First of all go to the police and make a report. Even if they do nothing at least the complaint is recorded for future reference. An unwarranted demand with menaces is blackmail. Of course I am assuming that your business is completely above board but if he did not put any money up and you 'loaned' him money and he still has 51% of the shares then something is not correct with that arrangement. Is he asking for money he feels may be due to him by virtue of his 51% ownership? 

[Mavideol]

7 hours ago, notagain said:

This should be a pinned topic. NEVER START A BUSINESS IN THAILAND.

NEVER TRUST A THAI would be more like it

[Mavideol]

when you started the company did you use a lawyer to draw the bylaws, shareholders rights, object of the company, shareholders rights and obligations, etc.

[seancbk]

8 hours ago, notagain said:

This should be a pinned topic. NEVER START A BUSINESS IN THAILAND.

 

So you'd recommend all the foreign businessmen with successful businesses in Thailand close them down do you?

 

 

[natway09]

To avoid this very thing happening to me I put 2% of the shares in the accountant's secretaries name along with her signing a power of attorney to me.

.The judge accepted my control of the company

[khunPer]

@blackcab said, what I was going to ask about; What about the third shareholder?

 

9 hours ago, jacklh said:

4. am i able to mark certain shares as common / preferential afterwards to further reduce rights of current shareholder?

I think you need to expand the nominal shareholder capital to do that – but check with a lawyer – when I did it, we (the law firm) expanded the shareholder capital. However, that requires more than simple majority at a general meeting.

 

In another Thaivisa thread some years ago, a poster suggested to make preferred shares to a Thai, for example holding 2 percent of the shares, as shares with no voting rights in return of a fixed yearly dividends; where 4 percent was mentioned, i.e. with 2 million baht capital 2 percent of the shares would be 40,000 baht nominal shareholder capital, and 1,600 baht in guaranteed annual 4 percent dividend. This could be a better solution than giving a foreign shareholder preferred shares with 10 votes, whilst normal shares have one vote.

[mokwit]

2 hours ago, seancbk said:

 

So you'd recommend all the foreign businessmen with successful businesses in Thailand close them down do you?

 

 

How many of them are happy running a business here?

[Thaidaddy]

The are more questions than answers based on the way this topic has been put forward. Just to cut through the misconceptions first:

1. The shares are already issued as ordinary shares rather than preferred, therefore that is what we are dealing with. The Thai shareholder holds 51% so he has control.

2. Increasing the capital wont work without the 51% holder agreeing.

3. If shares are not fully paid then you can insist all shareholders fully pay. Failure then provides options to reduce existing holding % and possibly have someone take up the additional shares- will require court action.

The key is to look at the Loan Agreement to see what options are available.

Regardless of what you say, this is a nominee situation. The courts will always look at the underlying commercial realities rather than the simple legal structure. You need professional assistance to examine the documents and review your options.  

[madmen]

1 hour ago, mokwit said:

How many of them are happy running a business here?

Profit = Happy

why would you even ask that question

[inThailand]

Normally when a company is started updated signed share transfers agreements are setup. Just transfer the trouble maker's shares to someone else. 

[seancbk]

6 hours ago, mokwit said:

8 hours ago, seancbk said:

 

So you'd recommend all the foreign businessmen with successful businesses in Thailand close them down do you?

 

 

How many of them are happy running a business here?

 

 

Logic would dictate that a person with a successful business would be happy.   All of the business owners I know in Bangkok (all expats) that have successful businesses are pretty happy, some extremely so. 

 

[blackcab]

3 hours ago, inThailand said:

Normally when a company is started updated signed share transfers agreements are setup. Just transfer the trouble maker's shares to someone else. 

 

Unfortunately such documents can easily be rendered worthless.

 

If the person who signed the undated share transfer agreements makes a written statement to the police that they lost these documents, then the future use of the document becomes problematic.

 

If the same person reports the documents stolen by persons unknown, anyone using the agreement in the future could find themselves in serious trouble.

 

These documents can be signed one day and reported stolen the next day, creating a time bomb for anyone using them in the future.

[mokwit]

14 hours ago, madmen said:

Profit = Happy

why would you even ask that question

I was thinking of the reality of running a business here might not be worth the profit. People I know who have problems with the operating environment here are born and bred Thais. I am amazed how expats come in here and miraculously overcome everything that locals cannot.

[watboy]

If you want to fight, you need to lawyer up. There's lots of details about company law, how your loan and share pledges were written and structured that may or may not give you leverage. Best to hire a lawyer to review all the documentation to see what is enforceable and what is not. How are you the only director with authority? The company articles? Make sure you're the only authorized bank signatory.

 

Alternatively, there are limits of what your partner can do to make life difficult without breaking the law. The bark maybe worse than the bite. If he only needs a few $k's to go away, much easier to buy him out as legal fees of a fight will be much higher than that.

[manchega]

I have been told you can hire Burmian security guards to take care of this sort of problem.

they do everything such as house visits, conversations when driving etc. they are not worried about the security guards or police

[jacklh]

On 3/20/2019 at 7:40 AM, Peterw42 said:

What does the company do, owns real estate, runs a profitable business, gives you a WP ? Its unclear, does the Thai guy now want to sell his 51% and no longer be part of the company? Wants 51% of the companies capital, assets etc

You cant create more than 100% shares, 100% of the shares are already accounted for. You cant sell/give another 51%. 

it's a normal business - the shareholder wants to get money to return shares even though his money was never put in.. of course we can raise additional capital that is what companies do all the time. watch the facebook movie on the concept of share dillution.

[jacklh]

On 3/20/2019 at 8:36 AM, blackcab said:

 

That's not going to happen, for a number of reasons. The most obvious reason being that a limited company can only increase its capital by special resolution, and a special resolution requires 75 per cent of the shareholders to agree.

 

This rule is unchangeable as it is statute law (CCC Section 1220).

 

You would be better advised to consider CCC Section 1184 which states, “No shareholder is entitled to vote unless all calls due by him have been paid.”

 

This is a complex area of company law, and you should consider getting decent legal advice. In essence, though, if a properly constituted meeting is held, and the unpaid capital of a shareholder is demanded or "called", then that shareholder cannot vote until the capital is paid up.

 

This is quite significant, because a director can be removed if more than 50 per cent of the shareholders pass a motion during a properly constituted meeting. Another option would be to appoint a second director, but specify the signature of only one director is required to bind the company. Either way you would lose control of the company and the banking.

 

Who is the third shareholder, and what percentage of shares do they hold? If they hold 2 per cent or more, you only need to get them to vote in your favour and you will control the ordinary resolutions.

third shareholder is also foreign, and has 1 share. not worth the hassle.

 

current thai shareholder is also director without signature rights. so i'm in control of banking.

 

i want to raise additional capital for a 4th thai shareholder that i trust.. amount doesnt need to be large, just enough to get 51% on my side between me and shareholder 3 and 4.

 

 

[blackcab]

1 hour ago, jacklh said:

current thai shareholder is also director without signature rights.

 

As I explained, the majority shareholder can easily change this any time he wants. There is nothing you can legally do to stop him.

 

1 hour ago, jacklh said:

so i'm in control of banking.

 

You do not control anything: You manage the banking until the majority shareholder decides otherwise.

 

1 hour ago, jacklh said:

I want to raise additional capital for a 4th thai shareholder that i trust.

 

I don't think you understand: You cannot dilute the shares unless the majority shareholder agrees.

[MiNombreEsFicticious]

On 3/20/2019 at 4:06 PM, seancbk said:

 

So you'd recommend all the foreign businessmen with successful businesses in Thailand close them down do you?

 

 

As a formerly successful business owner, i wish i had closed it down and gotten outta "Dodge" when I had the chance to lose less than everything. The longer you stay, the less you have left when it's past time to leave. Get out now, and don't come if you're not here yet.

[inThailand]

Yeah good idea, throw more money into a losing proposition. Just give to gf its easier to loose it this way.