Stock Exchange Of Thailand Increases Listed Companies Minor Shareholders To Be 20% And Determines Three New Measures To Protect Unusual Stock Trading

The SET Board of Governors passed a resolution to modify the regulations concerning minor shareholders distribution in listed companies, in order to ensure that the proportion of shares distributed to minor shareholders adequately reflects the number of shares able to be circulated in the stock market. In this regard, the Board of Governors resolved to clarify the definition of minor shareholders to make it more suitable as follows:

1. To amend the definition of minor shareholders, as follows: Minor shareholders shall refer to shareholders who are not strategic shareholders, or shareholders whose main aim in shareholding is the circulation of trade. Shareholders who come under the definition of strategic shareholders include:
   1. The government, state enterprises, and public sector agencies.
   2. Company boards of directors, together with other persons and family members who have close relations with the board members.

      Shareholders who have holdings of 5 percent and above of paid-up capital by including those who are related in the holding share except securities companies, accident insurance companies, life insurance companies, mutual funds, provident funds, social security funds and retirement funds.

   3. Persons not covered by 1.1-1.3, but for whom there are grounds to believe that their holdings are strategic.
2. To modify the listing criteria, by requiring newly listed companies to distribute holdings to minor shareholders at a rate of 20 percent of paid-up capital, compared to the previous rate of 10-20 percent. The SET will relax the timeframe for distribution for large companies with paid-up capital of 10 billion baht and above as appropriate.
3. To modify the criteria for maintaining listed company status. Companies wishing to maintain their status as a listed company must have no less than 150 small ordinary shareholders, holding in aggregate of no less than 15 percent of the company's paid-up capital (compared to 10 percent previously).
4. To modify the delisting criteria. Under the new regulations, listed companies will be delisted if their number of ordinary shareholders is less than 150, or if the combined holdings of these shareholders falls below 15 percent of the paid-up capital for a period of two consecutive financial years.

   In this regard, the SET will allow listed companies a one-year period to amend their qualifications relating to the minor shareholders distribution in accordance with the new criteria for maintaining listed company status. If any listed companies are unable to make these alterations, the SET will transfer the stocks in these companies from the ordinary group to the group in which trading is conducted on a call market basis (trading via stock trading partners, with trading made at pre-determined times), until the companies have achieved all the criteria. The SET will consider these qualifications from the shareholders list on the company book closing date to preserve the right for the company's annual general meeting, starting from the annual general meeting of shareholders of listed companies whose accounting periods close on the 31 December 2001 onwards. SET will give listed companies the opportunities to inform the additional information about shareholders who are considered as 'Strategies Shareholders'.

   In addition, the Board of Governors also passed a resolution to ease the criteria for the companies under rehabilitation which are currently going through Central Bankruptcy Court procedures. These companies will not be required to hold an annual general meeting of shareholders.

   The SET will submit these regulations to the Securities and Exchange Commission (SEC) for approval.

The SET Board of Governors agreed in principles to the following three measures to protect against unusual trading activities in order to catch such behavior more efficiently, and to ensure that the culprit groups are targeted:

• If the SET decides from its initial investigations that suspicions of unusual stocks trading of customers are grounded, and if it looks as if this might continue in the future, the SET shall forbid member companies from sending in trade orders from these customers for at least 30 working days.
• If the SET finds that there are unusual stocks trading together with the stock trading situation show signs of systematic risk due to severe fluctuations in the trading price and should there be severe crowding of the stock trading volume, SET will order member companies not to allow such customers from trading on a net settlement basis, and/or from trading on a margin basis, and/or from short trading, and shall order these customers to temporarily trade in cash only. This measure is designed to protect against damage to the system as a whole.
• In addition to the measures laid out in 1 and 2, if it is found that the trading of the stocks could be dangerous to the overall trading, the SET shall temporarily suspend trading in these stocks.