Year in Review – Thai Law in 2016
Securities and Exchange law: The amendment (5th) to the Securities and Exchange Act (“SEC Act”) has recently been announced and came into effect on 12 December 2016. The changes made to the SEC Act aim to improve the regulations relating to market misconduct which will in turn provide more credibility to the Thai capital markets as a whole. This amendment gives a clearer scope of Thai insider trading and price manipulation rules, and also introduces civil sanctions and procedures for certain charges (such as insider trading, misrepresentation or market manipulation) in addition to existing criminal court proceedings. It also captures a broader range of persons who will presumably fall under insider trading rules, i.e. those who have possession or know of inside information, rather than have a position or title in the listed company, and captures those who tip insider information (i.e. tipper and tippee).
Foreign business law: The Ministerial Regulation issued on 11 February 2016 exempts certain services/businesses which are regulated under other laws, i.e. commercial banks, life insurance companies and non-life insurance companies from being required to obtain the foreign business licence, in addition to those specific business licences.
Bankruptcy law: The new amendment (9th) to the Bankruptcy Act came into effect on 25 May 2016 and introduces a new chapter which aims to provide a better position against bankruptcy through a rehabilitation platform for SMEs (either natural persons, juristic persons or partnerships). This establishes a lower threshold of debt in order to be eligible for a rehabilitation process. It should give SMES more time to work out liquidity while avoiding a seizure or auction process undertaken by creditors.
Public offering of shares: As the previous rules regarding public offerings do not assist listed companies as intended, the amendment of the listing rules provides an additional platform for those listed companies with good corporate governance records and shortens the approval process and timing for the filing to become effective. For an offering in accordance with the rehabilitation plan where the shares will be issued to the creditors to discharge their debts as approved by the Bankruptcy Court, or for a preferential public offering, i.e. the investors are the existing shareholders of the company and subscribe for shares not exceeding their proportionate shareholding, approval and filing requirements will be exempted.
Thai Business Security Law: The Business Security Act B.E. 2558 (A.D. 2015) (the “Business Security Act”) was published in the Government Gazette on 5 November 2015 and became fully effective on 2 July 2016 (except for certain provisions with respect to the application for the security enforcer licence which were effective on 6 November 2015). In 2016, a number of regulations were issued under the Business Security Act regarding the procedures for registration of the security, details of security and fees, licensing requirements and application is for licensed security enforcers etc. Read more...
Deposit Protection law: The Deposit Protection Act imposes mechanisms on insured financial institutions to protect their deposits to reduce the State’s financial obligations while maintaining public confidence and stability of the financial institutions. The law sets a gradual phasing out of the blanket guarantee of deposits, which has recently been extended for a longer period (i.e. until 11 August 2020, instead of 11 August 2016). This extension came into force on 11 August 2016. However, the maximum insured amount per depositor per financial institution is of different rates during each year, i.e. THB 15 million for the first two years; THB 10 million for the following year; THB 5 million for the year after; and THB 1 million from 11 August 2020 onwards. This extension is likely to have an impact on the cost of funding (in the form of deposits) of the financial institutions.
Renewable Energy law: The Energy Regulatory Commission (“ERC”) has launched several bidding programmes of renewable energy supported and directed by the policy of the National Energy Policy Committee (“NEPC”). Regardless of difficulties during the bidding process for ground mounted solar farm projects for government agencies and agricultural cooperatives (e.g. the zoning restriction and the process of public-private partnership), the list of winning bidders (where only projects with agricultural cooperatives as the project owner are selected) was officially announced by the ERC on 26 April 2016 and the commercial operation date (“COD”) was scheduled before 30 December 2016. This was followed by a bidding process for biomass and biogas projects located in certain southern provinces of Thailand. The winning bidders were officially announced by the ERC on 21 April 2016 for biogas and 25 August 2016 for biomass. Finally, the industrial waste to energy bidding programme was launched by the ERC with the winning bidders announced on 28 October 2016. The PPAs are scheduled to be signed by 25 February 2017.
Updates to the Act on Private Investment in State Undertaking B.E. 2556 (2013) (the “PPP Act”): On 26 April 2016, the Ministerial Regulation re the increase of the minimum value of a project which was required to proceed in accordance with the PPP Act (the “Ministerial Regulation”) was published in the Government Gazette.
The Ministerial Regulation introduced a new minimum project value to Section 23 of the PPP Act. The threshold was previously set to at least THB 1,000,000,000. As a result of the Ministerial Regulation becoming effective, the minimum project value has been increased to be at least THB 5,000,000,000.
Currently, a project with value equal to or over THB 5,000,000,000 is required to proceed in accordance with the full provisions under the PPP Act and, in some cases, a project with value equal to THB 1,000,000,000 but less than 5,000,000,000 may be required to proceed in accordance with the full provisions under the PPP Act, subject to a decision of the PPP Committee on a case by case basis.
Such a change in project value also brought an amendment to the Notification B.E. 2558 (2015) as the project value less than those specified in Section 23 of the PPP Act is no longer merely THB 1,000,000,000. The new minimum project value has added an additional project type which is a project with value equal to THB 1,000,000,000 or more but less than THB 5,000,000,000.
Therefore, the Notification B.E. 2559 (2016) has been imposed in lieu of the previous one, the Notification B.E. 2558 (2015), to cover all types of project value.
Currently there are three types of projects categorised by project value as prescribed below. Each of these is required to proceed in accordance with the specified procedures depending on its value. The three types are as follows:
(a) Project with a value less than THB 1,000,000,000 (small-sized project);
(b) Project with a value of at least THB 1,000,000,000, but less than THB 5,000,000,000 (medium-sized project); and
(c) Project with a value of at least THB 5,000,000,000.
Guidelines for teleconference meetings: The Ministry of Commerce published guidelines for teleconference meetings held via electronics devices used by Thai companies. It proposes that the board of directors and shareholders meetings of Thai companies conducted through electronic devices will have the same legal effect as those meetings conducted by means and procedures prescribed by law. However, such meetings are subject to certain requirements which are, among others:
(a) the public limited company, trade association and chamber of commerce must specify the matter of teleconferences using electronic devices in its articles of association;
(b) the meeting must have a security system and be on video tape;
(c) the attendees of at least 1/3 of the quorum must be at the same place and all attendees must be in Thailand; and
(d) the meeting shall be conducted in accordance with the Announcement of the National Council for Peace and Order No. 74/2557 Subject: Teleconference through Electronic Devices dated 27 June 2014 and the Notification of the Ministry of Information and Communication Technology Re: the Security Standards for Teleconference through Electronic Devices dated 24 November 2014.
Year to Come – Thai Law in 2017
Trade Competition law: In the past there have been attempts to amend the Trade Competition Act to improve legal enforcement. The draft of the new act has finally been proposed and is currently being considered by Parliament. This new act will repeal and replace the current Trade Competition Act and aims to bring more efficiency and independence in terms of law enforcement. Material changes include a broader definition of business operator in order to capture not only the operating company, but its group companies as well; extending its application to state owned enterprises (except in certain circumstances); a clearer obligation to notify the authority in the event of merger; and higher penalties. The business operator will need to prepare for these new changes which are expected to come into effect in the first quarter of 2017.
Corporate law: There is a draft amendment to the Civil and Commercial Code (“CCC”) proposing a model for a company incorporated by two persons (rather than one person as previously proposed in 2015). Current law prescribes that a minimum of three shareholders is required for incorporation of a Thai private company. The new law aims to encourage small and medium-sized business owners to establish separate legal entities to undertake business activities. Other proposed changes are, among others, a one month deadline to pay a dividend to shareholders once approved by the board of directors (the current CCC does not specify such a limit). The draft was approved by the Cabinet on 24 May 2016. However, it was later revoked by the Council of State on 20 September 2016 before being sent to Parliament for consideration and approval. No further update has been published on this draft amendment.
Petroleum law: There are proposed amendments to the Petroleum Act and the Petroleum Income Tax Act. Both Acts are currently being considered by Parliament and are expected to come into effect around mid 2017. The main rationale for such proposed amendments is to provide more alternatives in the exploration and production process (“E&P”), i.e. the government may choose to engage in E&P by way of production sharing contracts or E&P service contracts, in addition to concession contracts under the current law, and to improve certain rights and benefits of the concessionaire and concession fees thereunder.
Personal data protection law: There have been various attempts to propose a new law which aims to protect personal data by requiring the owner’s consent for the utilisation of such data. This will affect a number of business operators in various sectors, such as banking, insurance, telecoms, etc. The most recent draft was revoked from being sent for Parliament consideration in late 2015 until further revision and the timing for the new proposed amendment has not been indicated.
Renewable Energy law: There will be the second round of bidding for ground mounted solar farm projects for government agencies and agricultural cooperatives with the expected quota of approximately 118.68 MW (with a maximum of 5MW/project) pending additional regulations to be further prescribed by the ERC and difficulties in the public-private partnership process. The ERC regulations on the community waste to energy bidding programme (approximately 77.9MW in total) were previously issued on 1 December 2016. These timetable the submission of the bidding offers for 1-2 March 2017 and the official announcement of the wining bidders and the signing of PPAs for 31 March 2017 and 31 July 2017, respectively, as the COD is scheduled before 31 December 2019. A bidding process for biogas projects of 8MW located in certain southern provinces of Thailand is expected to be introduced by January 2017. Another biogas and biomass programme of 400 MW in total is also expected to be launched this year and the wind energy programme may possibly be launched by the ERC this year too.
New Labour Protection Act: In 2017, it is expected that new provisions of the Labour Protection Act will be enacted. One of the key amendments is to include retirement in a list of causes for employment termination. The employer will be required to pay statutory severance to the retiree in the event that a retirement age in not specified and the employee will be required to retire at the age of 60. The draft amendment is currently under consideration and will be submitted to the National Legislative Assembly.