Change Of Shareholder

[llewynx]

I have a question concerning the change of shareholder in a limited company. Our current lawyer tells us that there is no way we can change the name (taking one name off and put a new one on) without the signature of the person who is getting out. The person to be taken off the company papers is British and has as far as we know left the country or is somewhere else in Thailand as he left the company in a hurry after causing us and several others problems (in other words, he did a runner). Our lawyer tells us we need this persons signature and passport as well as the Thai major shareholder's signature to take him off the papers. Is this true or is there a way around it? Then what's the point of having a Thai majority shareholder (except that it's required by law) if they don't have any power to "kick someone out"? Otherwise I guess we have to cancel the current company and start a new one, which would be a lot of hassle and quite expensive. Any suggestions anyone?

[SunbeltAsia]

I have a question concerning the change of shareholder in a limited company. Our current lawyer tells us that there is no way we can change the name (taking one name off and put a new one on) without the signature of the person who is getting out. The person to be taken off the company papers is British and has as far as we know left the country or is somewhere else in Thailand as he left the company in a hurry after causing us and several others problems (in other words, he did a runner). Our lawyer tells us we need this persons signature and passport as well as the Thai major shareholder's signature to take him off the papers. Is this true or is there a way around it? Then what's the point of having a Thai majority shareholder (except that it's required by law) if they don't have any power to "kick someone out"? Otherwise I guess we have to cancel the current company and start a new one, which would be a lot of hassle and quite expensive. Any suggestions anyone?

All the Ministry of Commerce requires is the MD's signature. They never require the shareholders signature to replace a shareholder. The signature of the shareholder is only internally for your records (in case the shareholder sues for fraud that he did not authorize the transfer)

www.lawyer.th.com

[Chang_paarp]

Could you do a share offer to all shareholders? ie 10, 100 or 1000 shares for each current one held at 1 B for each share currently held.

Post the offer to the registered address of all share holders with Xdays/weeks to take the offer up.

This would dilute the shareholders equety to an insignificant amount.

It would have to be approved by a meeting of directors and approved at a general meeting.

[llewynx]

Sunbelt: Thanks for clarifying that, thought that was the case. Ok, off for another frustrating phone call to lawyer. Sigh.

Chang: Thanks for the advice, but we're a limited company with only three shareholders: Thai majority ("silent") and two farang, one of which is soon to be "expelled" and replaced with a more trustworthy person. It's a small company where the shareholders (except the Thai partner) are actually working in the company.

[~G~]

Sunbelt: Thanks for clarifying that, thought that was the case. Ok, off for another frustrating phone call to lawyer. Sigh.

Chang: Thanks for the advice, but we're a limited company with only three shareholders: Thai majority ("silent") and two farang, one of which is soon to be "expelled" and replaced with a more trustworthy person. It's a small company where the shareholders (except the Thai partner) are actually working in the company.

I am not sure you really understood the comments presented here.

Sunbelt just told you it's illegal to just plainly "expel" a shareholder but that you might get away with it unless that shareholder sues.

Chang_paarp explained a legal way to turn this shareholder to insignificant.

but we're a limited company with only three shareholders

This is both irrelevent and impossible. Every Thai company has minimum of 7 shareholders.

Edited July 13, 2006 by ~G~

[jamie46]

Would be a bad thing for all foreigners if the other shareholders could expel him/her on a quick whim.

Hopefully the guy hasn't too much invested and won't lose too much if you get it together to stab the guy in the back or expel him or whatever.

The usual tactic over here might be to drive over or suffercate or drown the person you wish to expel. Or let him jump of a balcony or something. in another country it would be murder but here it might be looked at as just business if there was no direct trail back. Scarey.

[llewynx]

Ok, maybe I should clarify:

The guy in question has not been working in the company for almost a year, he was involved in some illegal activities and has done a runner - could be somewhere else in Thailand or left the country - it doesn't really matter. This guy has been causing us a lot of headaches and we have been trying to get him off our papers for a long time, our lawyer has said she can do it (has been telling us for a long time) but now when she was getting around to actually do it she turns around and says she can't. Just wondering how we can (legally) get him "expelled" (sorry, I'm not English, again I might be using the wrong words). Now, as we have a new person coming in we need the "space" he's taking up for a new work permit to be issued.

As for the 7 shareholders (maybe I'm using the wrong word - is "partner" the correct one?) - this sounds very strange, as many many of my friends with limited companies here have a Thai majority partner and one or two farang (where the farangs have workpermits for that reason, and working in the company), no problems with that. On our current paperwork there is three names, the MD (Thai) and two farangs, one of which should not be on there, since he is no longer involved in anything we're doing.

Could not read from SunbeltAsia's post that it was illegal to do this, can someone please tell me why/how?

We are honest people that got ######ed over by a <deleted>, and now want to go on with our business (yes, legally). Is the only way to start a new company (expensive and a lot of hassle...)?

[smartecosse]

i was told that when i started the thai company i have that it was a legal requirement to have 7 shareholders..........

[Sunbelt Asia]

The guy in question has not been working in the company for almost a year, he was involved in some illegal activities and has done a runner - could be somewhere else in Thailand or left the country - it doesn't really matter. This guy has been causing us a lot of headaches and we have been trying to get him off our papers for a long time, our lawyer has said she can do it (has been telling us for a long time) but now when she was getting around to actually do it she turns around and says she can't. Just wondering how we can (legally) get him "expelled" (sorry, I'm not English, again I might be using the wrong words). Now, as we have a new person coming in we need the "space" he's taking up for a new work permit to be issued.

The new person coming in to take his place, is not required to be a shareholder to get a work permit.

As for the 7 shareholders (maybe I'm using the wrong word - is "partner" the correct one?) - this sounds very strange, as many many of my friends with limited companies here have a Thai majority partner and one or two farang (where the farangs have workpermits for that reason, and working in the company), no problems with that. On our current paperwork there is three names, the MD (Thai) and two farangs, one of which should not be on there, since he is no longer involved in anything we're doing.

It may be what you are thinking of is a "Director" If its a Thai limited Company, it must be 7 shareholders with 1 shareholder being Thai in any restricted business. If its a director, only one director is required so 3 directors would be fine.

Removing someone as a director is different than as a shareholder. The easiest way is if the director has resigned and signed the paperwork along with a resignation letter. Otherwise to kick them out during their term, you must have two shareholders meeting with announcements, before you can do so.

Could not read from SunbeltAsia's post that it was illegal to do this, can someone please tell me why/how?

If its a shareholder, no one looks at the paperwork until the stuff hits the fan with the shareholder claiming fraud. The government never ever looks at it when you do the transfer and will be annoyed you are taking the shareholders signature as its just cluttering their work space.

But if the stuff does hit the fan, you may claim that he never paid for the shares. He may claim that it was agreed he would pay with "sweat equity" or with equipment, etc. Then it will be tied up in the civil courts for 2 or 3 years and his lawyer may also press for criminal charges of theft. If you had a partnership agreement and he was suppose to pay with cash for his shares and never do so, then this could be your claim why you replaced him as a shareholder. He can't claim fraud as he cannot show proof of funds being paid.

We are honest people that got ######ed over by a <deleted>, and now want to go on with our business (yes, legally). Is the only way to start a new company (expensive and a lot of hassle...)?

Depending on the above and how screwed up it is, it could be cheaper. But keep in mind if you open a competing business, you may be in violation of Thai laws as the director has a fiduciary responsibility to the shareholders to not open the same type of business and compete. It would be better to resign as the director of the first company to protect yourself before opening company #2 and becoming a director and shareholder.

www.lawyer.th.com

[~G~]

The guy in question has not been working in the company for almost a year, he was involved in some illegal activities and has done a runner - could be somewhere else in Thailand or left the country - it doesn't really matter. This guy has been causing us a lot of headaches...

All this is irrelevant. Shareholders do not have to be a nice guys. He owns shares, meaning part of the company is his own property.

As I understand it, what's relevant is:

- Did he, or did he not invest money or equivalent in the company? Did he participate in paying in the company capital? Is there evidence of that?

If he indeed invest money, in my view what you are trying to do is illegal.

Now, as we have a new person coming in we need the "space" he's taking up for a new work permit to be issued.

Irrelevant again. See Sunbelt's comments.

As for the 7 shareholders (maybe I'm using the wrong word - is "partner" the correct one?) - this sounds very strange, as many many of my friends with limited companies here have a Thai majority partner and one or two farang (where the farangs have workpermits for that reason, and working in the company), no problems with that. On our current paperwork there is three names, the MD (Thai) and two farangs, one of which should not be on there, since he is no longer involved in anything we're doing.

Each and Every company registered in Thailand has minimum of 7 shareholders. Did you never see your sharholders list? Or is it a Limited Partnership you have and not a company at all?

[trajan]

Removing someone as a director is different than as a shareholder. The easiest way is if the director has resigned and signed the paperwork along with a resignation letter. Otherwise to kick them out during their term, you must have two shareholders meeting with announcements, before you can do so.

I was told that in order to remove a director, you only need one shareholders meeting because it would not be a "special" resolution, just an ordinary resolution. Do you need two shareholders meetings to remove a director?

[llewynx]

As I understand it, what's relevant is:

- Did he, or did he not invest money or equivalent in the company? Did he participate in paying in the company capital? Is there evidence of that?

If he indeed invest money, in my view what you are trying to do is illegal.

No, he did not invest with money, equipment or anything else. At least as far as I know (I came in to the company after that would have happened) and as there is not any paperwork or evidence of it I suppose it never happened.

Each and Every company registered in Thailand has minimum of 7 shareholders. Did you never see your sharholders list? Or is it a Limited Partnership you have and not a company at all?

Ah, sorry again, my fault for not being up to scratch with terminlogy. Yes, it's a limited partnership (checked with lawyer, I'm quite new with all this legal stuff). Didn't know there was a difference between company and partnership, maybe my english again Will that make things easier, being a partnership?

Anyway, thank you all for your help, and again, we do not want to do anything illegal and we're not after to screw this guy over, he's already taken good care of that himself.

[Chang_paarp]

You have just learned one of the problems of a limited partnership. In spite its name your liability to your partners debts are unlimited.

Try this (check with lawyer first)

1) form limited company with preferred shareholders. (Partners)

2) Call a meeting of the limited partnership, letter to last known mailing address of all. Advert in paper.

3) Agree to disolve the partnership and sell all assets.

4) Sell assets to company formed in 1)

5) Split the funds from asset sale to partners. You may be able to recover funds used to pay for non business debtsfrom the partners at this point.

6) File paperwork and continue with business as normal.

7) Put under new management sign on door have sale!

[~G~]

Yes, it's a limited partnership

OK, so we established what legal body you have, that is already some progress... Don't know much about limited partnerships, apart from them not being recommended except in very specific cases.

I assume following chang_paarp's steps of establishing a Thai company limited instead of the partnership will be the best way.

I really recommend that as Director and major Shareholder in that future company, try to understand the legal issues a bit more, in order to protect yourself plus reduce legal fees and administrative fees that WILL arrive if you don't understand what you're doing.

Edited July 17, 2006 by ~G~