1. SCL Legal Issues and Practices in Relation to M&A Transactions presented by Picharn Sukparangsee at the Conference on Mergers & Acquisitions 2010 arranged by the Asia Business Forum on May 13-14, 2010 at Royal Orchid Sheraton Hotel, Bangkok

2. 2 Contents Latest Regulations related to M&A Key Legal Contracts that govern M&A deals Legal Considerations for foreign investors regarding M&A transactions Dispute Resolution and Legal Risk Management Practical approaches to avoid disputes and litigation Case Study

3. 3 Disqualifications of directors and executives incompetent / quasi-incompetent be ordered to be under receivership / be bankrupt be prohibited by the SET be accused or charged in a criminal case be imprisoned breach of duties of care or loyalty do an unfair act or an act of taking advantage of investors or participate or support such act conceal the financial condition or the business or state a false statement negligent to supervise the business Requirements for directors and executives of a company issuing securities

4. 4 Reporting requirement acquisition or disposition of every of 5% of the total voting shares, not the total issued shares securities acquired or disposed may be shares or convertible securities In the case of existing shares, a report shall be made within 3 business days from the date of acquisition or disposition of existing shares. In the case of newly issued shares, a report shall be made within 3 business days from the date on which the business has registered a change of issued shares.

5. 5 Tender offer requirement Any person acquires 25% of the total number of shares, 50% or 75 % of the total voting rights of the company shall make a tender offer of the securities of the company. Exceptions of tender offer 1. Acquisition of securities by inheritance or a right issue. 2. Acquisition of securities by a Thai trust fund or a company authorized to offer a non-voting depository receipt or NVDR. Notes 1. Acquisition of 25%, 50% or 75% of the total voting shares includes an offer to purchase securities. 2. Acquisition of the threshold includes acting in concert 3. Acquisition of 25%, 50% and 75% of the voting rights through legal entities under the chain principle shall make a tender offer.

6. 6 Types of connected transactions 1.Normal Business Transaction 2.Business Supporting Transaction 3. Short term Lease or Letting 4. Transaction on Assets or Services 5. Financial Assistance Transaction Connected Transaction

7. 7 Calculation of the size of transaction 1. A small transaction of not more than Baht 1 million or 0.03% of the Net Tangible Asset or NTA 2. a medium transaction of more than Baht 1 million but less than Baht 20 Million or more than 0.03% of the NTA but less than 3% of the NTA 3. A large transaction of more than Baht 20 Million or more than 3% of the NTA ( in the case of a financial assistance, the value of the transaction is more than Baht 100 million or more than 3% of the NTA) Connected Transaction

8. 8 Previous Regulation New Regulation 1. Only a connected transaction between the listed company and/or its subsidiary and a connected person of the listed company, not the subsidiary. 1. Include a connected transaction between a subsidiary and a connected person of a subsidiary. 2. More than 50% of the shares of one company is held by another company. 2. One company is under control of another company. 3. A normal business transaction with general commercial conditions can be carried out by the management. 3. General commercial transactions with special conditions shall be approved by the board of directors.

9. 9 Acquisition and disposition of Assets Types of transactions 1. A transaction as a backdoor listing in the case of a transaction with the value of more than 100% of the total assets of the listed company. 2. A transaction to be notified to the SET and be approved by a general meeting of shareholders in the case of a transaction with the value of at least 50% but less than 100% of the assets of the listed company. 3. A transaction to be notified to the SET and shareholders in the case of a transaction with the value of at least 15% but less than 50% of the assets of the listed company. 4. A transaction to be notified to the SET but not to shareholders in the case of a transaction with the value of less than 15% and issuance of securities by the listed company. 5. A transaction not to be notified to the SET in the case of a transaction with the value of less than 15% but no issuance of securities by the listed company.

10. 10 A significant transaction on acquisition or disposition of assets as required by the CMSB shall be approved by a general meeting of shareholders. 1. Previous transaction A significant transaction means acquisition or disposition of assets, a transfer or a waiver of rights and benefits, acquisition or transfer of right to possess the assets in the long term. 2. New Regulation 2.1 enter into, amendment or termination of an agreement on letting, a hire purchase of the business or all or part of the assets. 2.2 Assignment to another person to manage all or part of the business. 2.3 A merger of the business with the business of another. 2.4 a financial assistance which is not in an ordinary course of business of the company The new regulation has not defined a significant transaction, as a result, listed companies shall comply with the notification of the SET on acquisition or disposition of assets.

11. 11 Share purchase 1.Licenses can be continuously used. 2.Tax can be saved (no or little capital gain tax on sale of shares, capital gain on sale of shares on the SET or the MAI is exempted from Thai tax). 3.Liabilities are still with the company (actual, contingent, hidden and off-financial statements liabilities) 4.Tax losses, if any, can be carried forwarded 5.Litigations remain with the company. Share Purchase / Asset Purchase

12. 12 Asset Purchase 1. liabilities (actual, contingent or hidden liabilities) will not be with assets. 2. a lot of taxes (withholding tax /or income tax, value added tax,specific business tax and stamp duty) shall be paid. 3. licenses shall be renewed or transferred. 4. Tax losses can not be used by an acquirer. 5. A fraudulent transaction arising within one year before the date of filing a petition for the business rehabilitation or the date of filing the application for adjudication of bankruptcy may be cancelled. Share Purchase / Asset Purchase

13. 13 Contents Latest Regulations related to M&A Key Legal Contracts that govern M&A deals Legal Considerations for foreign investors regarding M&A transactions Dispute Resolution and Legal Risk Management Practical approaches to avoid disputes and litigation Case Study

14. 14 share purchase and asset purchase individual or corporate shareholding conditions precedent legal due diligence actual, contingent and hidden liabilities licenses binding clauses in material agreement minimize potential tax liability indemnification right of first refusal tag along provision settlement of dispute Key Legal Contracts that govern M&A deals

15. 15 Contents Latest Regulations related to M&A Key Legal Contracts that govern M&A deals Legal Considerations for foreign investors regarding M&A transactions Dispute Resolution and Legal Risk Management Practical approaches to avoid disputes and litigation

16. 16 Legal Considerations for foreign investors regarding M&A transactions foreign shareholding limit compliance with laws and regulations on transactions regulatory requirements shares subject to encumbrances, seizure or attachment assets pledged, mortgaged and/or secured equity and/or debt financings legal risks undertakings in material agreements full disclosure of information representations, warranties and covenants control by a majority shareholder matters decided by the Board matters to be approved by a meeting of shareholders management discussion and analysis Legal Considerations for foreign investors regarding M&A transactions

17. 17 Foreign shareholding limit In general, a foreigner shall not hold more than 49% of the total shares of a company incorporated under law of Thailand unless the company is promoted by the Board of Investment of Thailand. Foreign Business Act Not more than 49% of the total shares of a Thai company which carries on any of the businesses specified in Schedule 1, 2 or 3 of the Foreign Business Act can be held by a foreigner. Legal Considerations for foreign investors regarding M&A transactions

18. 18 Specific Acts Specific acts restricting foreign shareholding include the following: Air Navigation Act Condominium Act Financial Institutions Business Act Hotel Act Land Code Telecommunication Business Operation Act Thai Vessels Act Legal Considerations for foreign investors regarding M&A transactions

19. 19 Corporate Structure A complicated structure should be created for protection of foreign investment in Thailand and avoidance of foreign shareholding limit. Legal Considerations for foreign investors regarding M&A transactions

20. 20 Equity Financing Payment for subscription for shares cannot be tax deductible. Equity financing will be within the limit of the debt to equity ratio of 3: 1 as required by the BOI. Debt Financing Payments of interest are tax deductible. Loan by an investor can be made to a company. Loan is secured by mortgage of land, building, equipment and machinery, pledge of shares and/or guarantee. Assignment can be used. A floating charged is not enacted under Thai laws. Legal Considerations for foreign investors regarding M&A transactions

21. 21 Contents Latest Regulations related to M&A Key Legal Contracts that govern M&A deals Legal Considerations for foreign investors regarding M&A transactions Dispute Resolution and Legal Risk Management Practical approaches to avoid disputes and litigation Case Study

22. 22 Litigation Litigation is used in loan agreement and project financing. Litigation is time-consuming and very expensive. Enforcement of a judgment may face challenges. A foreign judgment cannot be automatically enforced in Thailand. A new lawsuit shall be filed by a foreign company against a Thai company in a Thai court. Dispute Resolution and Legal Risk Management

23. 23 Arbitration Arbitration is normally applied in a joint venture, trade and investment. Arbitration is favoured by foreigners. Arbitration is supposed to be fast and efficient. Arbitrators are very knowledgeable and specialized. Award issued by arbitrators can be enforced in Thailand under the Arbitration Act as Thailand is a signatory to the New York Convention. Enforcement of an award can be challenged on the grounds of unlawful proceedings of arbitration,or an award contrary to laws or a public order. Dispute Resolution and Legal Risk Management

24. 24 Contents Latest Regulations related to M&A Key Legal Contracts that govern M&A deals Legal Considerations for foreign investors regarding M&A transactions Dispute Resolution and Legal Risk Management Practical approaches to avoid disputes and litigation Case Study

25. 25 due diligence investigation management discussion and analysis extensive representations and warranties comprehensive covenants strict terms and conditions engaged experience and versatile lawyers Practical approaches to avoid disputes and litigation

26. 26 Case Study A holding of a telecommunication company Operat ing Comp any 1 Operat ing Compa ny 2 Operat ing Comp any 3 Operat ing Compa ny 4 Foreign Company Operat ing Comp any 5 Operatin g Company 6 49 % 42.86 % 51.38 % 53 % 50% 13.45 % 40.02 % 100% Holding s A Investment C Holding Holding Company Thai Holding Bank 99.99 % 99.94 % 49 % 41.1% 9.9 % 38.62 % 10.97 % P Sharehold er S Shareholde r 19.26 % 20% 30.9 6% A Holding

27. 27 Levels of an offshore company and a beneficiary 1. An offshore company is incorporated in an offshore territory. 2. A company setting up an offshore company is located in the first country. 3. A company managing an offshore company is located in the second foreign country. 4. Shares in the listed company held by an offshore company are transferred into a securities account maintained with a securities company in Thailand. 5. Shares in the listed company held by an offshore company are transferred from a securities account maintained with a securities company in Thailand to a securities account maintained with a securities company in the second foreign country. 6. Shares in the listed company held by an offshore company are transferred from a securities account maintained with a securities company in the second foreign country to a securities account maintained with a securities company in the third foreign country. 7. An offshore company has its bank account opened with a bank in Thailand. 8. A bank in Thailand transfers dividends and proceeds of a sale of shares of the offshore company to a bank account in the second foreign country. 9. A bank in the second foreign country transfers money from the second foreign country to a bank account in the third foreign country. Case Study

28. 28 Corporate structure Trust Offshore Company A Offshore Company B Fund A Fund BFund C Company A M & F A B Offshore Company C Company B Case Study

29. SCL Picharn Sukparangsee PARTNER SIAM CITY LAW OFFICES LIMITED 20th Floor, Rajanakarn Building, 183 South Sathorn Road, Bangkok 10120, Thailand Tel: (662) 676-6667 – 8 Fax: (662) 676-6188-9 E-mail : picharn@siamcitylaw.com www.siamcitylaw.com THANK YOU