As the Thai government is showing a welcoming nature towards foreign investors in the country, many of them are looking for the best opportunities to gain profits from this potential market. One of the most common options for foreign investors to be a part of the Thai business sector is through joint venture arrangement. The idea is to get associated with a local Thai business owner and help them grow in the competitive market with innovative ideas. You can also help them enjoy increased capacity, technical expertise, resources, and distributed range of channels.
It is important to mention that foreign investors in Thailand need to follow few legal restrictions. One of the most important rules is that they can hold only minority shares while the majority of shares are owned by the Thai partner. Therefore, foreign investors might be worried about how to protect themselves and their investment while being minority shareholders.
How can Joint Venture Agreement help you safeguard your investment?
The great news is that there are several legal options that you can follow while preparing and executing your Joint Venture Agreement. The documents can govern the obligations and rights among shareholders to conduct the management and business operations carefully. Few essential details about the terms and conditions of the Thai Joint Venture Agreement include:
Board participation and representation
Minority shareholders have the right to agree on the number of directors and their nominations while defining the board of directors for the company. When you choose the members carefully, they can help you balance the power with ease while staying informed about all the company activities. Directors that are appointed by foreign minority shareholders must be actively involved in all company decisions.
Key management officer
Along with the Board of Directors, the foreign investors also need to have the right to put forward the proposal for the key management personnel, including COO, CFO or CEO, etc. It may help them to create a balance in the company while ensuring enhanced internal control.
Affirmative right
When you are investing in a joint venture, you should sign a mutual agreement on Affirmative Right that usually has several terms and conditions in favor of foreign minority investors. It is useful to create any obligation on majority shareholders for seeking prior approval from minority shareholders regarding any reserved matter’s related decision. Note that this affirmative right focuses on matters that can affect shareholder’s interest in the organization. It may help you stay aware of possible changes in the capital structure, removal and appointment of the key personnel in the company, and matters associated with dilution or issuance of the shares.
Restrictions on transfer of share
While forming a joint venture in Thailand, the minority shareholders are always advised to make a decision on long-term involvement with majority shareholders. When transfers of some shares are to be done to some third-party units, it should include the approval of minority shareholders along with majority ones.
Once you start following these terms and conditions for setting up a joint venture in Thailand, it may help you to lead a profitable journey ahead.
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