Mar 18, 2024
With the development of social economy and the increase of commercial trade at any time, most people assume that registering a company in Thailand is an easy task to do, that is, everyone can set up a company. However, the fact is setting up a Thai company is not something that everyone can do. This is because setting up a company involves many aspects such as internal management structure, capital circulation, company future plans, risk control, etc., and the scale and details of each aspect are based on the characteristics of each company. Therefore, in order to control, manage and operate a company more efficiently and compliantly, many companies will adopt "Articles of Association (AOA)"
The company's articles of association refer to areas where the company and its shareholders jointly formulate business scope, business management systems, share transfers, the power of decision-making, rules of procedure and other areas of concern to the company. Under normal circumstances, more complex organizational structures and Thai companies holding shares will specify company articles of association. However, it is worth paying special attention that not every company is required to set up articles of association. Some companies believe that their organizational structures are relatively simple and do not need to set up articles of association. In this case, their company will automatically implement corporate management under the Civil and Commercial Code.
Articles of association ensure the rights and interests of the company and its shareholders. Since some companies delegate powers to directors, directors may sign on their own initiative without the approval of shareholders, which may cause unforeseen risks and variables. Therefore, the company's articles of association can restrict the rights and interests of authorized directors. For example, board meetings must be held with more than half of the directors present, and must be passed by more than half. Some of the more important things, such as large fund transfers, hiring new employees, laying off employees, etc., all need to be approved by the board of directors. In order to standardize the company's organization and behavior and protect the company, the company's articles of association can specify the shareholder voting system by show of hands.
To sum up, the company's articles of association are legally binding because they are specific rules formulated in accordance with the law to regulate the company's organization and behavior, and are regulations that everyone should abide by.
Regarding the formulation of company articles of association, it is not difficult and very complicated. The company's articles of association shall be on the basis of not violating Thai law. For example, Section 1194 of Thailand's Civil and Commercial Code stipulates those special resolutions (special resolutions of shareholders' meetings including mergers, dissolutions, changes in company forms, modifications to company articles of association, additions or the reduction of registered capital) must be approved by no less than three-quarters of the voting rights held by shareholders attending the general meeting of shareholders. If the company's articles of association stipulate that special resolutions must be passed by shareholders attending the general meeting with no less than two-fourths of the voting rights, and their voting rights are lower than those required by Thai law, this company's articles of association are not enforceable.
The company's articles of association should be drafted and submitted to the Department of Business Development (DBD) of the Ministry of Commerce of Thailand for their review. Review times are determined on a case-by-case basis. Once approved by the Department of Commercial Development of the Ministry of Commerce of Thailand, the articles of association are lawfully enforceable toward the company and all relevant parties.
