Thailand’s Securities and Exchange Commission and the Stock Exchange of Thailand (SET) have opened a public hearing period on proposed changes to requirements for IPO securities issuers and other regulations relating to companies listed on the SET and the Market for Alternative Investment (MAI). The proposed changes aim to prevent the use of publicly offered securities to avoid or violate strict regulations on investment management.
During the public hearing period, interested parties may submit comments on the proposed rules until August 18, 2022, with the finished regulations expected to be issued soon after.
Key Proposed Changes to Rules for Securities Issuers
Under the proposed rule adjustments, securities issuers (i.e., operating companies, holding companies, or foreign companies that request a public offering) must not be investment companies, except for companies or subsidiaries undertaking financial institution business (e.g., commercial banks, finance companies, credit foncier companies, securities companies, and life/non-life insurance companies).
“Investment company” refers to a company that has more than 40 percent of its total assets as passive investments in securities, derivatives (excluding for hedging purposes) or digital assets. When considering whether a company that has a subsidiary is classified as an investment company, it will be determined based on the consolidated financial statement. Excluded from such classification are investments for low-risk liquidity management (i.e., bank deposits, government bonds, debt instruments backed by the Ministry of Finance, money market mutual funds, or fixed-income funds); affiliate companies that do not operate as investment companies; subsidiary companies under the same group company; and investments in business networks, synergies, or value chains.
Key Proposed Changes to Rules for Listed Companies
A company with the characteristics of an investment company mentioned above is not allowed to list its securities on the SET or the MAI.
Companies listed on SET and MAI with more than 40 percent of their total assets as passive investments must disclose investment information—such as the investment ratio, investment movements, and profits and losses from investment—in the notes to their financial statements. Such disclosures must be made for any period during which passive investments make up more than 40 percent of the company’s total assets. A listed company with more than 40 percent of its total assets as passive investments cannot increase its passive investment proportion until its passive investment ratio will be lower than the limit.
Listed companies must comply with and maintain the stipulations described above for as long as they remain listed. Failure to do so—or failure to remedy noncompliance within a period specified by the SET—will lead to company securities being marked with a caution or suspension sign, and can ultimately result in the securities being delisted from the SET or the MAI.
The new draft regulations are intended to apply to all listed companies. Existing listed companies that fall within the definition of investment companies before the effective date of the regulations to be issued will have a one-year grace period to comply.
Tilleke & Gibbins will continue to monitor these and other relevant capital markets regulations.
For further information, please contact:
Santhapat Periera, Partner, Tilleke & Gibbins