Regulating controlling shareholders in thai private companies

Abstract

In a private company, conflicts arise from disagreements between controlling and non-controlling shareholders. Controlling shareholders may be involved in the management and active monitoring of directors in order to maximize the value of the company. On the other hand, they may also use their power to benefit themselves at the expense of the company and other shareholders such as by appointing their family members or acquaintances to be on the board of directors regardless of their qualification and performance and granting them high remuneration. Controlling shareholders can also oppress non-controlling shareholders by removing the latter from management positions and refusing to distribute dividends even when the company has sufficient profits to do so. This leaves non-controlling shareholders with no financial benefits and even-tually these shareholders involuntarily decide to leave the company. This article discusses how controlling shareholders dominate the company and examines how Thai laws, particularly the Civil and Commercial Code which governs private companies, prevent controlling shareholders from exploiting the benefits of the company and non-controlling shareholders and provide remedies for both the company and non-controlling shareholders. The author argues that the legal mechanisms for deterring controlling shareholders from wrongdoing and providing remedies are not effective enough.