Amendments to the Securities
and Exchange Act B.E. 2535 (A.D. 1992)
by
Yingyong
Karnchanapayap
December 2008
The Securities and Exchange Act B.E. 2535
(A.D. 1992) (the "SEC Act") has recently been amended
by the Securities and Exchange Act (No. 4), which among others,
sets forth major amendments in three important areas: reorganization
of the structure of the Securities Exchange Commission ("SEC"),
enhancement of mechanisms related to investor protection, and
supportive mechanism for effective enforcement of securities laws.
Reorganization of the SEC Structure
To enhance the SEC's
operational flexibility, a new capital markets supervision board,
the Capital Markets Supervisory Board ("CMS Board"),
will be added to the SEC office. The CMS Board shall assume, from
the SEC, the authority to promulgate regulations and notifications
under the SEC Act which governs day-to-day operational matters
such as securities business, securities offering, tender offer,
etc., with the aim to enable the SEC to focus on the role of policymaking
and the supervision and development of the overall securities
markets. In addition, to enhance transparency and internal control,
new criteria for selecting the members of the SEC and the CMS
Board including its composition, qualifications, and term of office,
were adopted along with other measures such as empowering the
SEC Office's Audit Committee to verify the financial report and
financial information of the Office of the SEC as well as coordinate
with the Office of the Auditor General, and ensure the SEC's compliance
with the relevant laws and regulations.
Enhancement of Mechanisms Related to
Investor Protection
The amendments grant increased protection
for investors and set up mechanisms to reduce associated risks,
enhance operational efficiency and encourage transactions for
services related to securities markets. Major amendments are as
set out below:
1. More stringent fiduciary duties for directors
and management of listed companies
Company directors and management shall be
protected by the law if they perform their duties in good faith
and with care to preserve the company's interests based on information
which they honestly believe to be sufficient for decision-making
and without conflict of interest. Company directors or management
who commit dishonest acts or perform duties with gross negligence
shall be prohibited from obliterating their wrongful deeds by
seeking resolutions/ratification at the shareholders' or board
of directors' meeting.
The board of directors must appoint a Company
Secretary to perform the following duties on behalf of the Company/Board
of Directors:
- Preparing and maintaining register of
directors, notices calling for shareholders' and directors'
meetings, minutes of shareholders' and board of directors' meetings,
and Company's annual report.
- Maintaining a report on directors or
executives who have a vested interest in relation to a resolution.
- Performing any other matters as specified
in the notification of the CMS Board.
As with Company directors and management,
Company Secretary must also adhere to the principles of business
judgment, duty of loyalty, and conflict of interest rules, the
breach of which could expose the directors, management and/or
Company Secretary to criminal sanctions.
2. Affirmative
action for investors
Shareholders, jointly or individually, holding
shares in aggregate of 5% of voting shares or more, may:
- File the claim on behalf of the company
to disgorge ill-gotten benefits obtained by the company directors
or management and claim for reasonable litigation expenses from
the company.
- Submit a proposal to include an agenda
to be considered in the shareholders' meeting.
In addition, shareholders may bring a civil
action on their own behalf to claim for compensation/damages from
directors or management who disclose false information or fail
to disclose material facts that should be disclosed.
3. Revised rules for takeovers
Provisions regarding the acquisition of
securities for business takeovers are revised to make it clear
that the voting percentage of shares held in a company (instead
of the shareholding percentage) shall be used as the basis of
calculating the 5% reporting requirements of acquisitions and
disposals of shares and the thresholds to trigger a tender offer,
i.e. 25%, 50%, and 75%. The revised rules also expand the coverage
of "securities" to include such securities or instruments
entitling the holders to receive securities of the acquired company
such as derivatives warrants.
Holdings of securities by both "controlling
person" and "controlled person" shall be counted
to ensure that the securities held by related persons with a 30%
shareholding relationship both downwards and upwards throughout
the chain are counted for the purpose of calculating the reporting
requirements of acquisitions and disposals of shares and the thresholds
to trigger a tender offer. In addition, persons who act together/collaborate
to acquire and exercise power over the acquired company shall
be regarded as "acting in concert" and their voting
rights shall be counted together for the purpose of calculating
the reporting requirements of acquisitions and disposals of shares
and the thresholds to trigger a tender offer.
Attempts of
directors or management to employ "anti-takeover" measures
shall obtain prior approval at the shareholders' meeting in accordance
with pre-specified rules, otherwise such anti-takeover measures
shall not have binding effect on the company and the directors
or management shall be personally liable to a third party acting
in good faith and for value.
4. Transactions with related parties
Transactions between directors and management
and the company or subsidiary company as well as material transactions
such as the acquisition of disposal of assets of the company or
subsidiary company shall obtain prior approval at the shareholders'
meeting in accordance with pre-specified rules, otherwise such
transactions shall be regarded as a material breach of the conflict
of interest rules.
5. Issuance
of securities
To support fund raising of new types of
entities established under both Thai and foreign laws, any securities
issuance, established in whatever form, shall receive approval
from the SEC and disclose pre-offering and post-offering information,
except when the issued securities are deemed to be risk-free such
as treasury bills, government bonds, Bank of Thailand bonds, etc.
6. Enforcement of pledged securities
Pledged securities may be enforced through
public auction or through a sale in the Securities Exchange of
Thailand ("SET").
Supportive Mechanism for Effective Enforcement
of Securities Laws
Major amendments with regard to supportive
mechanism for effective enforcement of the securities law and
suppressing of economic crimes are as set out below:
1. Securities companies are prohibited from
prosecuting or engaging in unfair practices against whistleblowers
who are company officers, employees or persons hired to work for
the companies including consultants and auditors who, in good
faith, provide the authorities with clues relating to unlawful
acts under the securities law. Violations could be punishable
by criminal sanctions.
2. Persons who provide information on insider
trading or market manipulation shall, subject to certain conditions
and exceptions, be entitled to a reward funded by the settlement
fine in an amount not exceeding 30% of such fine.
3. The auditor of a securities company is
required to report to the company's Audit Committee activities
suspected of violating securities laws, and the company's Audit
Committee shall report such activities to the SEC within a specified
period of time.
4. The director, manager or any person responsible
for the operation of the company could also be liable to criminal
sanction for offenses committed by the company, unless it can
be proven that such person has no involvement with the commission
of offense by the company.
5. The SEC shall have the power to cooperate
with foreign regulators in the areas of investigation and information
exchange for the suppression of international economic crimes.
For
further information, please contact
Yingyong Karnchanapayap, Attorney, Corporate and Commercial
Department, Tilleke & Gibbins (e-mail yingyong.k@tillekeandgibbins.com).
©2008
Tilleke & Gibbins, Bangkok, Thailand
