THAILAND Law and Practice Contributed by: Tirayu Songdacha, Nutchaya Khayan, Piyachat Suwanwihok and Lalita Sriboonruang, MSC International Law Office
6.2 Governance and Decision-Making In UJVs, decision-making is governed solely by the joint-venture agreement, which outlines the manage - ment structure, decision-making procedures, and voting rights of each participant, and since there is no statutory framework regulating these matters, it is essential that the agreement be drafted comprehen - sively to address all potential scenarios that may arise. In IJVs, decision-making is governed by the compa - ny’s constitutional documents, including the AOA and any shareholders’ agreement, and for matters not cov - ered in these documents, the applicable procedures under the CCC will apply. 6.3 Funding In Thailand, a UJV is typically funded directly by the JV participants through capital contributions or partner loans in agreed ratios. All initial and future funding obligations are purely contractual, set out in the joint- venture agreement. As a UJV is not a separate legal entity and has no share capital, ownership and control are determined solely by the contractual terms. IJVs, generally formed as private limited companies, are funded through capital increase and/or sharehold - er loans. The shareholders may also agree to raise additional capital through mechanisms permitted by Thai law, such as issuing bonds. Under the CCC, capital increases are generally required to be offered to all shareholders in propor - tion with their existing shareholdings, so that if all shareholders exercise their rights to subscribe for the new shares, the shareholding proportions will remain unchanged. However, if the JV participants have agreed in the joint-venture agreement on a mecha - nism for future equity funding, such agreement will be binding on them. Where such funding leads to chang - es in the participants’ shareholding proportions, the joint-venture agreement should clearly set out how related provisions, such as those concerning the right to appoint directors, will be amended to reflect the adjusted ownership structure. 6.4 Deadlocks Deadlocks in joint ventures in Thailand are typically resolved through mechanisms pre-agreed in the joint-
venture agreement. Deadlocks occurring at the board level (or similar level) of both IJVs and UJVs are usually addressed by similar approaches, such as exercising the casting vote, referring the matter to a sharehold - ers’ meeting (or similar level) for consideration and resolution, or appointing a neutral third party (media - tor) to facilitate negotiations and help reach a settle - ment. However, deadlocks arising between JV participants in IJVs and UJVs tend to be resolved differently. UJVs commonly rely on frequently used deadlock resolu - tion methods such as third-party conflict resolution, buy-sell mechanisms, forced buy-outs, or voluntary winding up. In contrast, UJVs may not be able to uti - lise all these methods due to their status as non-legal entities. Therefore, deadlock resolution in UJVs pri - marily focuses on the joint-venture agreement, speci - fying how to manage the rights and obligations arising within the joint venture if the partners fail to reach an agreement. 6.5 Other Documentation The specific documentation required depends on the terms of the investment. In some cases, a JV par - ticipant may contribute intellectual property, tangible assets, or rights in such assets as part of its capital contribution. For IJVs, Thai law permits share subscriptions to be paid in kind, including with assets or intellectual property, subject to valuation and compliance require - ments. Common ancillary documents include intel - lectual property licence agreements, asset transfer agreements, and technology transfer contracts. 6.6 Rights and Obligations of JV Partners Key Rights and Obligations of JV Participants The principal rights and obligations of JV participants typically include the following. • Profit sharing and loss allocation in accordance with the JV agreement or governing law. • Access to information, including financial records and operational data, to ensure transparency and oversight. • Non-compete and non-solicitation undertakings, restricting participants from engaging in compet -
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