Services / Cross-border transactions and investment
A share transfer in the wrong form is void
A sale of shares in a Thai limited company carries formal requirements that are very short and very strict. Falling short is not a defect to be cured later but voidness — and there is a separate layer beyond it, being able to set the transfer up against the company and third parties.
Transferable without consent, unless
The first paragraph of section 1129 of the Civil and Commercial Code lays down that shares are transferable without the company's consent, except where they are shares registered in the name of the holder and the company's articles provide otherwise. Restrictions on transfer therefore come from the articles rather than from the Code itself, which makes reading the articles the first step rather than the last.
Four requirements, or the transfer is void
The second paragraph provides that a transfer of shares registered in the holder's name is void unless made in writing and signed by both transferor and transferee, with at least one witness certifying those signatures; and the instrument must also state the numbers of the shares transferred. Four things, then: writing, both signatures, at least one attesting witness, and the share numbers.
A second layer: setting it up against others
The third paragraph adds a separate layer: such a transfer cannot be set up against the company or third parties until the transfer, together with the transferee's name and address, has been entered in the register of shareholders. A transfer made in perfect form therefore binds the parties to it, yet is not enough against the company or outsiders until registered. Both layers have to be completed.
Mergers: the two forms in section 1238
Section 1238 provides that limited companies may merge by special resolution, and sets out two forms: merging into a newly created company, with all the merging companies ceasing to be juristic persons; or merging with one of the companies remaining a juristic person and the others ceasing to be. The second form is the one older material still says is unavailable.
Choosing a route, and the questions each raises
The two routes lead to different results and different questions. A share purchase under section 1129 leaves the company standing with everything it already carries, so the questions move to due diligence and to the warranties in the sale agreement. A merger under section 1238 requires a special resolution and changes the juristic personality of the companies merging, so the questions move to the votes required and the statutory sequence.
PREPARE
What to bring
- The articles of association on transfer of shares
- The current share register and the share certificates
- Any share transfer instruments executed previously
- The shareholding before and after the intended transaction
- The resolutions involved and the majorities required
QUESTIONS
Questions this raises
Shares were transferred long ago with no witness signature.
The second paragraph of section 1129 uses the word void, which is different from a defect that can be perfected later. This is therefore something to check back through before entering a new transaction, because a break in the chain of transfers bears on how the person now shown in the register came to hold the shares — a question a new buyer will ask in any event.
Once it is in the share register, is that the end of it?
Registration under the third paragraph answers only the question of setting the transfer up against the company and third parties. It does not cure a transfer that failed the form required by the second paragraph. The two paragraphs answer different questions and both have to be satisfied, so in practice the complete transfer instrument and the evidence of registration are worth keeping together every time.
LAW
The legislation
- Civil and Commercial Code, section 1129
- Civil and Commercial Code, section 1238
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