The Capital Markets Supervision Board of the Securities and Exchange Commission of Thailand (SEC) issued a new notification (Regulation) under the Securities and Exchange Act B.E. 2535 (1992) (SEC Act) which re-introduced the concept of “acting in concert” (with a more restricted scope) into the Thai takeover code.

In a previous notification, the SEC had introduced a wide reaching concept of “acting in concert”. This was subsequently cancelled due, according to the SEC, to enforcement difficulties.  

This reintroduction is, of course, very significant and reintroduces restrictions on acting in concert which, in differing forms, apply in many other countries with developed Takeover Codes. Particular care will now need to be taken by holders of securities in listed companies in Thailand to ensure that they do not inadvertently trigger the mandatory offer requirement. Holders of securities in both listed and unlisted public companies will also need to ensure that they comply with the new reporting requirements.  

What does the Regulation do?

The Regulation re-introduced the concept of “acting in concert” whereby the securities held by persons who are “acting in concert” (each a concert party) and their “related persons” (as defined in section 258 of the SEC Act) are aggregated for the purposes of triggering (i) a reporting obligation under section 246 of the SEC Act (Reporting Requirement) (broadly upon reaching every 5% of the total voting rights of the target company as a result of acquisition and disposal) and (ii) a mandatory tender offer obligation under section 247 of the SEC Act (Mandatory Offer Requirement) (broadly upon reaching 25%, 50% or 75% of the total voting rights of the target company as a result of acquisition).

For the purposes of this article, securities of a company means shares, warrants and other securities which are convertible into shares and company means a company which is regulated under the relevant provisions of the SEC Act.

When does the Regulation take effect?

The Regulation will be effective from 1 August 2009 (Effective Date).

What constitutes “acting in concert”?

Individuals or incorporated or unincorporated entities (each a person and together persons) “acting in concert” are those persons who intend to (i) exercise their voting rights together, or (ii) allow another person to exercise their voting rights, in either case with the aim of exercising control over their aggregate voting rights or the company and such person(s):  

  • pursuant to an agreement (whether or not in writing), (i) agree to exercise their voting rights together; (ii) allows another person to exercise its voting rights or (iii) agree to jointly manage the company; or
  • pursuant to an agreement (whether or not in writing), are (i) restricted from accepting a tender offer for the securities; (ii) required to maintain the level of their securities holding or (iii) restricted from changing the level of their securities holding in the company; or
  • directly or by authorising other persons, solicit another person to acquire or dispose of securities at the same or substantially the same time; or
  • use the same source of funding, or take any action to assist another person to obtain funding, for the acquisition of securities or take any other action which results in the acquisition of securities; or
  • acquire or dispose of securities (Current Transaction) together with the same person with whom they have previously “acted in concert” in the acquisition or disposal of securities in another company (Previous Transaction) and the Current Transaction and the Previous Transaction share similar characteristics; or
  • allow another person (Designee) to exercise their voting rights in a shareholders’ meeting of the company on a regular and continuous basis, irrespective of whether the Designee is a shareholder of the company, except for a proxy granted to an independent director, custodian or proxy voting service agency; or
  • who are partners in a partnership or directors or employees in a company or other legal entity, hold themselves out or act in a manner which indicates that they hold the securities on behalf of, or jointly with, that partnership, company or legal entity; or
  • give the securities as a gift to another person, who is not their parent or adult child; or
  • pursuant to an agreement (whether or not in writing), trades securities at an unjustifiably low price, except for trades between a parent and an adult child; or
  • are in the same group pursuant to the notifications issued under section 246 or section 247 of the SEC Act.  

Concert relationship existing before the Effective Date

Reporting Requirement  

Persons who have “acted in concert”, and whose collective holding of securities has reached or passed the trigger point for the Reporting Requirement before the Effective Date, are not required to comply with the Reporting Requirement, unless any concert party acquires or disposes of any securities on or after Effective Date. In this case, the concert party who made the acquisition or disposal must comply with the Reporting Requirement.

Mandatory Offer Requirement

Persons who have “acted in concert”, and whose collective holding of securities has reached or passed the trigger point for the Mandatory Offer Requirement before the Effective Date, are not required to comply with the Mandatory Offer Requirement, unless any concert party (Acquirer) acquires any additional securities (Additional Securities) on or after the Effective Date. In that case, the Acquirer will be required to comply with the Mandatory Offer Requirement unless:  

  1. the acquisition occurred when the collective securities holding of the concert parties has not reached or passed the trigger point for the Mandatory Offer Requirement; or
  2. the acquisition occurred when the collective securities holdings of the concert parties has reached or passed the trigger point for the Mandatory Offer Requirement but the Acquirer has disposed of all the Additional Securities on the main board of the Stock Exchange of Thailand (SET) or sells all of the Additional Securities back to the seller, in either case within seven business days from the date of the acquisition or before the date the Acquirer becomes the shareholder of record entitled to vote, whichever is earlier.  

Application in connection with chain principle

For the purposes of determining whether a Mandatory Offer Requirement is triggered, the chain principle aggregates the direct shareholding of a concert party with the shareholdings of all intermediate companies (Intermediate Companies) over which that concert party has “material control”.

If the collective shareholding of concert parties and the Intermediate Companies reaches or passes the trigger point for the Mandatory Offer Requirement prior to the Effective Date, those concert parties are not required to comply with the Mandatory Offer Requirement, unless a concert party (Relevant Person) subsequently acquires (i) additional shares in the company (Additional Shares) or (ii) additional control over an Intermediate Company (Additional Control). In that case, the Relevant Person must comply with the Mandatory Offer Requirement unless:

  1. the Additional Control or the Additional Shares was acquired while the concert parties do not have “material control” over the Intermediate Company; or
  2. (where the Additional Control was acquired while the concert parties have “material control” over the Intermediate Company prior to the Effective Date) the Relevant Person has disposed of the Additional Control or the shares of the company on the main board of the SET so that the collective shareholding falls below the trigger point for the Mandatory Offer Requirement; or
  3. (where the Additional Shares were acquired while the concert parties have “material control” over the Intermediate Company prior to the Effective Date) the Relevant Person has disposed of the Additional Shares on the main board of the SET or sells the Additional Shares back to the seller or disposed of its control over the Intermediate Company so that the concert party no longer has “material control” over the Intermediate Company.

In order to rely on any of the exemptions set out above, the relevant disposal must be completed within seven business days from the date of acquisition of Additional Shares or Additional Control, as the case may be, or before the Relevant Person or the Intermediate Company, as the case may be, becomes the shareholder of record of the company and entitled to vote, whichever is the earlier.

Concert relationship existing on or after the Effective Date

Reporting Requirement

  • If persons “act in concert” on or after the Effective Date and the collective securities holding of the concert parties reaches or passes the trigger point for the Reporting Requirement, all of the concert parties are required to comply with the Reporting Requirement.
  • If, after the concert parties have complied with the reporting obligation referred to above, any concert party who subsequently acquires or disposes of any securities, causing the collective securities holding to reach or pass the trigger point for the Reporting Requirement, only that concert party will be required to comply with the Reporting Requirement.

Mandatory Offer Requirement

  • If persons “act in concert” on or after the Effective Date and the collective securities holding of the concert parties reaches or passes the trigger point for the Mandatory Offer Requirement, all of the concert parties are required to comply with the Mandatory Offer Requirement.
  • If, after the concert parties have complied with the Mandatory Offer Requirement referred to above, any concert party who subsequently acquires additional securities, causing the collective securities holding to reach or pass the trigger point for the Mandatory Offer Requirement, only that concert party will be required to comply with the Mandatory Offer Requirement.