group 4 - business optimisation under legal constrain€¦ · • original share certificate •...

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

218 October 2016 Maximise Shareholder Value 2017

PwC

7 Business selling

PwC

How can we optimise new investment?

1 New investment: M&A


PwC

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


PwC

Funds

2

PwC

How can foreign companies expand their business without increasing capital?

2 Use of RE


PwC

• 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)


PwC

PwC

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)


PwC

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


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


Incentive

BOI after tax holiday


PwC

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


PwC

3

PwC

Is it possible for group companies to increase their efficiency by sharing facilities and common services?

4 Facilities sharing


PwC

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


PwC

4

PwC

How can we cut manpower to increase efficiency, without affecting business operations?

5 Employment termination


PwC

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


PwC

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


PwC

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)


PwC

6

Preparation

Capitalreturn

PwC

What are the steps for foreign companies to take when exiting a shareholders agreement or business partnership?

Exiting JV agreement


PwC

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


PwC

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 [email protected]

Anuwat NgamprasertkulDirectorTel: +66 (0) 2344 [email protected]

Thiti SiriphairojDirectorTel: +66 (0) 2344 [email protected]


PwC

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.

group 4 - business optimisation under legal constrain€¦ · • original share certificate •...

Documents