Regulating Controlling Shareholders in Thai Private Companies

By Lertnuwat, Nilubol | Asia Pacific Law Review, July 1, 2018 | Go to article overview

Regulating Controlling Shareholders in Thai Private Companies


Lertnuwat, Nilubol, Asia Pacific Law Review


I.Introduction

Shareholders in most private companies can be categorized into two groups - controlling and non-controlling shareholders. Controlling shareholders have significant control over the decision-making process of the company at the levels of the board of directors and shareholders' meetings. Based on their large stake in the company, controlling shareholders have strong incentives to both continually be involved in and to monitor the management. Their active role increases firm performance and maximizes the value of the company. This benefits all shareholders including non-controlling ones.

Controlling shareholders, however, may not always act in the best interests of the company. They tend to appoint their family members or those whom they have close connections with to sit on the board of directors despite the fact that their representatives are not qualified, and to reappoint them regardless of their performance. These directors enjoy the benefits of being in the executive positions by approving high salaries and bonuses for themselves, using the company's capital to fund their personal living expenses. Also, given the controlling shareholder's voting power, they could dominate the shareholders' meeting to approve any matters proposed at the meeting including self-dealing transactions.

Apart from exploiting the company's interests, the controlling shareholders may extract private benefits of control at the expense of non-controlling shareholders. In a small company, shareholders are often involved in the management of the company and are usually employed or appointed to key positions such as managers or board members. This allows the shareholders to take part in management of the company and to earn salary or bonus as a way of getting a return on their investment. However, working closely may lead to disagreement among the shareholders which could affect their relationships and result in conflict. The disputes between shareholders may come into an irretrievable breakdown in mutual trust and confidence or a deadlock in the management of the company. Given their power, the controlling shareholders could terminate the employment contracts of non-controlling shareholders or remove them from the board of directors in order to deprive them of any participation in company management. The conflict within private companies therefore is a result of the divergent interests between controlling and non-controlling shareholders.

From the above observations, the controlling shareholders are in the position to enjoy their control and exploit the benefits of the company and non-controlling shareholders. This article therefore aims to study how Thai laws prevent the controlling shareholders from misusing their controlling power. The key research questions of this article are firstly, to what extent the controlling shareholders dominate the company; and secondly, whether Thai laws provide sufficient and effective legal measures to deter the controlling shareholders from exploiting the benefits of the company and noncontrolling shareholders and to provide remedies to compensate the damage caused.

As the purpose of this article is to study the legal mechanisms which deter controlling shareholders from wrongdoing and provide remedies to the company and non-controlling shareholders, it assumes the lack of any shareholders' agreement between controlling and non-controlling shareholders which may impose terms forbidding the controlling shareholders from exercising their rights. This is to ensure that the outcome of the study reflects the effectiveness of Thai laws in preventing and providing remedies. This article focuses on the study of Book Three of the Civil and Commercial Code (CCC),1 which is the primary law governing private companies, and further examines other related regulations.

This article's outline is as follows: first, it examines the power of the controlling shareholders in two governance levels of the company - the shareholders' meeting and the board of directors - to observe how controlling shareholders dominate the company. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Regulating Controlling Shareholders in Thai Private Companies
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.