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Legal Issues & Implications: UNIDROIT Convention and TSD Application

This article discusses the legal issues and implications raised by the UNIDROIT Convention and the application of the Thai Securities Depository (TSD) system. Topics covered include securities holders lists, registrar records, participant deposits, exercise of rights, collateral agreements, and corporate actions.

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Legal Issues & Implications: UNIDROIT Convention and TSD Application

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  1. Legal issues and implications raised by UNIDROIT convention and TSD application Waranuch Worapathirunmas Deputy Head-Legal, Enforcement Department

  2. TSD operation as Depository and Registrar Issuer assign (3) submit the securities holders list Registrar record on register book CSD a/c keeping (2) Participants deposit the Clients’ securities Investors Mr. A/B/C Participant a/c a/c keeping (1) Mr. A/B/Cdeposit their securities House a/c (beneficiary owner) Client a/c (Omnibus) (beneficiary owner) Mr.A Mr.B Mr.C

  3. Legal Issues for TSD Application • The right of third parties to receive the corporate actions which benefits as a result of the securities issuer. Convention TSD CSD a/c keeping CSD a/c keeping Issuer Issuer securities a/c of intermediary a/c keeping Participant a/c a/c keeping exercise right a/c holder (or relevant intermediary) holding securities House a/c Client a/c agreement exercise right third parties third parties agreement

  4. Legal Issues for TSD Application • The right to use collateral securities under security collateral agreement as if it were the owner of them. Convention TSD CSD a/c keeping CSD a/c keeping Issuer Issuer securities a/c of intermediary a/c keeping Participant a/c a/c keeping exercise right exercise right a/c holder (Collateral Provider) House a/c Client a/c (Collateral Provider) agreement exercise right Collateral Taker Collateral Taker agreement • However, Collateral Taker in TSD system has the right to dispose of collateral securities under Thai Laws, is the same as the Convention.

  5. Thai Laws • The Securities and Exchange Act B.E.2535 Section 194 The securities issuer has to give the benefit as a result of the corporate action to the person whose name appear on the register book. Section 225On the date prior to the first register book closing date, the Depository shall compile the accounts of all deposited securities and the name lists of the shareholders of such securities from the participants and submit them to the Registrar, in accordance with the rules and procedures as specified by the Depository to be a part of the securities register book to entitle the corporate action from the issuing company.

  6. The Securities and Exchange Act B.E.2535 • Section 194 No company issuing securities which are listed in the Securities Exchange shall pay dividends or other benefits to persons other than the persons whose names are entered in the securities register and in cases where such securities are shares, no issuing company shall allow such other person to vote in the shareholders' meeting. • Section 225 Where securities are deposited with the Securities Exchange, the depositor shall prepare a list of securities holders, whose securities have been deposited with the Securities exchange, in accordance with the rules and procedures as specified by the Securities Exchange. After the Securities Exchange has accepted the deposit of such securities, the Securities Exchange may accept the transfer of such deposited securities into its own name and shall hold such securities for the depositor or for any customer who is the owner of such securities.

  7. The Securities and Exchange Act B.E.2535 Section 225 (paragraph 2-3) Securities which are in the name of the Securities Exchange in accordance with the first paragraph shall be presumed to be securities held by the Securities Exchange on behalf of those persons according to type, category and amount as appear in the list of names prepared by the depositor. On the closing date of the register of the company which issues securities, the Securities Exchange shall collect the accounts of all deposited securities and the name lists of the holders of such securities, which existed on the date prior to the first closing day, from the depositor of such securities and deliver them to the registrar of the issuing company. Such lists shall be deemed to be a part of the securities register, except for the names of those persons to whom the registrar of the issuing company has notified objection within three business days from the receipt of such lists, on the ground that the holding of securities by such persons is contrary to the law or any restriction on transferability which have been registered in accordance with the law.

  8. Thank you. E-mail: waranuch@set.or.th

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