Recent SET Notification modifying regulations re Treasury Stock

The Public Company Act (No. 2), B.E. 2544 (A.D. 2001) ("PCA2"), was promulgated in the middle of last year to amend the provisions of the original Public Company Act (the "Act"). One of the amendments, Section 66/1 of the PCA2, introduced the concept of treasury stock. The amendment permits a company with excess liquidity to repurchase its shares from its shareholders. Previously, under the Act, a company was prohibited from purchasing its own shares.

In December 2001, the Thai Commerce Minister issued a ministerial regulation to supplement the PCA2 containing provisions relating to the groundwork and requirements for the repurchase of shares, disposal of the repurchased shares, and writing-off of repurchased shares.

At the same time, the Stock Exchange of Thailand ("SET") issued a notification stating the information disclosure requirements and other obligations required of listed companies in the event of repurchase of their own shares and/or the disposal of such repurchased shares.

The SET issued another notification, effective 5 April 2002, amending the provisions on the disclosure of information and other obligations required of the listed companies relating to repurchase of shares. This latest notification seeks to enhance protection of the independent shareholders' rights and benefits; it also seeks to prevent negative repercussions on trading on the stock exchange arising from the share repurchase. The main purposes of the 5 April 2002 amendment are as follows:

1. Any repurchase of shares in excess of 10 per cent of its paid-up capital must have the approval of the requisite shareholder majority and, in such case, the shares must be repurchased from the shareholders within one year of the shareholders' approval date.

2. For any listed company intent on repurchasing shares totaling less than 10 per cent of such listed company's paid-up capital, its articles of association must stipulate that such share repurchases are permissible and authorize its board of directors to decide whether or not and when to approve any such proposed share repurchase.

3. Any listed company whose shares are the subject of a repurchase under item 2. above must report its board of directors' approval of the share repurchase to the SET on the date of such approval or no later than 9.00 a.m. of the following business day. The report may be transmitted via facsimile or on-line via the Electronic Company Information Disclosure network of the SET.

4. No share repurchase or disposal of repurchased shares shall be permissible during the period when takeover bids of a listed company are pending finalization.

5. For any proposed repurchase under either item 1. or 2. above, the price of the shares to be repurchased must not exceed the average closing price of the shares during the five trading days preceding the date proposed for repurchase of the shares plus 15 per cent of the average closing price.

6. Any subsequent proposed sale by the listed company of its shares repurchased under either item 1. or 2. above must be at a price not less than the average closing price of the shares during the five trading days prior to the date proposed for sale of the shares less 15 per cent of the average closing price.