Investing in a company as a minority shareholder can be a lucrative opportunity but comes with certain risks. In Thailand, minority shareholders have legal rights that are designed to protect their investments and ensure fair treatment. Understanding these rights and protections is crucial for anyone looking to invest in a Thai company as a minority shareholder. This article will provide a comprehensive guide to the legal rights of minority shareholders in Thai companies.
Who is Considered a Minority Shareholder?
Minority shareholders are individuals or legal entities that own less than 50% of the shares in a company. They are typically investors who have purchased shares in a publicly traded or private company.
Minority shareholders are distinct from majority shareholders, who own more than 50% of the shares in a company and have a controlling interest. Minority shareholders do not have the power to make major decisions in the company, but they do have legal rights that protect their investments and allow them to participate in important decisions.
In Thailand, minority shareholders are entitled to certain legal protections and rights, including the right to vote, receive dividends, access information, sue the company for damages, and participate in shareholder meetings. The number of votes each minority shareholder has is usually proportional to the number of shares they own. For example, if a shareholder holds 800 shares out of a total of 1,000 shares issued by the company, that shareholder controls 80% of the votes at a general meeting of the company.
Minority shareholders need to understand their rights and protections in order to protect their investments and ensure fair treatment. In some cases, minority shareholders may form groups or coalitions to exert influence over the company and make their voices heard.
Important Minority Protection Mechanisms
Minority protection mechanisms are legal tools and strategies that are designed to protect the rights of minority shareholders in a company.
One important mechanism is the right to file a derivative action. This allows minority shareholders to sue the directors or officers on behalf of the company for any actions that harm the company. This mechanism is particularly handy when the majority shareholders or directors engage in acts detrimental to the company.
Another important mechanism is the right to call a shareholders’ meeting. Minority shareholders can convene a meeting of all shareholders to vote on important issues or challenge decisions made by the company’s management. It can be particularly effective when minority shareholders band together to exert influence over the company. Specifically, their influence on a resolution is as follows:
- More than 25%, but less than 50%: minority shareholders have the right to convene an extraordinary meeting and can block special resolutions.
- At least 20% of the shares: minority shareholders have the right to convene an extraordinary meeting but cannot influence the decision to be made.
- Less than 20% of the shares: minority shareholders cannot require the company to convene a shareholders’ meeting and cannot influence the passing of an ordinary or any special resolution.
Whenever a request to the directors to call and hold a general meeting is made, the directors shall summon such a meeting. If it is not summoned within 30 days after the date of the requisition, the requisitioner or any other shareholder amounting to the required number may themselves summon the meeting.
Other Mechanisms Protecting Minority Shareholders
Additionally, minority shareholders have the right to receive notice of the shareholders’ meeting not less than seven (7) days in advance or 14 days in advance for a special resolution. They can also file a motion with the court to cancel any resolution passed at irregular general meetings.
Minority shareholders also have the right to petition the court to investigate the company’s management. This can be done if the minority shareholders believe that the directors or officers have engaged in illegal or unethical behaviour that harms the company.
Specifically, they are entitled to inspect minutes of all proceedings and resolutions free of charge. In addition, minority shareholders holding not less than 20% of the company shares can file an application to the competent Minister to appoint one or more competent inspectors to examine the company affairs.
Conclusion
Understanding the rights of minority shareholders is critical for anyone investing in a company in Thailand. With the proper knowledge and legal protections, minority shareholders can protect their investments and ensure fair treatment. By utilising minority protection mechanisms, minority shareholders can have a powerful impact on the governance and success of a company.
Have a better understanding about the role of a shareholder in Thailand by engaging with a professional business services provider like Reliance Consulting. The firm is specialized in providing business services which includes accounting services, withhold tax, company registration, auditing, payroll outsourcing, corporate secretarial and business license application.
