Joint venture arrangements have become a widely used form of business collaboration, particularly in situations where foreign investors seek to conduct business in Thailand together with local partners. While the shareholding ratio is an important factor in determining the economic interests of the parties, the corporate governance structure of the company established for the joint venture is equally significant.
One legal mechanism that is commonly used in joint venture agreements and shareholders’ agreements is the concept of “Reserved Matters.” Reserved Matters refer to certain important matters of the company that cannot be decided solely by the board of directors or by the majority shareholders, but must instead obtain approval from the shareholders under the conditions specified in the agreement.
This mechanism plays a significant role in maintaining a balance between joint venture partners and helps prevent either party from exercising managerial power in a manner that could adversely affect the rights or interests of the other party.
Definition of Reserved Matters
Reserved Matters refer to significant matters of the company for which the contracting parties agree that special approval from the shareholders, or from certain specified shareholders, must be obtained before the company may proceed with such actions.
In practice, Reserved Matters are typically stipulated in a Shareholders’ Agreement or Joint Venture Agreement to define the scope of decision-making authority of both the board of directors and the shareholders.
In many cases, this mechanism functions as a minority protection mechanism, preventing majority shareholders from unilaterally making decisions on critical matters that could affect the company’s shareholding structure, business direction, or the value of the investment without the participation of minority shareholders.
Legal Framework under Thai Law
Under the Thai Civil and Commercial Code, the management of a limited company is generally vested in the board of directors, while certain significant matters—such as amendments to the company’s articles of association, capital increases or reductions, and the dissolution of the company—require approval from the shareholders’ meeting.
However, Thai law allows shareholders to agree on additional corporate governance arrangements through contractual agreements under the principle of freedom of contract, provided that such agreements are not contrary to law.
Accordingly, the parties may agree that certain significant matters require approval from the shareholders in accordance with the conditions specified in the Shareholders’ Agreement and the Articles of Association of the company before the joint venture business commences operations.
Examples of Common Reserved Matters
In practice, Reserved Matters often cover important matters that may affect the company’s structure or business direction, such as:
- Amendments to the Articles of Association of the company
- Increase or reduction of the registered capital
- Issuance of new shares or changes in the shareholding structure
- Approval of dividend distributions
- Incurring debt or borrowing exceeding a specified threshold
- Acquisition, disposal, or transfer of material assets of the company
- Creation of mortgages or pledges over the company’s fixed assets
- Entering into contracts of substantial value or outside the ordinary course of business
- Appointment or removal of senior management
- Dissolution or liquidation of the company
These matters are typically specified as a defined list within the shareholders’ agreement, the company’s articles of association, or in a schedule attached to the agreement in order to clearly define the approval requirements.
Importance of Reserved Matters in Joint Venture Structures
Reserved Matters play an important role in maintaining a balance of power among shareholders, particularly in joint ventures between foreign investors and local partners.
This mechanism allows each shareholder to participate in decision-making regarding key corporate matters and reduces the risk that one party may exercise managerial authority in a way that adversely affects the interests of the other.
In the context of cross-border joint ventures, Reserved Matters also serve as an important mechanism for enhancing confidence among foreign investors, as they ensure that strategic decisions of the company require approval from both parties.
Key Considerations in Determining Reserved Matters
When preparing a joint venture agreement or shareholders’ agreement, the parties should consider several important issues, including:
- The voting threshold required for approval
- Whether approval must be obtained from a specific shareholder
- The relationship between the authority of the board of directors and the shareholders’ meeting
- The potential risk of deadlock in decision-making
In many cases, Reserved Matters are established together with deadlock resolution mechanisms, such as a buy-out clause or a shotgun clause, to ensure that the company can continue its operations even where shareholders cannot reach agreement.
Case Study: Reserved Matters in a Joint Venture between a Thai Investor and a Foreign Investor
In practice, Reserved Matters frequently play a critical role in joint ventures between Thai and foreign investors, particularly in businesses subject to shareholding restrictions under the Foreign Business Act B.E. 2542 (1999).
Hypothetical Case Example
A foreign investor intends to conduct business in Thailand together with a Thai partner by establishing a Thai limited company with the following shareholding structure:
- Foreign investor: 49% shareholding
- Thai investor: 51% shareholding
Although the Thai investor holds the majority shareholding under Thai law, both parties agree to include Reserved Matters in the shareholders’ agreement, requiring approval from both shareholders before the company may proceed with certain significant matters.
Under this structure, even though the Thai shareholder holds the majority voting rights in the shareholders’ meeting, decisions relating to Reserved Matters must also obtain approval from the foreign investor.
This mechanism therefore creates a balanced governance structure, allowing the foreign shareholder to participate in decisions on important matters of the company despite holding a minority shareholding.
Legal Implications from the Case Study
The above example illustrates that Reserved Matters can function as an important mechanism to:
- Protect the rights of minority shareholders
- Provide confidence to foreign investors
- Reduce risks in the management of joint venture companies
- Promote cooperation between the shareholders
Conclusion
Reserved Matters constitute an essential component of corporate governance structures in joint venture agreements. Properly structured Reserved Matters can protect the interests of all shareholders, reduce risks in corporate management, and promote stability in the business relationship between the contracting parties.
For investors seeking to establish joint ventures in Thailand, carefully determining Reserved Matters in the shareholders’ agreement represents an important mechanism for risk management and maintaining a balance of decision-making power within the company.
Disclaimer
This article is prepared for general informational purposes only and is not intended to constitute legal advice. The information contained herein may not be exhaustive and may not reflect the most current legal developments. Readers should not rely on this article as a substitute for professional legal advice, which requires an analysis of the specific facts and circumstances of each individual case. The publication or use of this article does not create a lawyer–client relationship. All rights are reserved under the Copyright Act B.E. 2537 (1994).
Author: Pinprapus Chartikavanich
Date: 12 March 2026