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Legal update

2018

Sep 2018 : Peer to Peer Lending

In light of the dramatic increase of peer-to-peer lending transactions, the Ministry of Finance has published a notification regarding peer-to-peer lending platform dated 10 September 2018 which became effective on 21 September 2018 to regulate and set out qualifications of P2P lending platform operator and certain key requirements as follows:

 

1. Platform provider shall be a private or public company incorporated in Thailand with a minimum paid up capital of Baht 5 million, whereby at least 75 per cent of its total issued shares with voting rights must be held by Thai persons;

 

2. Platform provider is restricted from acting as borrower or lender via a system or an electronic network whether or not on its own platform;

 

3. The applied business may be subject to a regulatory sandbox under supervision of the Bank of Thailand prior to its approval and the granting of licence; and

 

4. Maximum interest rate is limited at 15 per cent per annum.

 

Meanwhile, the Bank of Thailand is in the process of drafting relevant notifications to prescribe further detailed requirements which are expected to be put into force by the end of 2018.

May 2018 : Digital Asset Businesses Decree

On the rise of cryptocurrencies and initial coin offerings across the world, it is impossible to ignore the massive impact and embedded legal implications. Accordingly, the Emergency Decree on the Digital Asset Businesses B.E. 2561 (the “Decree”) was promulgated and came into effective on 14 May 2018 to regulate digital asset-related transactions, having the Office of the Securities and Exchange Commission (the “SEC”) as the supervisory authority to oversee the public offering of digital tokens and operation of digital asset businesses (e.g. digital asset exchange, broker and dealer).

 

Despite the varied approach adopted by each country to cope with the controversy of cryptocurrencies, the Decree does not prohibit these fast-growing transactions but rather sets out regulatory framework and protective measures for the stakeholders. Particularly, the Decree requires the issuer to seek approval from and file a registration statement and draft prospectus with the SEC and the public offering must be made through the approved ICO portal. Further, an operator of digital asset businesses is subject to certain prescribed qualifications and licencing requirements.

 

Likewise, the Emergency Decree on the Amendment of the Revenue Code (No. 19) B.E. 2561 was issued to specifically recognise (i) a share of profit or any benefit derived from holding or having possession of digital tokens, and (ii) capital gains from the transfer of cryptocurrencies or digital tokens, as taxable income and are subject to applicable taxes.

Apr 2018 : Payment Systems Act B.E. 2560 (2017)

The Payment Systems Act B.E.2560 (2017) was promulgated on 18 October 2017 and became effective on 16 April 2018 with an aim at reforming and unifying Thailand’s regulatory framework for payment systems. Accordingly, the Bank of Thailand as main regulator under the Act is empowered to supervise three main categories of payment systems and payment services as follows:

 

1. essential payment systems (i.e. national payments infrastructure and payment systems for high value transfer, clearing, or settlement between members);

 

2. payment systems under supervision (i.e. payment systems or network for money transfer, clearing, or settlement or other systems which may affect public interest or confidence or the stability and security of payment systems); and

 

3. payment services under supervision (i.e. provision of credit card, debit card, or ATM card, e-money, bill payment and electronic money transfer services).

 

Whilst existing e-payment operators who have been granted licences under the current regime will be required to reapply for new licences or registrations (as the case may be) within 120 days after the announcement of the relevant notification of the Ministry of Finance (i.e. an application shall be submitted by 13 August 2018),  any person who wishes to engage in regulated e-payment service must register or obtain a requisite licence (as the case may be) before commencing such businesses, unless other exemptions apply.

2017

Oct 2017 : Trade Competition Act B.E. 2560 (2017)

The newly enacted Trade Competition Act (B.E. 2560) (2017) (the “TCA”) was published in the royal gazette on 7 July 2017 and came into effect on 5 October 2017. Amongst other notable changes, the TCA extends the authority of the Office of Trade Competition Commission (the “OTCC”) as an independent authority to regulate and promote competition and fair trade and introduces new merger control regime as follows:

 

1. Pre-Merger Approval – any merger which would result in a ‘monopoly’ or ‘market dominance’ requires a prior approval from the OTCC; and

 

2. Post-Merger Notification – any merger which would result in a ‘substantial reduction of market competition’ shall be notified to the OTCC within seven days from the date of the merger.

 

In this connection, relevant ministerial regulations and other subordinated rules prescribing criteria for activities to be considered a market dominance or substantial reduction of market competition remain to be further announced.

Apr 2017 : Law amendments for ease of doing business

Focused on creating supportive environment for doing business in Thailand, the Head of the National Council for Peace and Order issued Order No. 21/2017 on 4 April 2017 with immediate effect to amend five key legislations, namely the Civil and Commercial Code, the Labour Protection Act, the Public Limited Companies Act, the Social Security Act and the Bankruptcy Act.

 

Amongst other significant amendments, certain key changes which may warrant particular attention can be summarised as follows:

 

1. Civil and Commercial Code

 

1.1  corporate registration can now be made nationwide, as opposed to being restricted within the province where the head office is located;

 

1.2  a share certificate issued by a company no longer requires a company’s seal, but is now valid upon bearing a signature of at least one director;

 

1.3  dividends declared must now be paid within one month from the date of the resolution of the shareholders or directors (as the case may be); and

 

1.4  any cause making a continuance of the company to be impossible (i.e. a dead lock in business) has been included as an additional ground for shareholders to seek a court’s order for its dissolution.

 

2. Public Limited Companies Act

 

The minimum requirement of shareholders requesting for calling an extraordinary general meeting has been reduced to not less than 10 per cent of the total number of issued shares of the company (as opposed to the pre-amended minimum of 25 per cent or 25 persons holding an aggregate of not less than 10 per cent).

 

3. Labour Protection Act

 

A copy of work rules and regulations will no longer be required to be submitted with the Department of Labour Protection and Welfare, Ministry of Labour, and therefore reduces the administrative burden on employers.

 

4. Bankruptcy Act

 

During an automatic stay or rehabilitation process, a secured creditor may now enforce the secured properties after one year from the date of receipt of the petition by the court, whilst this was not permitted under the pre-amended Act. Nevertheless, such period may be extended twice by the court, provided that each extension shall not exceed six months.

Feb 2017 : Criminal Liability of Representatives of Juristic Persons

On 11 February 2017, the Criminal Liability of Representatives of Juristic Persons Amendment Act (B.E. 2560) (the “Act”) came into effect and repeals a legal presumption of criminal liability on a director, a manager, or other persons responsible for the operation of juristic person embedded in 76 legislations, including, amongst others, the Financial Institution Business Act, the Life and Non-Life Insurance Acts, the Revenue Code, the Consumer Protection Act, the Act Prescribing Offences Related to Registered Partnerships, Limited Partnerships, Limited Companies, Associations And Foundations, the Anti-Money Laundering Act and etc.

 

The amendment follows the landmark decision of the Constitutional Court case no. 12/2555 dated 28 March 2012 and certain subsequent decisions, which ruled that the presumption of a criminal liability is contrary to the Constitution. Hence, the Act has revived the principle of a presumption of innocence and a burden of proof on the prosecution now lies on a claimant to prove that the offence committed by a juristic person results from instruction, act, or omission of its representative.

2016

Dec 2016 : Amendments to the Securities and Exchange Act

The amendments to the Securities and Exchange Act B.E. 2535 (as amended) which came into effect on 12 December 2016 are aimed at regulating increasingly complex market misconducts as well as improving the efficiency of legal enforcement.

 

Key amendments include:

 

1. The scope of unfair trading practices has been expanded across four main categories of offences, namely (i) disclosure of false or misleading information; (ii) insider dealing; (iii) market manipulation; and (iv) others, e.g. sending of orders which create disruption or delay to trading system or use of nominee accounts to commit market misconduct.

 

2. Severity of criminal punishment for unfair trading offences has been raised.

 

3. Interestingly, the amendment has also introduced civil sanction for certain offences, including, amongst others, unfair trading practices and breach of fiduciary duty by directors or executives. Accordingly, a civil penalty committee will be established to consider and determine certain matters and to impose an appropriate level of civil penalty, e.g. fine, monetary compensations of illicit benefits, ban from securities trading or from being directors or executives, and etc.

 

4. Whilst all charges against offenders will cease upon settlement of all fines and fees imposed by the civil penalty committee, failure to settle them will now direct the relevant matters to the civil court directly.

Oct 2016 : Minimum Par Value – New Listing Criteria

With effect form 1 October 2016, companies listed on the Stock Exchange of Thailand (“SET”) and Market for Alternative Investment (“MAI”) are required to have par value of not less than Baht 0.5 per share, except in certain permitted circumstances (e.g. having closing price for each trading day of Baht 100 or more for a consecutive period of 6 months or undergoing rehabilitation or restructuring process). Nevertheless, the amendment does not apply to listed companies whose par value is currently below the new minimum or those which have obtained a resolution of the meeting of the shareholders to reduce the par value below the new minimum prior to the amendment came into force.

 

Further, certain criteria for listing on SET and MAI have been revised with an aim at improving the quality and liquidity of listed securities and will take effect from 1 January 2017. Key changes include:

 

1. Companies applying for listing on both SET or MAI shall now have positive shareholders’ equity prior to their IPO with a minimum free float of at least 25 per cent of their paid-up capital (or at least 20 per cent if their paid-up capital (ordinary shares only) is Baht 3,000 million or more).

 

2. Listing on MAI requires minimum paid-up capital (ordinary shares only) and shareholder’s equity of Baht 50 million, with a minimum net profits in the latest year of Baht 10 million.

 

3. Market capitalization for listing on SET has been increased to at least Baht 7,500 million.

Jul 2016 : Secured Transaction Act

After a long wait, the Secured Transaction Act B.E. 2558 (2015) has finally come into full force on 2 July 2016. The Act introduces a new form of security interest over assets to the Thai legal system, which previously recognised only (i) mortgage (available for immovable property and certain specific types of movable property); and (ii) pledge (available for movable property and requires the delivery of the pledged property). Thanks to the new legislation, the old limitations were overcome and a legal security can now be created over a broader range of assets of economic value (e.g. business, rights of claim, machinery, inventory, raw materials, immovable property (only if the security provider directly engages in a real estate business), intellectual property, and etc.) without the need for delivery of the secured asset. Particularly, the security provider retains the right under the Act to possess, use, exchange, dispose of, transfer and mortgage the secured asset during the secured period, as well as to use it as a security to secure other performances except by way of pledge in which case the pledge will be void.

 

The Act also sets out registration requirement of the secured transaction agreement, upon which the security receiver (i.e. a financial institution or other person to be prescribed by ministerial regulation) shall have preferential rights over the secured assets and in priority to the unsecured creditors. Moreover, specific procedures for the enforcement of security created under the Act have been established with an aim at promoting a more efficient and less time-consuming out-of-court enforcement.

 

In light of this significant development, small and medium enterprises or even large-scale businesses would benefit from gaining more flexibility and greater access to the needed finance.

Feb 2016 : Inheritance Tax and Gift Tax

The Inheritance Tax Act B.E. 2558 (the “ITA”) is one of the key tax reforms which came into force on 1 February 2016 with an aim at bridging the gap of income disparity in Thailand as well as increasing state revenue.

 

An inheritor receiving the prescribed assets (e.g. immovable property, securities, bank deposit, registered vehicle, and other financial assets to be further announced) with aggregate value over Baht 100 million from each testator will be taxed on the portion exceeding the said threshold at the rate of 5 percent for ascendants and descendants and 10 percent for others. In any event, the ITA does not apply to inheritance received by the surviving spouse and tax exemption is also available for an heir who will use the inheritance for religious, educational, or public purposes as intended by the testators.

 

As a countermeasure for possible avoidance of the inheritance tax, the Thai Revenue Code was amended to include a new gift tax which came into effect on the same date as the ITA. In brief, an individual receiving certain types of gifts in excess of the tax-free thresholds will be subject to personal income tax at the rate of 5 percent of the exceeding portion with an option to exclude such income from annual income tax computation.

2015

Dec 2015 : Amendment to private placement rule

A surge in equity private placement during the past few years has prompted the Capital Market Supervisory Board to announce the Notification No. TorJor. 72/2558 dated 28 October 2015 which came into force on 1 December 2015 with an aim of preventing the exploitation of fund raising through private placement of listed companies. Particularly, certain types of private placement of newly issued shares which were formerly deemed approved by the Office of the Securities and Exchange Commission (the “SEC”) will now require its prior approval.

 

In this connection, in one instance, a private placement whereby the shareholders authorise the board of directors to determine the offering price based on the market price (as defined under the relevant rules) at the time of the offering shall be deemed approved by the SEC upon submission of the required documents. In other instances, listed companies are now required, amongst others, to submit an application, together with the required documents, to the SEC for approval, whereby a pre-application consultation and review process may require at least 30 or 45 days (as the case may be) prior to the date of the relevant shareholders meeting.

 

The above amendment should be read in conjunction with the Capital Market Supervisory Board Notification No. TorJor. 73/2558 dated 28 October 2015, which also came into force on 1 December 2015 and sets out new rules concerning the required particulars of the notice of the shareholders meeting of listed companies for approval of the issuance and offering of securities.

Oct 2015 : Amendments to the Anti-Money Laundering Act

The Amendment No. 5 to the Anti-Money Laundering Act B.E. 2542 (the “AMLA”) which came into force on 9 October 2015 has brought certain new changes to anti-money laundering regulations in Thailand with an aim of increasing enforcement efficiency and conformity with international standards.

 

Amongst other key changes, all ten types of business operator under Section 16 of the AMLA (i.e. in addition to the operators of investment consultancy and e-payment businesses which were originally required under the pre-amended AMLA) will now be required to:

 

1. implement a policy on customer acceptance and risk management, as well as to conduct customer due diligence in accordance with the ministerial regulations to be further announced;

 

2. not make any disclosure or act which may cause the customers or third parties to be aware of the customer due diligence, transaction reporting, or sending of information to the Anti-Money Laundering Office (“AMLO”), except in certain cases;

 

3. monitor the compliance of its staffs who receive training provided by the AMLO; and

 

4. maintain information and documents concerning customer due diligence for a period of 10 years from the closure of accounts or the cessation of relationship with the customer.

 

In light of the above, business operator who falls within the ambit of the AMLA should ensure that its anti-money laundering policy and internal handbooks are reviewed and updated in accordance with the recent legislation changes.

Aug 2015 : Amendments to the Bankruptcy Act

On 27 August 2015, an amendment to the Bankruptcy Act B.E. 2483 (as amended) came into effect with an aim of speeding up the debt repayment process by reducing certain steps of the bankruptcy proceedings. Particularly, the official receiver is now empowered to consider and make an order on claims for debt repayment filed by creditors without the need of seeking approval from the court.

 

Additionally, a creditor who fails to file a claim for debt repayment within the prescribed period (i.e. within two months from the absolute receivership order’s publication date, which may be extended at the official receiver’s discretion for an additional period of up to two months in case of a creditor residing outside Thailand) as a result of force majeure event is now entitled to seek approval from the court for extended submission period.

 

The amendment also seeks to improve the clarity of pre-bankruptcy composition application by setting out certain of its required particulars. Further, relevant sanctions under the Bankruptcy Act B.E. 2483 (as amended) have been revised to be more adequate and in line with current economic circumstances.

Jul 2015 : Amendments to the Civil and Commercial Code

Following an amendment to the Civil and Commercial Code in respect of guarantees and mortgages which came into effect on 11 February 2015, additional amendments were subsequently taken into consideration by the National Legislative Assembly with an aim of making the legislation better correspond to the business operation in Thailand. In particular, this latest amendment has brought back certain flexibilities in terms of contractual arrangements between certain type of guarantors and creditors which were not allowed under the earlier amendment.

 

Amongst other significant revisions, a juristic guarantor is re-allowed to agree to be a joint debtor or jointly liable with the debtor and to the extent that a guarantor is a financial institution or engaged in a guarantee business as its ordinary business, to give advance consent to the extension of time by the creditor to the debtor. Additionally, a person lawfully authorised to manage or a person having a control over the operation of the juristic person who has mortgaged his or her assets as collateral to the debt of such juristic person is also allowed to agree to be liable as a guarantor by entering into a separate guarantee agreement.

 

The above amendment was published in the Royal Gazette on 14 July 2015 and came in to effect on 15 July 2015.

May 2015 : Silent period for private placements

On 29 April 2015, the Stock Exchange of Thailand issued an additional rule imposing a “silent period” in respect of new shares which are privately placed or issued upon conversion of privately placed convertible securities at a price below 90 per cent of the “market price”. In general, the term “market price” is determined based on a weighted average trading price of 7 to15 consecutive business days prior to the offering of shares or convertible securities. The rule came into effect on 6 May 2015.

 

The silent period will be for a period of (i) in case of shares (including convertible securities being offered together with shares), one year from the date on which the offered shares commence trading; and (ii) in case of convertible securities, one year from issuance of the convertible securities, but one-fourths of the silent shares would become available for trading after the first six months of the silent period.

 

Further, the above rule does not apply to unsubscribed shares or convertible securities from a rights offering that are subsequently privately placed with specific investors at the same or higher than the price offered to the existing shareholders. In any event, a waiver may be granted by the SET under certain circumstances.

Mar 2015 : Life and Non-Life Insurance Acts

With effect from 6 March 2015, foreign ownership limit of insurance businesses has been increased to 25% (from the previous cap of less than 25%) of the total number of shares with voting rights with certain exemptions as may be approved by the Office of Insurance Commission or the Minister of Finance. The recent changes to both Life and Non-Life Insurance Acts have also removed the previous stringent definition of Thai shareholders.

Amongst other key changes, the amended legislations provide additional protection to policy-holders in case of bankruptcy or licence revocation of insurance companies by requiring the insurance funds to compensate the claimed amount without the need for a completion of prolonged bankruptcy proceedings. For this specific purpose, the insurance funds have now been empowered to borrow or issue other financial instruments in accordance with the rules, procedures, and conditions set out by the Fund Management Committee.

 

Debt Collection Act B.E. 2558

 

On 6 March 2015, the Debt Collection Act B.E. 2558 was published in the Royal Gazette and will come into effect within 180 days after its publication. Being Thailand’s first debt-collection law, it is aimed at providing more protections to individual debtor and guarantor against inappropriate or unfair debt collection practices as well as setting a system and due process for debt collection.

Operators of debt collection business will now be required to register themselves with the registrar. The Act further imposes certain restrictions on place, time, and frequency of contact with the debtor as well as prohibits the use of abusive, libellous or deceptive collection methods, disclosure of debtor’s indebtedness, or unfair collection fees and expenses. Violation of the law is subject to either imprisonment and a fine, or both.

Feb 2015 : Amendments to the Civil and Commercial Code

On 11th February 2015, an amendment to the Civil and Commercial Code in respect of guarantees and mortgages came into effect with an aim at providing more protections to third party guarantors and mortgagors. In light of the amendment, a guarantor’s liabilities for future or conditional obligations will be narrowed down and limited only to those specifically referred to in a guarantee agreement. Further, contractual provision which requires the surety to be jointly liable with the debtor or to waive certain statutory rights and defences will be void. Likewise, any agreement imposing unreasonable burden on a mortgagor will be void, including those requiring the mortgagor to be responsible for any shortfall from an enforcement of the mortgage. The amendment has also introduced new notice requirements and more detailed procedures in relation to enforcement of mortgage.

 

Forthcoming Changes to Key Regulations

 

Apart from the above, certain proposed regulatory changes which merit a progress monitoring this year include:

 

Life and Non-Life Insurance Acts

 

The proposed amendments to both Acts are substantially the same and primarily focus on (i) provision of an additional protection to policy-holders in case of bankruptcy of insurance companies; and (ii) removal of the previously stringent definition of its Thai juristic person shareholders.

 

Debt Collection Act

 

The draft is aimed at providing more protections to debtors as well as setting a system and process for debt collection. All debt collectors will soon be required to register themselves with the government and all aggressive debt reminders, threats, intimidation and violations of rights of the debtors will be considered illegal, for which a criminal sanction will apply.

 

Personal Data Protection Act

 

Aiming at providing extensive protection to personal information, the current draft stipulates that all personal information can no longer be collected without consent of the owner and the holder of personal data is forbidden from using or disclosing it to a third party without the owner’s express consent. In addition, any transfer of data overseas is prohibited except for limited circumstances. Personal Data Protection Commission will subsequently be established for the purposes of implementing and enforcing the law.

 

Securities and Exchange Act

 

Based on recent press reports, it appears that the National Legislative Assembly will likely be pushed forward to consider proposed amendments to the Act concerning unfair securities trading practices by imposing certain assumptions on those considered as an insider and higher fine and penalty. If guilty, an offender may not be allowed to be involved in capital market related activities, including trading as long as five years.