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17th Annual Conference
Maximise Shareholder Value 2016
Business optimisation under legal constraints
18 October 2016
Legal Services18th Annual Legal & Tax
Conference
MaximiseShareholder Value 2017
PwC
We will focus on …M
oney sp
end
ing
Business expansion
Mon
ey s
avin
g/ea
rnin
g
Business divestiture
3 Returning BOI certificate(s)
2 Use of RE 1 New investment: M&A
7 Exiting JV agreement
Facilitiessharing45 Employee
termination
6 Winding up business
3 BOI after tax holiday
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7 Business selling
PwC
How can we optimise new investment?
1 New investment: M&A
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Shares• Conditions precedent• Representation & warranty• Employee objection• Latent liabilities• Relationship with existing shareholders
Assets• Key terms and conditions
in agreements• Genuine rights• Zoning restriction• Construction control• Encumbrances• Expropriation
Business• Transferred licenses• Share swap• Entire/Partial business• Compliance process• Tax exemption
Amalgamation• Compliance process• Transferred licenses Others
• New JV• IP right• Purchase price
adjustment
How to optimise
new investment
Sources of funds• Loan• Capital increase• R/E• Funds raising
Use of funds• Enhance current business
operation• Cash flow liquidity• M&A• New business• Business expansion
LegalCompliance
3• D/E ratio under
• Existing licenses• New licenses
• Foreign business restriction
• Available incentives• Legal formality• Due diligence
M&AObjectives
1
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Funds
2
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How can foreign companies expand their business without increasing capital?
2 Use of RE
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• Holding shares in other company ≥ 25%
• Lending to affiliates & group companies
• Business growth• Dividends received are CIT exempt
• Outbound lending• RD conditions compliance
Alternatives• Switch business (wholesale vs. retail) &
use exemption under other laws • New scope
Benefits• Less compliance
requirements• Lawful business operation
Points of consideration• Possibility of approval• Specific scope of business
Alternatives• Manufacturing• Services, e.g. IHQ, ITC, TISO
Points of consideration• Debt to equity ratio (3:1)• Eligible activities• General & specific criteria
compliance
Benefits• Tax privileges, e.g. CIT and import
duty exemption & reduction• Non-tax privileges, e.g. land
ownership, visa & work permit, remit foreign currency abroad
• EBT• PBT
• SD/ SBT/ CIT/ VAT exemption
• Sufficient cash on hand• RD conditions compliance
Business Expansion Scheme for
foreign company(Use of RE)
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What can we do with BOI certificates after using up all of our tax incentives?
3 - BOI after tax holiday- Return of BOI certificate(s)
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Condition precedent • Existing project (BOI/Non-BOI)• Minimum cap not less than
Baht 1 million• Submit within 31 December 2017
Condition subsequent To be fulfilled within 3 years
Machinery• Must be new and must increase
product performance
Technology• Must be new
• CIT exemption: 50% of investment amount/ 3 years
• Existing project (BOI/Non-BOI)• Minimum cap not less than Baht 1
million• Submit within 31 December 2017
To be fulfilled within 3 years
• Investment/expenditure must not be less than 1% of the total revenue for the first three years
• CIT exemption: 50% of investment amount/ 3 years
Condition precedent • Existing project (BOI/Non-BOI)• Minimum capital not less than Baht 1
million• Machinery must be new• Submit by 31 December 2017
Condition subsequent To be fulfilled within 3 years
GeneralCondition
1. Reduction of environmental impact• Less pollution2. Alternative energy conservation• Fossil fuel substitution3. Energy conservation• Value of saved energy must not be
less than CIT exemption
SpecificCondition
• CIT exemption: 50% of investment amount/ 3 years
Incentive
BOI after tax holiday
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3
Returning BOI
certificates
Capital No restriction on minimum
capital Can use the capital to operate
other businesses
Raw materials No longer be restricted to use
for a specific promoted project. No ceiling on raw materials
imports.
Work permit Restricted by immigration law. 4 to 1 ratio for Thai to Foreign
employees
Balance Sheet No need to separate accounts
for BOI business and non-BOI business
Machinery Machinery can be used in
multiple production lines No restriction on sale,
transfer, mortgage or lease of machinery
Benefits Land – Foreigners cannot own land Import duty – No duty exemption
from importation of machinery and raw and essential materials
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3
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Is it possible for group companies to increase their efficiency by sharing facilities and common services?
4 Facilities sharing
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Exa
mp
les
- Canteens- Factories- Office space- Parking lots- Accounting
services- Legal services- Administration- Technical
services- Other service
businesses
Alt
ern
ati
veI:
F
orei
gn B
usi
nes
s L
icen
seRestricted Businesses under List 3 of the Foreign Business Act 1999 • Accounting services (6)• Legal services (7)• Other service businesses (21)
Key Conditions• Limitation of market• Complexity of services• Technology transfer
Financial Requirements• At least Baht 3 million of capital• Government fee
Alt
ern
ati
ve I
I:
Inve
stm
ent P
rom
otio
n
Procedures for Establishment of Promoted Businesses• Investment promotion certificate• Foreign business certificate
Eligible Activities• IHQ and/or TISO
Investment Promotion Conditions• Conditions for each activity• Investment amount• Debt to equity ratio
Financial Requirements• IHQ: At least Baht 10 million of paid-up
capital• TISO: At least baht 10 million of
administrative expenses
Investment Incentives• The Board of Investment (Non-tax
incentives)• The Revenue Department (Tax incentives:
only IHQ)
Termination of Employment (if Any)
1. Advance notice 2. Severance pay 3. Wage payment in lieu of advance notification 4. Annual leave payment
Legal Concerns: Shared Facilities & Common Services among Group Companies
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4
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How can we cut manpower to increase efficiency, without affecting business operations?
5 Employment termination
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Labour dispute
Serious
Not Serious
Labour Protection Law
Work rules
Reorganisation
BOIRelocation
Business loss Loss of profit
Loss of businessEarly retirement
Resignation Non-voluntary
Voluntary
Economic downturn
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Termination Package*1. Wages up to the date of
termination.
2. Wages for unused carried forward annual leave (if any).
3. Wages for unused annual leave (prorated).
4. Wage compensation for immediate termination (no advance notice).
5. Wage compensation for special advance notice (no advance notice).
6. Severance pay.
7. Compensation for unfair termination
8. Certificate of employment.
9. Withholding tax certificate.
10.etc.* Depending on the type of termination
Termination of
Employment
Counter claim
Labour union
Inspector
Court
Hold-harmless letter
5
PwC
What is the quickest way to return capital/investment to shareholders after a business liquidation?
6 Winding up business
1418 October 2016 Maximise Shareholder Value 2017
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Social Security Office
Dissolution &
Liquidation
Capital Returns
Dividend Objection
Compliance
Bankruptcy Capital decrease
CapitalShare
Legalreserve
Premium
Preference
OrdinaryCapital
gainCapital
loss
Requirements under Civil and
Commercial Law• Share transfer restriction• Share transfer requirement• Requirement under Civil and
Commercial Law and Articles of Association
ObjectionCreditor
• No objection is raised within 30 days
• Satisfied the claim or given security to creditors
Court casedispute
Creditors
Employees
MinistryOf Commerce
Revenue Department
DebtComposition
• Requirements under Bankruptcy Act
Annual General Meeting of
Shareholders
Extraordinary Meeting of
Shareholders
Board of Directors(Interim)
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6
Preparation
Capitalreturn
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What are the steps for foreign companies to take when exiting a shareholders agreement or business partnership?
Exiting JV agreement
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Seller side• Anti-takeover measures• Long-term contracts• Golden parachute• Preference shares/ golden share• Minority shareholders• Separation of assets to
several entities• Labour union• ESOP/ EJIB• Disputes and court cases
Requirements Under the CCC• Minimum par value• Maximum share decrease amount• Shareholder’s supermajority resolution• Objection& handling• Registration
Point of concerns• Shareholder’s consent• Resolution revocation within 1 month• 10 year-prescription period for invalid
meeting• Company nationality (license)• Control ower in BOD
Methods• Reducing share value• Reducing number of shares
o One party’s capital decrease
Grounds• Default of filing a statutory report
or holding a statutory meeting• Failure to start business within 1
year or suspend business for a whole year
• Only loss will be accrued and irretrievable
• Less than three shareholders
Requriements• Instrument• Original share certificate• Share register book• List of shareholders
Point of concerns• Share transfer restriction• Share transfer requirement• Tag along/ drag along• First right of refusal• Understanding with third parties• Survival obligation• Event of default & exit clause• penalty
Exiting shareholdersagreement or
businesspartnership
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7
PwC
Any questions, please contact…Through our extensive legal compliance experience and expertise, we excel in legal health check and can always serve your needs
Vunnipa RuamrangsriPartnerTel: +66 (0) 2344 1284vunnipa.ruamrangsri@th.pwc.com
Anuwat NgamprasertkulDirectorTel: +66 (0) 2344 1320anuwat.ngamprasertkul@th.pwc.com
Thiti SiriphairojDirectorTel: +66 (0) 2344 1016thiti.siriphairoj@th.pwc.com
1818 October 2016 Maximise Shareholder Value 2017
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Thank you
This content is for general information only and should not be used as a substitute for consultation with professional advisors.
© 2016 PricewaterhouseCoopers Legal & Tax Consultants Ltd. All rights reserved. PwC refers to the Thailand member firm and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
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