Thailand
Generally
The most common types of legal entities are private limited companies and public limited companies, both of which are body corporates with separate legal personality and limit the liability of their members to their shareholdings (ie shareholders are liable to pay for their shares but no the company's debts).
Limited companies can either be private (denoted by the suffix Co Ltd, Ltd or Limited) under the Civil and Commercial Code of Thailand (CCC) or public (denoted by the suffix PLC or Public Limited Company) under the CCC and the Public Limited Companies Act (PLCA). Only shares in public limited companies listed on an exchange can be publicly traded, subject to approval by the SEC.
Thai public limited companies can choose to list their shares with the Stock Exchange of Thailand (SET) or the Market for Alternative Investment (MAI) depending on its qualifications. Companies listed on the SET or the MAI are required to comply with the regulations of the SEC and the SET applicable to the main exchange or the alternative exchange, as the case may be. Foreigners may invest in listed securities using non-voting depository receipts (NVDRs) through Thai NVDR Co., Ltd. (the Thai NVDR), which is a subsidiary of the SET. The Thai NVDR was established in order to alleviate the constraints on foreign shareholding in Thai companies.
Funds
The most common type of funds used as investment vehicles for the private sector are mutual funds, private funds and provident funds.
Mutual fund
A mutual fund is a form of collective investment, pooled and managed by an asset management company holding a license from the SEC to undertake investment management business. A mutual fund is established as a separate legal entity from the asset management company. Mutual funds may be established for specific investment purposes and/or investors, for example property, infrastructure, carbon credit, retirement and collective investment schemes.
Private fund and provident fund
A private fund is formed of no more than 35 investors. It is managed by an asset management company licensed by the SEC to invest in securities or other assets according to an agreement with its investors. Unlike a mutual fund, a private fund does not have a separate legal personality. To protect the interests of its investors, the asset management company is required to appoint a private fund manager approved by the SEC. In addition, the assets of the private fund must be segregated from the portfolio of the asset management company and a custodian approved by the SEC to safeguard the assets of the private fund must be appointed. The custodian must also separate the assets of the private fund from the custodian's own proprietary portfolio.
A provident fund is a form of pooled fund to which an employer and its employees contribute as an incentive for additional savings for retirement or resignation. Regulations on provident funds are generally in line with those governing mutual and private funds, including asset segregation, asset custody, prevention of conflicts of interest, investment restrictions, asset valuation, information disclosure, investors' choice and unitization of members' rights. Provident funds are managed by a private fund manager who is approved by the SEC and appointed by the asset management company.
The only type of pension fund recognized under the laws of Thailand is the Government Pension Fund established under the Government Pension Fund Act B.E. 2539 (1996) for the purposes of ensuring benefits upon retirement, promoting awareness of saving and providing other welfare to members who are employed by government agencies.
Funds must be managed by an asset management company and such companies are generally required by law to be set up as either a private limited or public limited company and must be licensed by the SEC.
Generally, fund managers must be qualified individuals approved by the SEC.
Others
Other types of investment vehicles recognized under Thai law include:
- trusts for transactions in capital market, established under the Trust for Transactions in Capital Market Act, B.E. 2550 (2007) for the purposes of investing and managing investment eg institutional investors and high net worth trust funds, real estate investment trusts, exchange-traded funds and special purpose trusts (such trusts must be managed by a trustee licensed by the SEC);
- venture capital funds, which are required to be set up as a limited company or a public limited company established specifically to operate a venture capital business (such funds must be managed by a securities company licensed for venture capital management by the SEC); and
- crowdfunding platforms, established in order for small and medium enterprises to fundraise through funding portals approved by the SEC (investors can be retail investors (with an offer limit) or non-retail investors (without an offer limit)).
What are the main laws and regulations that apply to entities that are involved in finance and investments generally?
Generally
Civil and Commercial Code of Thailand
Securities and Exchange Act B.E. 2535 (1992)
Financial Institution Act B.E. 2551 (2008)
Payment System Act B.E. 2560 (2017)
Security Business Act B.E. 2558 (2015)
Consumer credit
Civil and Commercial Code of Thailand
Credit Information Business Act B.E. 2545 (2002)
Consumer Protection Act B.E. 2522 (1979)
MOF Notification re Business Subject to Approval to Clause 5 of the Revolutionary Council Decree 58 as amended
MOF Notification re Business Subject to Approval to Clause 5 of the Revolutionary Council Decree 58 (Regulated Personal Loan) as amended
MOF Notification re Business Subject to Approval to Clause 5 of the Revolutionary Council Decree 58 (Regulated Nano Finance) as amended
MOF Notification re Business Subject to Approval to Clause 5 of the Revolutionary Council Decree 58 (Pico Finance) as amended
MOF Notification re Business Subject to Approval to Clause 5 of the Revolutionary Council Decree 58 (Regulated Peer-to-Peer Lending Platform Business)
Mortgages
Civil and Commercial Code of Thailand
Security Business Act B.E. 2558 (2015)
Corporations
Civil and Commercial Code of Thailand
Public Limited Companies Act B.E. 2535 (1992)
Foreign Business Act B.E. 2542 (1999)
Investment Promotion Act B.E. 2520 (1977)
Funds and platforms
Securities and Exchange Act B.E. 2535 (1992)
Emergency Decree on Digital Asset Business B.E. 2561 (2018)
Ministerial Regulations - Approval for operation of securities business B.E. 2551 (2008)
Notification of the Office of the Securities and Exchange Commission No. SorNor. 87/2558 - Criteria, conditions and method of management of Mutual Funds for General Investors, Mutual Funds for Non-Retail Investors, Mutual Funds for Institutional Investors and Private Funds
Notification of Capital Market Supervisory Board No. TorNor. 88/2558 - Establishment of Mutual Funds for General and Non-Retail Investors and Execution of Agreements for Private Fund Management
Notification of Capital Market Supervisory Board No. TorNor. 89/2558 - Criteria for management of Mutual Funds for General and Non-Retail Investors and Mutual Funds for Institutional Investors and Private Funds
Notification of the Securities and Exchange Commission No. KorNor. 19/2540 (criteria, conditions and method of establishment of property fund for institutional investors)
Notification of Capital Market Supervisory Board No. TorNor. 73/2552 (criteria, conditions and method of establishment of funds for foreign investors)
Notification of Capital Market Supervisory Board No. TorNor. 38/2562 (criteria, conditions and method of establishment and management of infrastructure funds)
Notification of Capital Market Supervisory Board No. TorNor. 42/2555 (criteria, conditions and method of establishment and management of carbon funds)
Notification of the Securities and Exchange Commission No. KorNor. 22/2545 (criteria, conditions and method of management of venture capital funds)
Notification of the Office of the Securities and Exchange Commission No. KorJor. 15/2561 (Public Offer for Sale of Digital Tokens)
Notification of the Office of the Securities and Exchange Commission No. KorJor. 12/2562 (Private Placement Offer for Sale of Digital Tokens)
Notification of Capital Market Supervisory Board No. TorJor. 21/2562 (Regulations on Offer for Sale of Securities through Crowdfunding System)
Notification of Capital Market Supervisory Board No. TorJor. 1/2563 (Public Offer by a Private Limited Company Social Enterprise)
Notification of Capital Market Supervisory Board No. TorJor. 17/2563 (Private Placement Offer by SMEs)
SEC Guidelines on Issuance and Offer for Sale of Green Bond, Social Bond and Sustainability Bond
Other key market legislation
Derivatives Act B.E. 2546 (2003)
Notification of the Securities and Exchange Commission No. KorKor. 9/2552 (criteria of approval and approval to operate as trustee)
Notification of Capital Market Supervisory Board No. TorJor. 39/2559 (approval for sale of newly issued shares)
Notification of Capital Market Supervisory Board No. TorJor. 17/2561 (approval for sale of newly issued debt instruments)
Notification of Capital Market Supervisory Board No. TorJor. 49/2555 (issuance and sale of trust unit of Real Estate Investment Trust)
Notification of Capital Market Supervisory Board No. TorJor. 12/2558 (issuance and sale of units of Infrastructure Trust)
Who are the regulators?
The Securities and Exchange Commission (SEC) is the supervisory authority responsible for securities regulations. The remit of the SEC covers a wide range of securities-related activities and transactions in both the retail and wholesale market.
The Stock Exchange of Thailand (SET) is the supervisory authority which provides a platform for the sale and purchase of listed securities. The SET also acts as a clearing house and securities depository.
The Bank of Thailand (BOT) is the supervisory authority which regulates financial institutions, currency exchange, payment system, regulated non-banks, peer-to-peer lending and asset management.
The Ministry of Finance (MOF) oversees the SEC, the SET and the BOT. The MOF also regulates other specific finance activities, such as credit bureau and escrow agent.
The Ministry of Commerce (MOC) overseas the business registration and the business security registration.
What are the authorization requirements and process?
Depending on the type of firm or the transaction, a firm or an individual must generally apply to obtain authorization from the relevant regulator and satisfy documentary requirements.
Certain activities are exempt from authorization. For instance, certain types of activity only require the satisfaction of documentary or information requirements before commencement or upon completion of a transaction. Activities exempt from authorization but which must satisfy documentary filing requirements include private placement offerings of debentures or shares, as regulated by regulations of Securities and Exchange Commission.
What are the main ongoing compliance requirements?
There are two main forms of ongoing compliance requirements, namely merit-based regulations and disclosure-based regulations.
Merit-based regulations
Ongoing compliance obligations are determined depending on the type of transaction involved, for example corporate governance requirements apply to an offering of equity securities and credit rating requirements apply when a transaction involves debt instruments.
Examples of merit based regulations include the following.
The Corporate Governance Code for listed companies
The latest version of these guidelines for listed companies was issued in 2017 and contains eight main practices of good governance. Although not mandatory, compliance with good corporate governance provides reassurance for investors.
The investment governance code for institutional investors (I Code)
Having considered the Stewardship Code of United Kingdom, the Securities and Exchange Commission (SEC) has issued this code which sets out seven keys practices regarding investment governance of institutional investors. Similarly to the Corporate Governance Code for Listed Companies, this I CODE is not a mandatory guideline but has been encouraged by the SEC to be implemented to enhance creditability and investment environment.
Notification of the security exchange commission no. korjor. 3/2560 - determination of untrustworthy characteristics of company directors and executives
This Notification sets out criteria to determine the characteristics of untrustworthy directors.
Credit-rating requirements
The issuance of bonds/debentures and bills or an investment unit of funds requires a credit rating which is required to be given by approved credit rating agencies. There are currently five approved credit-rating agencies under the laws of Thailand, being Standard & Poor's, Moodys, Fitch Ratings, Rating and Investment Information, Inc. and the Japan Credit Rating Agency, Ltd.
Disclosure-based regulations
Disclosure requirements depend on the nature of a transaction and the type of investors involved, for example disclosure requirements for private placement are more lenient than for initial public offerings. Disclosure of information about a company, the securities and investors are generally required. In some instances, approval must be obtained before commencement of a transaction and/or certain documentary requirements must be fulfilled upon completion.
Examples of disclosure based obligations include the following.
Equity securities
The offering of equity securities to the public requires disclosure on a strict basis. Disclosure is normally carried out by filing a form and preparing a prospectus which contains information regarding the issuer, details of securities, risks of investment.
Bonds / debentures
The offering of bonds / debentures requires disclosure of certain details, including the terms and conditions of the bonds / debentures, any transfer restrictions and the rights of holders of such debt instruments.
Executive summary
The issuer is obliged to prepare an Executive Summary in the form required, which is attached to the subscription form for the securities. In addition, disclosures must be published on the website of the Securities and Exchange Commission and investors are encouraged to read it.
What are the penalties for failure to be authorized?
A person undertaking a regulated activity without being authorized or exempt, commits a criminal offence and is liable to a fine and/or imprisonment.
What finance and investment activities require authorization?
Generally
A person must not carry on a regulated activity in Thailand unless authorized or exempted.
A financial activity requires regulatory authorization when it is identified as a regulated activity in relation to a regulated investment and it does not fall within any of the available exemptions.
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Regulated activities include, without limitation, activities such as accepting deposits, dealing in, managing, arranging and advising on investments, and establishing collective investment schemes.
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Regulated investments include, without limitation, equity instruments, debt instruments, options, futures and units in a collective investment scheme eg mutual funds, property funds, funds for foreign investors and infrastructure funds.
Consumer credit
Regulated consumer credit activities include, without limitation, the operation of an electronic system in relation to credit cards, personal loans, nano finance, PICO financing, payment gateway services, electronic money, clearing house services and the settlement of payment.
Unless exempted by law, these activities can only be offered by qualified companies who are licensed and supervised by the Ministry of Finance and the Bank of Thailand.
It might be worth noting that currently there is a draft Bill on the Regulated Financial Service Providers, e.g. hire purchasing, leasing and factoring. Once this bill become enacted as an act, certain consumer financial services will become regulated services.
Are there any possible exemptions?
There are two types of exclusions available when regulated activities may be undertaken without authorization.
General exclusions
Certain persons may carry on a regulated activity provided such activity does not fall into a category of operating a securities business which requires authorization. For example, providing general advice on securities investment to foreign investors or providing advice to closed groups or institutional investors may be undertaken without authorization.
Specific exclusions
For each type of regulated activity there are a number of specific exemptions that could also apply, such as making introductions (that is, making arrangements under which clients can, under certain circumstances, be introduced to another person).
Do any exchange controls or other restrictions on payments apply?
Yes.
The Bank of Thailand applies foreign exchange regulations to control and supervise cross-border transactions which involve foreign currencies, in particular if there will be repatriation of funds outside of Thailand.
Foreign currencies can be transferred into Thailand without limit. However, any person receiving foreign currencies from abroad is required to immediately sell such funds to an authorized bank or deposit such funds in a foreign currency account opened with an authorized bank within 360 days of receipt. Non-Thai residents and foreigners staying in Thailand for not more than three months, foreign embassies, and international organizations (including staff with diplomatic privileges) are exempt from this rule.
Anti‑money laundering and tax considerations should also be taken into account.
What are the rules around financial promotions?
Rules
Only a securities company licensed by the SEC can contact or solicit business from or otherwise provide advice on securities investment to investors or clients.
Exemptions
Exemptions include solicitation to institutional investors for investment outside of Thailand. For example, a non-Thai securities company licensed by a regulator which is an ordinary member of the International Organization of Securities Commissions can solicit business from Thai institutional investors to manage investments overseas without being licensed by the SEC.
Waranon Vanichprapa
Partner, Country Managing Partner
[email protected]
T +66 2 686 8555
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