Selling A Minority Shareholding In A Thai Company

[simon43]

I own a 49% share of a Thai limited company. The remaining 51% of shares are held by 3 other Thai shareholders.

I am the designated Director of the company.

The company articles place no rules/restrictions on me as regards the sale of these shares

If I want to sell my shareholding to another non-Thai, are there any government or Thai company rules/procedures that I must follow?

Is there a tax to be paid for the transfer of these shares to another person?

If a sale of shares is effected, what happens to the position of Director? I assume that the new shareholder does not acquire the position of Director 'by default'

Simon

[SunbeltAsiaExpert]

If the company has its own by-laws or sets of rules and regulations, then the agreement must first be honored. Normally the by-laws of the company would be established at the time that the company was established which can include provisions in cases of sale, transfer and disposal of shares. A sample provision would state the right of first refusal in which the selling party is not allowed to sell, exchange or transfer the shares without first offering it to the remaining party(ies). Violation of such provision normally results in dissolution of the company.

However, if no by-laws has been made, you would be using the Civil and Commercial Code as its foundation for the company’s by-law. Then you are free to transfer, sell or dispose of your shares to whomever you prefer. A share transfer instrument is normally signed for protection of both the buyer and the seller and the Managing Director/Authorized Director (Authorized Director is the terminology used with the government sectors) must be informed of the transfer of shares. The process normally takes 2-3 days (in some cases just within 1 day) and a new list of shareholder list will be issued (Bor or jor 5). If your company also has the shareholder registration book, the transfer of shares will be logged in this book. As for the amount of the shares, there are no taxes if the shares are sold at par value. If it is sold for a profit, then of course it is subject to capital gain taxes. Once agreed on the selling of the shares, the Managing Director would have the responsibility to file the new shareholders list with the Department of Business Development (Ministry of Commerce) reflecting the new shareholders in the company.

There is a huge difference between a Managing Director and a Shareholder. The former oversees the operation of the company and is normally nominated and appointed by the shareholders (in western terminologies, this is also considered as board of directors). The Managing Director in other western legal terms are also referred to as President or CEO. The latter however, are considered “investors” in which they hold percentages of shares corresponding to their investment. In a normal corporate operation, the shareholders are called up for a meeting in which they will elect a Managing Director to control the company operations. Whoever has majority voting rights may appoint themselves as the Managing Director of the company thereby gaining control of the company operations. In other words, shareholders may become managing directors but managing directors may not necessarily be a shareholder of the company. Selling of such shares does not automatically transfer directorship to the new owner. The managing director can be retained as such, subject to the dispute of the new owner of the said shares.

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