Legal Issues and Regulatory Requirements for Business Acquisitions

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LEGAL ISSUES AND REGULATORY REQUIREMENTSFOR BUSINESS ACQUISITIONS

Kowit SomwaiyaManaging Partner

LEGAL & FINANCIAL DUE DILIGENCE STRATEGIES FOR SUCCESSFUL ACQUISITIONS,

JVs & STRATEGIC ALLIANCES

ASIA BUSINESS CONNECT28 November 2013

The Landmark Bangkok

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PRESENTATION TOPICS:

• Types of Business Acquisitions

• Legal Issues for Acquisitions of Shares

• Legal Issues for Acquisitions of Newly Issued Shares

• Legal Issues for Acquisitions of Assets

• Latest Development of M&A Regulations

• Legal Factors to Consider on Acquiring Businesses in Other AEC Countries

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TYPES OF BUSINESS ACQUISITIONS

• Acquisition of Shares- Existing shares

- Newly issued shares

• Acquisition of Assets- Real Property

- Machinery

- Vehicles

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LEGAL ISSUES FOR ACQUISITIONS OF SHARES (1)

• Foreign Business Act B.E. 2542 (1999) (“FBA”)

• “Foreigner”

(1) an individual person not having Thai nationality

(2) a legal entity not registered in Thailand

(3) a legal entity registered in Thailand having 50% or more of its shares held by foreigner

(4) a legal entity registered in Thailand having 50% or more of its shares held by person under (1), or entity under (2) or (3)

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• Foreign ownership limits−FBA List 2 activities: 40% of all shares

−FBA List 3 activities: 49% of all shares

• Exceptions of foreign ownership limits−Board of Investment (BOI) promotion certificates

−Industrial Estate Authority of Thailand (IEAT) permits

−Exceptions under the Treaty of Amity and Economic Relations between Thailand and the USA

−Exceptions under the JTEPA, etc.

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• Approvals from Board of Directors of Shareholders− under Articles of Association− under Shareholders Agreement / Joint Venture Agreement

• Share Transfer Deed− transferor and transferee − consideration− amount and number of shares to be transferred

− signatures of transferor, transferee and at least one witness

− affixed with duty stamp

• Recording Share Transfer Details− in the Share Register Book of the target company− share transfer does not bind the company and a third party if it is not recorded

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• Filing a New List of Shareholders− showing details of new shareholder / acquirer and the shareholding − filing with the MOC within 14 days of the transfer

• Issuing New Share Certificate− for the transferred shares in the name of the acquirer/transferee− cancellation of existing share certificate in the name of the transferor

• Reporting to Relevant Authorities− BOI− IEAT

• Appointment of New Director− nominated by new shareholder− approval by shareholders meeting

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LEGAL ISSUES FOR ACQUISITIONS OF NEWLY ISSUED SHARES

• Resolution of shareholders for the target company to increase its registered capital by issuing new shares

• Waiver of pre-emptive rights by existing shareholders

• Acquisition of at least one existing share in the target company by the acquirer before acquiring newly issued shares

• Subscription of newly-issued shares by the acquirer

• Registration of the capital increase with the MOC

• Issuance of share certificate to the acquirer

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LEGAL ISSUES FOR ACQUISITIONS OF ASSETS (1)

• Assets− Land

− Buildings

− Machinery

− Vehicles

• Ownership Documents− Title Deeds

− Encumbrance Documents

− Sale and Purchase Agreements

− Leasing Agreements

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LEGAL ISSUES FOR ACQUISITIONS OF ASSETS (2)

• Legal Due Diligence− Land title deed search and review− Review of permits and licenses− Review of major contracts− Legal due diligence report

• Sale and Purchase Agreement− Termination− Dispute resolution, arbitration− Governing law, court of jurisdiction

• Registration of Land Purchase− Official Land Transfer Agreement− Declared purchase price− How to pay the purchase price− Tax, official fee, stamp duty

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LATEST DEVELOPMENT OF M&A REGULATIONS (1)

The Capital Market Supervisory Board (“CMBS”) Notification No. TorJor. 12/2554 Re: Rules, Conditions and Procedures for Acquisition of Shares for Business Takeover

• Mandatory tender offer upon acquiring 25%, 50% or 75% of the total shares with voting rights of the business.

• Offering period must be at least 25 consecutive business days but not more than 45 consecutive business days.

• Tender offer price must be not less than the highest price paid for shares of the same class by the offeror during the period of 90 days before submitting the tender offer documents with the SEC

Office.

• Exceptions: Acquisitions by (i) inheritance, (ii) payment of dividend by shares, (iii) Thai Trust Fund or Thai NVDR Company Limited, etc.

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LATEST DEVELOPMENT OF M&A REGULATIONS (2)

CMBS Notification No. TorJor. 28/2554 Re: Rules for Reporting Acquisition or Sale of Securities

• A report must be filed with the SEC Office within 3 days from the date of acquisition or sale of securities resulting in an increase or decrease of 5% or more of the total

securities with voting rights in a company.

• Applicable to acquisition or disposal of securities by a person and related persons.

• Not applicable to: Disposal of convertible securities, acquisition of shares or convertible securities by right offering, acquisition or disposal of securities through

securities borrowing and lending transactions made with securities business licensees, etc.

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LEGAL FACTORS TO CONSIDER ON ACQUIRING BUSINESSES IN OTHER AEC COUNTRIES

• Legal status of the target company

• Requirements for transfer of shares

• Foreign ownership limits

• Foreign investment promotion law

• Tax issues

• Exchange control regulations

• Termination requirements

• Measures for dispute resolution

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