The principal legislation governing public takeovers in
Thailand is the Securities and Exchange Act B.E. 2535 (A.D.
1998), as amended (SEC Act), and the Notification of the
Capital Market Supervisory Board (CMSB) No. ThorJor. 12/2554
Re: Rules, Conditions and Procedures for the Acquisition of
Securities for Business Takeovers (CMSB Notification).
For foreign investors, there should not be any unusual
characteristics under the SEC Act, nor any unique notifications
and regulations on takeovers. Thailand has adopted laws and
regulations mainly from the US and other similarly developed
According to the CMSB Notification, only shares of a public
company listed on the Stock Exchange of Thailand are subject to
the tender offer process.
The mandatory takeover threshold
The triggering threshold that gives rise to an obligation to
make a mandatory tender offer is 25%, 50% or 75% of the total
voting rights of the target company. Once the acquisition of
shares reaches or passes the tender offer threshold, the
acquirer is required to conduct a mandatory tender offer of all
shares, including securities convertible or exercisable into
shares (for example warrants or convertible debentures) of such
It is important to note that the so-called chain principle
can apply when calculating the takeover threshold: In the case
where the acquirer acquires a significant degree of control (by
holding shares conferring 50% or more of the total voting
rights or having the power to control the management or
operation, for example) of a juristic person (immediate holding
entity) who is a shareholder of the target company, either
directly or indirectly through his holding in, or control of,
other juristic persons (immediate entity) through to the
immediate holding entity, such acquirer is required to conduct
a mandatory tender offer of all shares, including securities
convertible or exercisable into shares of such target company
if his holding in the target company, when combined with those
held by each immediate entity, the immediate holding entity and
their related persons triggers the tender offer threshold.
In determining whether the number of shares held by the
acquirer triggers the tender offer threshold, shares held by
his related persons and persons acting in concert with him will
be included for the calculation.
Related persons are those specified under section 258 of the
SEC Act to include:
- a spouse or minor child;
- a natural person who is a shareholder of the acquirer in
an amount exceeding 30% of the total voting rights of such
acquirer (such voting rights also include his person's spouse
and minor child);
- a juristic person who is a shareholder of the acquirer in
an amount exceeding 30% of the total voting rights of such
- a shareholder in a juristic person under (iii) and
shareholders at all levels of upward shareholding beginning
from the shareholder in a juristic person under (iii), where
the shareholding at each level exceeds 30% of the total
number of voting rights of the shareholder in the immediately
lower level (in the case where the shareholder of any level
is a natural person, the voting rights of his shareholders'
spouse and minor child will be included);
- a juristic person in which the acquirer or the persons
under (i)–(iii) collectively hold shares in an
amount exceeding 30% of the total number of voting rights of
such juristic person;
- a juristic person in which the juristic person under (v)
hold its shares and shareholders in all levels of downward
shareholding, beginning from the shareholder in the juristic
person under (v), providing that shareholders in each level
exceeds 30% of the total number of voting rights of the
juristic person in the immediate lower level;
- an ordinary partnership in which the acquirer or the
person under (i)–(vi) or the limited partnership
under (viii) is a partner;
- a limited partnership in which the acquirer or the person
under (i)–(vi) or the ordinary partnership under
(vii) is an unlimited liability partner; and
- a juristic person over which the acquirer has the power
of management in respect of investment in securities.
Persons acting in concert, meanwhile, are those who have a
mutual intention to exercise their voting rights in the same
direction or who allow others to exercise their voting rights
for the purpose of achieving the common control of the voting
rights or of the business and have a relationship or act
together in the manner as specified below, which among
- Having an agreement to exercise his voting rights in the
same direction or an agreement to any party to exercise the
voting rights of another party or an agreement to jointly
manage the business;
- Having an agreement restricting the rights to sell
securities in case where there is a tender offer on such
securities or having an agreement to maintain or to change
the securities holding ratio in a business (the standstill
- Soliciting other person by himself or through his
assignee for the purpose of acquiring or disposing the
securities at the same time or nearly at the same time;
- Having the same source of funds or acting by any means to
facilitate the obtaining of the source of funds to conduct
the purchase of, or to perform any other acts for acquisition
of the securities of a business either for his own account or
for another person's; and
- Giving of securities to other person other than by way of
gratuitous transfer in respect of an ordinary partnership
between parent and sui juris child.
Other types of offer
In addition to the mandatory tender offer, there are also
voluntary tender offers and partial tender offers.
A voluntary tender offer is an offer made voluntarily by an
acquirer who does not hold any shares of the target company
that triggers the tender offer threshold, but wishes to control
such target company. In doing so, the acquirer must tender for
the entire share capital of the target company.
In the case where an acquirer wishes to hold the target
company's shares in the amount of less than 50% of the total
voting shares, he can do so upon the target company's
shareholders' approval and approval from the Office of the
Securities and Exchange Commission (SEC), and subject to
certain other conditions as specified in the relevant
(This article focuses only on mandatory tender offers.)
Steps to acquire the target
The key steps for an acquirer whose acquisition triggers the
tender offer threshold are as follows.
First, the acquirer must report the total number of shares
held to the Office of the SEC, including a statement of
intention to make a tender offer (if required) and the tender
offer document (which attaches the tender offer acceptance
form) to the Office of the SEC within the specified period.
Once the tender offer document is submitted to the Office of
the SEC, the acquirer must immediately send the tender offer
document together with the tender offer acceptance form to the
securities holders of the target company, the target company
and the Stock Exchange of Thailand. It must then advertise the
tender offer in at least two Thai newspapers and one English
newspaper for at least one or three consecutive days (as the
case may apply).
Upon the effectiveness of the tender offer document (which
is the following business day of the date of submission of the
tender offer document), the acquirer must commence the tender
offer within three business days following the date on which
the tender offer document has been submitted to the Office of
the SEC, with a tender offer period of not less than 25
business days but not more than 45 business days.
Finally, the acquirer must submit the final report on the
result of the tender offer to the Office of the SEC, with a
copy to the Stock Exchange of Thailand, within five business
days following the end of the tender offer period.
There is no squeeze-out concept under Thai law.
Conditions to an offer
A mandatory tender offer must be unconditional. However, the
acquirer can cancel the tender offer in two circumstances as
allowed by the CMSB Notification, provided that these
circumstances are stated clearly in the tender offer document
and the Office of the SEC has no objection to such
The first circumstance is where there arises a situation or
an action after submission of the tender offer document but
during the tender offer period which causes or may cause a
severe damage to the status or assets of the target company,
which does not result from the action of the tender offeror or
an action for which the tender offeror must be responsible.
The second is where the target company undertakes any action
after the acquirer submits the tender offer document but during
the tender offer period, which results in a significant
decrease in the share value.
However, if the tender offer is a voluntary tender offer,
the tender offeror can add a condition such that he can cancel
the tender offer if the number of tendered shares are less than
the number the tender offeror specifies as a condition for the
Risk and protection
In terms of execution risk, the only risk regarding the
mandatory tender offer is that the tender offeror may not
obtain the number of shares they would prefer, and may end up
being a minority shareholder of the target company.
There is no singular protection for foreign buyers if they
are required to conduct the mandatory tender offer. However, in
such a case, a foreign buyer needs to be concerned about the
target company being considered a foreign company as it will be
restricted from engaging in certain businesses. Also, to ensure
properly structured transactions it is recommended that foreign
investors consult experienced legal counsel at an early stage
in the merger and acquisition process.
The main legislation that restricts a foreigner in doing
businesses in Thailand is the Foreign Business Operations Act
B.E. 2542 (A.D. 1999) (FBA). The FBA prohibits a foreign
company eg (a company in which at least half of the share
capital is owned by non-Thai nationals) from engaging in
The businesses under the FBA are divided into three
Category 1 businesses are not allowed to be operated by a
foreigner – these include, among others, newspapers
and other media, farming, real property trading and extraction
of Thai herbs.
Businesses in Category 2 must obtain permission from the
Minister of Commerce, with the approval of the cabinet
– these are businesses involving national safety and
security, or affecting arts, culture, traditional customs and
folk handicrafts, natural resources or environment which are,
among others, manufacturing and sale of firearms and components
of war equipment, transportation, trading of Thai antiques and
handicrafts, manufacturing of sugar, mining, and so on.
Category 3 businesses must obtain permission from the
director-general of the Commercial Registration Department of
the Ministry of Commerce with the approval of the Foreign
Business Operations Committee – these include, among
others, professional services (legal, accounting, engineering
and architecture), construction, brokerage and agency, certain
wholesale and retail and other business services.
In the case where a foreigner is required to conduct a
mandatory tender offer and in order to avoid the target company
being classified as a foreign entity, the foreign tender
offeror must find a Thai partner to be a co-tender offeror.
Once the tender offer is completed, they can allocate the
number of shares derived from the tender offer to ensure that a
foreigner will not hold shares which will trigger the status of
the target company as a foreign entity. Such Thai partner must
be a third party who has no relationship with the foreign
tender offeror, otherwise, he will be deemed an agent or a
nominee of such foreign person, in which case the shares held
by him will be treated as shares held by a foreigner.
Apart from the FBA, certain businesses have specific
regulations which may have a separate requirement on foreign
shareholding. For example, laws governing a commercial banking
business or an insurance business have a foreign shareholding
limitation of 25%, unless falling into certain exception
categories. Also, the Articles of Association of a target
company may have such restrictions.
There have been some regulatory changes during the past year on
takeovers. The main reason has been to improve the regulations
to ensure fairness and reasonableness both in terms of the
tender offeror and the securities holders of the target
company. Samples of key amendments are the issuance of the CMSB
Notification to replace the then existing notification, the
amendment of regulations relating to the person deemed to be
acting in concert with the acquirer, and the tender offer price
in certain situations.
In Thailand, the Takeover Panel has a number of powers and
responsibilities. It can give an order relating to the request
for a waiver not to make a tender offer for all securities of
the target company, and give an order relating to tender offer
rules, as well as any other order under its power and
responsibilities as specified by the notification governing
acquisition of securities for business takeovers.
The Panel may also make orders relating to taking or
omitting any actions which may affect a tender offer as
specified by the relevant notifications; give opinions or
advice to the CMSB and Office of the SEC in matters relating to
acting in concert and any other matters relating to acquisition
of securities for business takeovers; and call any persons to
give facts, explanations, recommendations and opinions or to
submit supporting documents for consideration as necessary.
The Panel consists of experts and practitioners in business
takeovers selected from persons on the CMSB appointed list. The
CMSB appointed list can be divided into four groups: (i) those
who may be the chairman of the Panel; (ii) experts in the area
of finance; (iii) experts in the area of law; and (iv) a
representative of the SEC who acts as a Panel member and
secretary to the Panel.
When there is a matter that needs to be considered by the
Takeover Panel, the secretary-general of the Office of the SEC
will select five persons from the list who are suitable for
determining such matters, one from group one, three from group
two and/or three and one from group four to form a Panel.
Merger control in Thailand is governed by the Trade Competition
Act B.E. 2542 (A.D.1999) (TCA). Section 26 of the TCA prohibits
mergers of businesses that may result in monopoly or unfair
competition, as prescribed by the Trade Competition Commission
(TCC), unless permission is obtained from the TCC.
The TCA empowers the TCC to enforce the merger-control
provisions. In addition, the TCC is responsible for prescribing
notifications to enforce the provisions of the TCA, including
issuing notifications concerning the specific process by which
a certain merger will be examined. In this regard, the TCC is
empowered to set a minimum threshold of market share, total
sales, amount of capital, number of shares or quantity of
assets which will be subject to prohibition under this section.
This is part of the pre-merger notification requirement. As no
notification pursuant to Section 26 has yet been issued, the
restrictions on mergers are not yet enforceable. Therefore, a
merger in Thailand can be completed without being subject to
permission under Section 26.
Pursuant to Section 26 of the TCA, the merger of businesses
(i) the merger of a manufacturer and another manufacturer, a
distributor with another distributor, a manufacturer with a
distributor, or a service provider with another service
provider, where the mergers will result in one business being
maintained while the other is extinguished or a new business is
(ii) the purchase of all or part of the assets of another
business for the purpose of controlling business administration
policy, administration or management; and
(iii) the purchase of all or part of the shares of another
business for the purpose of controlling business administration
policy, administration or management.
Once the transaction is determined to be within the scope of
the merger of businesses, a transaction will be evaluated
against the criteria set by the TCC. A business operator who is
involved in the merger of businesses which triggers the minimum
threshold as prescribed in the notification by the TCC must
obtain approval from the TCC.
As the proposed minimum thresholds have not yet been issued,
there is no approval required from the TCC.
||Chatri is a partner of
Weerawong C&P Ltd. with extensive experience in major
international and domestic capital markets transactions.
Previously, he was a partner of White & Case in
Thailand, and prior to that, worked in a respected
international law firm in Bangkok. Chatri obtained his
LLB degree from Chulalongkorn University and subsequently
obtained an LLM degree (International Banking Law) from
Boston University, School of Law in the US. He is
recognised as a leading lawyer by international legal
Weerawong, Chinnavat &
22nd Floor, Mercury Tower
540 Ploenchit Road,
Bangkok 10330, Thailand
T: +662 264 8218