Thai law Siam Firm | Preference Shares
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| Law Firm Thailand |
For a foreign investor in Thailand, quite often
they will get the advice from a lawyer or an audit firm to set up a company to do business here locally.A few people have known lawfirm Thailand. A lawyer or an audit firm will suggest setting up a Thai company, the meaning of a Thai company is that you will have to have a majority of Thai shareholders and a majority of the shares held by Thai nationals. The maximum share percentage able to be held by a foreigner or foreign parties in a Thai company is forty-nine percent with a minimum Thai majority share of fifty-one percent. Many investors worry that they are the minority shareholder and will be in a weak position in case of any vote in the company. With doing business here there are many ways to go about this such as having the company become a juristic person, this requires the company to abide by rules and regulations according to Thai law but also has many benefits as well. One of the benefits of doing business as a company is that you are not required to pay any taxes if you’re not making a profit, our law firm Thailand also agrees that setting up a Thai company to run a business but we also have another idea to control the company.
To
be in control of the company you must be appointed as managing director and be
a shareholder with preference shares, to do this the company’s articles of
association must declare that there are to be two types of shares; preference
shares as well as ordinary shares. The preference shares must also be given
importance over ordinary shares in the voting system such as one preference
share to be equal to ten votes or one share to be equal to one hundred votes.
As such a foreigner with a minority share you can have the majority vote in the
company’s affairs in the foreseeable future; this ensures that Thai partners or
other shareholders cannot act against your will with regards to the company.
This is more protection than trust, we have to trust shareholders but being
able to control the company is to be able to make sure that your investment and
best interests are maintained.
Not
many lawyers or audit firms and law firm Thailand
understand this procedure and do not know how to set this up. They will try
other ways to ensure control such as asking the Thai shareholder to sign an
agreement to transfer the shares back to the foreign shareholder which is a
blank form. This is a form of guarantee but I have handled many cases like this
and quite often they will fight by stating that they are the owner of these
shares and the paper that they have signed is a blank form. If the other party
uses that form then they will charge them with a criminal charge of document
forging, usually this type of case will come down to be a compromise with the
foreigner paying the other shareholder to get his shares back.Our law firm Thailand understand that the money invested
in the company is the foreign investor’s so we do not recommend you to go about
this way and give anyone the chance to cheat you.
Lawyer comment: Every week I stress about the
importance of protecting yourself in everything that you do, preference shares
is a form of protection. It is the best way in company management as you will
not have to compromise or ask for mercy as a minority, you are in charge of the
company and your investment. Not many law firm Thailand
or audit firms understand or know how to execute this process but we have
extensive experience in this field. Also if you already have a company setup
with only ordinary shares we cannot change the type of share to be the
preference share. But we have a way around this, by increasing the capital of
the company we can form new shares which can be converted to preference shares
for use in the company. If you have your own case or any questions regarding
law in Thailand please feel free to write in to us and we will answer any
questions or concerns in this column.
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| Law Firm Thailand |
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