New Draft Regulation of the Energy Regulatory Commission Aims to Limit Foreign Shareholding and Foreign Board Composition in Electricity Businesses

During the period of 25 November 2022 to 12 December 2022, the Energy Regulatory Commission (the “ERC”) conducted a public hearing on three draft secondary laws. One of said draft laws, namely the Draft Regulation of the Energy Regulatory Commission re: Qualifications, Supporting Documentary Evidence and the Application to Engage in the Electricity Business B.E…. (the “Draft Regulation”) aims to revise the required qualifications of the person applying for the electricity business license (the “Applicant”). 

Under the existing law, there is a legal requirement imposed on an Applicant that is a juristic person (i.e. a partnership, private limited company, public limited company, or juristic person located overseas that has a branch office in Thailand), which requires the authorized persons, representatives, or executives/managing directors of the Applicant to be of Thai nationality (the “Existing Requirement”).¹

However, under the Draft Regulation, in the absence of an international agreement containing a specific commitment (either Mode 3 or Mode 4 respectively) for national treatment or an exemption provided under any other law, the following conditions are imposed on an Applicant that is a partnership, private limited company or public limited company, as follows:

• The Applicant must be incorporated under Thai law or registered in Thailand with the objective of engaging in electricity business;
• In the case where the Applicant is a private limited company, the shareholdings of foreign shareholders must not exceed 49% of the total issued shares, and the number of foreign shareholders must not exceed half of all shareholders; 
• Not less than half of the directors must be of Thai nationality; and 
• All authorized directors must be of Thai nationality. 

Therefore, unlike the Existing Requirement which only imposes the Thai nationality requirement on the Applicant’s authorized persons, representatives, or executives/managing directors, the Draft Regulation imposes more stringent restrictions on foreign participation in the energy business by extending such Thai nationality requirement to directors, as well as by introducing the foreign shareholding limitation.  Although this Draft Regulation is likely to take effect one day after its publication in the Government Gazette and will not take retrospective effect, all types of license applications (including applications for license renewal) which are submitted prior to the effective date of the Draft Regulation and under consideration, will be considered based on the revised conditions prescribed in the Draft Regulation. 

Currently, following the closed public hearing, the Draft Regulation is under revision and will be proposed to the ERC for further consideration before it is expected to be promulgated and to take effect sometime later this year. 

In light of the above, due to the fact that the Draft Regulation will impact existing licensed energy companies and new applicants for the electricity industry license who have foreign shareholders and/or foreign directors, all parties should therefore ensure compliance with the new requirements and, if necessary, revise their existing shareholding structure and board composition to comply with such new requirements in preparation for the anticipated promulgation of the Draft Regulation.  

This is intended merely to provide a regulatory overview. It is not intended to be comprehensive, nor to provide legal advice. Should you have any questions on this or on other areas of law, please do not hesitate to contract any of the authors.

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