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An Alternative Method to Increasing Capital: The General Mandate Method

In March 2011, the Stock Exchange of Thailand improved its regulations in regard to the increase in capital for listed companies by allowing these companies to increase capital through a general mandate. A listed company normally is required to seek authorization from a shareholders’ meeting every time the company wishes to increase its capital. Through a General Mandate, however, a listed company will be able to request permission from the shareholders’ meeting in advance, in accordance to the number of increased shares and type of allocation of the shares (e.g. right offering, public offering, private placement), to authorize the board of directors of the company to consider and manage the shares appropriately when the company requires immediate capital.

As the current method of increasing capital requires the explicit details of the objectives in relation to the capital increase, the issue and the allocation of shares, the advantage of increasing capital through a general mandate is that it eases the constraints placed on fund raising by decreasing the number of steps the company is required to take in order to raise funds more rapidly. The general mandate method decreases the period of time needed for the process by 4-10 weeks by allowing the board of directors to be able to consider the allocation of shares at the time the company needs to raise capital immediately; whereas the prior method of capital increase requires a shareholders’ meeting in order to authorize the increase in capital by determining the specifics related to capital increase, the issue and the allocation of shares.

Nevertheless, limitations have been imposed on increasing capital through the general mandate method by the Stock Exchange of Thailand to protect the interests of the shareholders:

  Rights Offering

Non-Rights Offering

Public Offering Private Placement
Number of Shares 

 

Calculated proportionately to the issued shares on the date of the proposal by the board of directors to increase capital through the general mandate method at the shareholders’ meeting

Not more than 30% allocation Not more than 20% Not more than 10%
Make calls upon the shareholders in respect of capital increase shares not more than 30%, where not more than 20% is NON-Rights Offering
Price Offering Not specified Must not be considered a low price (according to SEC regulations)
Allocation Period 

 

Within the day of the next AGM or the day of the AGM specified by law, whichever is first
Type of Securities 

 

Ordinary sharesPreferred sharesTSR* Ordinary sharesPreferred shares

*Transferable Subscription Right

Increasing capital through the general mandate method is merely an option for increasing capital. A listed company is also able to proceed with standard method of capital increase currently employed where the objectives in relation to the capital increase, the issue and the allocation of shares are explicitly specified.

By Rawat Chomsri, Partner and Araya Intang, Associate © September 2011
Khun Rawat can be reached at rawat@siampremier.co.th
Khun Araya can be reached at araya@siampremier.co.th