Forming a Company in Thailand? Know the Power of Your Shareholders

In Thai capital companies, such as a “Company Limited,” the Board of Directors (BOD) is typically granted broad authority to manage the company’s affairs. However, when establishing a company, it is essential to consider the extent of influence the shareholders intend to exercise over key decisions and corporate governance. Through shareholders’ meetings and resolutions, shareholders can significantly limit the powers of the Board, thereby shaping the company’s direction and management structure. Sanet Legal and Accountancy, the German-speaking legal experts in Thailand, provides clear and concise guidance on the legal framework governing these rights and responsibilities.

The Thai Civil and Commercial Code recognizes two types of shareholders’ meetings.

1. The first ordinary shareholders’ meeting must be convened no later than six months after the company’s registration with the Department of Business Development (DBD), and subsequently at least once every year. During this meeting, shareholders approve the company’s annual financial statements, decide on profit distribution, and appoint the auditor for the upcoming fiscal year.

   Note: Their remuneration also has to be determined at this meeting.

2. An extraordinary shareholders’ meeting must be convened when urgent matters arise that cannot be postponed until the next ordinary meeting—such as a vacancy on the Board of Directors. Additionally, if shareholders holding at least one-fifth (20%) of the company’s registered capital request such a meeting, the company is obligated to arrange it.

   Note: This 20% threshold may be met jointly by multiple shareholders; what matters is their combined shareholding in the company.

3. To validly pass a resolution at a shareholders’ meeting, the following quorum is required:

   • At least two shareholders must be present or represented,

   • Together holding no less than one-quarter (25%) of the registered capital.

   However, the company’s Articles of Association may stipulate a higher quorum or place specific restrictions on representation, which is a common practice in Thai corporate governance. Voting rights are determined in proportion to the number of shares held by each shareholder.

   Important Note: Before the company is officially formed and shares are issued, shareholders may agree to designate certain shares as preferred shares, which may carry enhanced voting rights. Once shares have been issued, however, it is no longer possible to convert ordinary shares into preferred shares retroactively

Furthermore, the Thai company law recognizes two types of shareholder resolutions:

1. Ordinary Resolutions: An ordinary resolution is passed by a simple majority of the shareholders present at a meeting. These resolutions can be used to issue binding instructions to the Board of Directors, effectively limiting their autonomy in specific matters. A common example is the adoption of management rules, such as the distribution of responsibilities among board members or the implementation of formal procedures governing the Board’s activities.
   But caution: If such management rules are intended to be included in the Articles of Association, they must be passed by a qualified majority. Otherwise, the Board of Directors retains the authority to establish its own internal management rules.

2. Special Resolutions: Far-reaching corporate decisions—referred to as special resolutions—must be adopted by a supermajority of at least 75% of the votes present at the shareholders’ meeting. Where this threshold is mandated by law, it cannot be modified or waived by provisions in the company’s Articles of Association.
   But caution: Special resolutions also require a 14-day advance notice and formal publication of the meeting invitation.

Examples of such special resolutions are

• Amendments to the Articles of Association

• Capital increases or capital reductions

• Dissolution of the company

• Merger with other companies

• Conversion from a private company to a publically listed company

However, the shareholders’ meeting may amend the Articles of Association to expand the scope of decisions that require a special resolution, thereby going beyond the statutory requirements.

Note: Such an amendment to the articles of association itself can only be decided by 75% of the votes!

If the legally required notice periods, quorum conditions, or voting thresholds are not properly observed, any shareholder or director may file a claim in court to annul the resolution within one month of the shareholders’ meeting. This underscores the importance of strict procedural compliance and highlights that shareholders’ meetings are a central mechanism for good corporate governance in Thailand.