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Preference Shares For Thai Companies

Transcript of the above video:

As the title of this video suggests, we are discussing preference shares for companies in Thailand and to quote a recent comment on the channel, quoting directly: "Ben, suggestion for next video about incorporation. Talk about "preferred shares" and the Thai set up to that effect which hardly any consultants/accountants seem to know anything about." - That doesn't really surprise me - Quoting further: "Pun intended about knowing nothing." This person was quoting on one of our videos we made regarding Socrates' quote: "the only true wisdom comes from knowing that you know nothing."

The issue of preferred shares, it doesn't really surprised me, accountants/consultants are not going to be real hip to that. Let me be clear, I am not a Thai Attorney. We have Thai Attorney's here on staff. I am an American Attorney. I am a naturalized Thai citizen and I am the Managing Director of the firm. Our Thai Attorney's handle all matters pertaining to Thai legal issues. That being stated, I often times act in a capacity as a liaison with our foreign clients in order to provide some nuance especially in the context of the US-Thai Treaty of Amity, I act in my capacity as an American Attorney with respect to incorporation issues and certification issues with respect to the Treaty.  

Back to preference shares, what are they?  Preference shares is kind of a ubiquitous term. It is kind of a broad term. Long story short, it means that you may have different shares in the company, different classifications; so you may have Class A shares or Class B shares if you will and Class A may have disproportionate dividend rights or disproportionate voting rights for example. Now I don't make a lot of videos on this and I don't go into it very often. We made other videos on his channel. You can look it up on the search function "preferred shares" or "preference shares". I don't make a lot of videos on this. I know a lot of people out there in the past at least, they talked about preferred shares like it was some kind of magic bullet. They have their uses and in limited circumstances, preference share companies can be very useful for foreign nationals as well as Thai nationals or in circumstances where different parties have different things they want to gain out of a business enterprise. For example some parties to a business enterprise may want to get a guaranteed return so they may set up preference shares in order to ensure that while other parties may want more day to day control, or more control over the Board for example and preference shares provide that differentiation which respect to control or profit. But long story short, they are not a magic bullet. It is not like some magical thing. The other thing is especially in the context of the Foreign Business Act, you need to be really careful. Use of preference shares needs to for lack of a better term, pass the "smell test" so that it is not completely clear that you have created some preference share company that is just entirely designed to subvert or circumvent the provisions of the Foreign Business Act.

So again there may be narrow circumstances where a preference share company is very useful but you probably are best off talking to a legal professional to gain some insight and guidance into how best to proceed with such a corporation because there is a lot of nuance with respect to that topic.