SEC Proposes Revisions on Private Placements.

On 9 February 2022, the Securities and Exchange Commission (“SEC”) has announced to arrange a public hearing on the revisions of the rules of newly issued shares offering through a private placement (“PP”) with a purpose of streamlining the procedures, processes and documents which may be required at the time of the submission with the SEC while the investors and shareholders are still in protection.

Key proposed amendments are outlined as follows:

•           Approval process

Under the current rules, a listed company, in addition to the requirement of getting approval from its shareholders under the Public Company Act B.E. 2535 (as amended), is required to (i) deliver the invitation of the shareholders’ meeting approving the offering of PP to its shareholders and (ii) seek for an approval of the offering of PP from the SEC with required documents.

To minimize the steps and documents required, under the SEC Regulatory Guillotine Project, the SEC proposed that the listed company will no longer be required to seek for an approval from the SEC and the principal approval concept will also be applied with the offering of PP including maintaining the disclosure requirement and submission of documents as specified by the SEC.

Hence, the listed company is still liable to disclose the information of the offering of PP, deliver the invitation of shareholders’ meeting to its shareholders and obtain an approval from the shareholders’ meeting.

In addition, the SEC proposed that the listed company must disclose the information regarding the offering of PP (e.g., offer price, price determining) through the Stock Exchange of Thailand’s disclosure system only in case where the offer price of the offering of PP does not specify in the shareholders’ meeting as, normally, the listed company is required to disclose such information in all cases even though the offer price is set out clearly.

•         Requirement of independent financial advisors’ opinion report (“IFA Report”) on the significant transactions

One of the requirements of the offering of shares proposed by the SEC through the PP is, in order to protect shareholders’ rights and ensure that things are going right before they make their decisions to approve the offering of the PP, to provide IFA Report to be an additional opinion for its shareholders on the transactions that could affect their rights and interests.

(i)         The offer price of the offering of PP is lower than the market price;

(ii)        The offering of PP which effects more than 25% of EPS/control dilution calculated on the date before the date of board of directors’ resolution; and

(iii)       The person who is allocated the shares from the offering of PP become a top-ranking person having the right to vote in the company.

It is worth noting that for (ii), if the calculation of EPS/control dilution is based on the date of board of directors’ meeting make the resolution and there is a corporate action such as a stock divided taking place at the time of such meeting is held if those additional should be included in the calculation. For (iii), the criteria   of what considered as “a top-ranking person having the right to vote” is yet to be determined in threshold by the SEC.  While this point remains unclear, it is likely that to determine who will be “a top-ranking person having the right to vote” no materiality of the amount of shares offered under the PP will be taking into consideration.

•         Allowance of the remaining shares from the allocation of right offering (“RO”) or preferential public offering (“PPO”) to be offered to PP

To facilitate the listed company to increase its capital in full, the SEC proposed that the remaining shares from the allocation of the offering of RO or PPO can be offered to PP only in accordance with the following criteria.

(i)         The offered shares must be the remaining shares after the existing shareholders exercise their rights to subscribe the shares in excess of the portion to their existing holdings;

(ii)        The offer price must not be lower than the market price at the time of offering;

(iii)       The offering must be disclosed and specified clearly in the invitation of shareholders’ meeting that “the offer price of the offering of PP can be lower than the offer price of the offering of RO or PPO”; and

(iv)       The offering must be offered within 12 months from the date of shareholders’ meeting approval.

The implement of a waiver of the requirement to make a tender offer for all securities of the business pursuant to the resolution of shareholders’ meeting (“Whitewash”) in case of any person who wishes to hold the voting control of the company of not less than 50% may not occur if (i) – (iv) above are applied. This is because the offer price of said scenario must be fixed and specified clearly at the time of board of directors’ meeting is convened but the price offered by way of RO or PPO is a non-fixed price.

Additionally, for the consistency purpose with other types of offerings, the SEC proposed to revise the definition of “market price”. In this regard, it is important to note that the revision of the definition is not allowed to include the “market price” which has been adjusted by the corporate actions e.g. increase/decrease of capital, price dilution. Moreover, in case where the offer price of the offering of PP is determined based on par splitting which will take place in the future, however, the “market price” which will be used to compare with such offer price is not a par splitting price should be allowed to adjust the “market price” on a same basis.

The proposed revisions of the offering of PP are a good development to reduce unnecessary procedures and steps from the SEC. However, there are some points of the revisions which are expected to give further clarification and guidance.

The SEC’s hearing will be opened to public until March 10, 2022.

Should you have any questions on the subject matter hereof, please feel free to contact your regular contacts or the contacts provided herein.

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