Shareholders’ Right of Inspection
Under Thai law, the shareholders of a limited company are its legal owners and are entitled to certain rights according to the Civil and Commercial Code. Nevertheless, due to the nature of a limited company, the ownership rights of shareholders are not absolute and, for example, are not the same as those of the partners of a registered ordinary partnership or a limited partnership. The most important rights of the shareholders are as follows: the right to receive the assets of a company upon liquidation in proportion to their shares subject to the superior right of any creditors of the company to be paid first, the right to vote at general meetings and extraordinary meetings in order to pass resolutions on such matters as appointment and dismissal of company directors and adoption of the annual company balance sheet. Furthermore, shareholders are allowed to file suit against the company directors for any damages that they may cause to the company. However, one important issue is whether the shareholders have the right to inspect company books and accounts upon demand or whether they have the right to inspect the business activity of the company.
Sections 1206 and 1207 relate to the requirement of the directors to keep accounts and books of the company respectively. The second paragraph of Section 1207 states that “Any shareholder may at any time during business hours demand inspection of the above documents.” A strict reading of the text would mean that the above clause applies only to Section 1207 (referring to company books) since it is located in that section and not Section 1206 (referring to company accounts). Nevertheless, arguments have been made that shareholders have the right to inspect company accounts, including the business activity of the company, upon demand. However, in Thai Supreme Court Decision No. 2098/2525, the Court settled the matter and held that the shareholders’ right of inspection is limited. Specifically, the Court held as follows:
- “An order of the Court granting shareholders the right to inspect various company documents according to Section 1207 means only the inspection of records of company meetings and resolutions. It does not mean that the shareholders have the right to inspect company accounts or have the right to inspect the business activity of the company in any way whatsoever.”
As investors in a business, company shareholders must be aware of their rights in order to protect that investment. Due to the limited rights of shareholders under Thai law, it is advised that investors consult with competent legal counsel in order to understand those rights.
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