Short Answer
Not simply because that was the commercial intention.
For ordinary shares in a Thai private company, section 1200 of the Civil and Commercial Code states that dividends are calculated in proportion to the amount paid on each share. The statutory wording makes a specific exception for different arrangements concerning preference shares.
That means a holder of partly paid ordinary shares is not automatically excluded from every dividend until the shares become fully paid.
If investors want a different economic outcome—such as no dividend entitlement until a funding commitment is fully completed—the structure must be analysed carefully rather than implemented as an informal company policy.
Why This Matters
Investment documents often connect economic rights with funding milestones.
For example, an investor may agree to subscribe for shares but pay the capital in stages. The parties may commercially intend:
“No dividends until the investor has fully funded.”
That sounds straightforward, but company law may calculate ordinary-share dividends by reference to the amount actually paid on the shares rather than an all-or-nothing funding condition.
The issue therefore belongs in the investment structure, not as a later instruction from management to Finance.
Typical Scenario
An investor subscribes for ordinary shares with only part of the nominal value paid initially.
The shareholders’ commercial agreement says the investor should not participate in distributions until the remaining commitment is funded.
Later, the company has distributable profits.
Management asks:
“Can the company simply exclude that investor from the dividend?”
The statutory starting point says the issue is more complicated.
Practical Analysis
01Start with the ordinary-share dividend rule.
Section 1200 provides that dividends are to be calculated according to the amount paid on each share, unless another arrangement has been made in relation to preference shares.
For ordinary shares, the default is therefore proportional participation based on paid-up capital—not zero participation until the share is fully paid.
02Separate unpaid capital from dividend entitlement.
A shareholder may still owe further capital when validly called.
That funding obligation and the shareholder’s dividend rights are related economically, but they are not the same legal question.
The company should not assume that an unpaid future capital commitment allows directors to hold back an otherwise validly declared dividend as leverage.
03Check what the investment documents are trying to achieve.
Sometimes the real commercial objective is not to penalise incomplete funding. It is to give different economics to investors who have funded at different stages.
That may require a properly designed share-rights structure rather than an informal dividend hold.
04Treat a shareholder waiver as a separate issue.
A shareholder may be willing to agree contractually not to receive or claim a particular distribution, but the effectiveness, timing and scope of that waiver should be reviewed on its own facts.
The company should not assume that a term-sheet sentence permanently rewrites the rights attached to ordinary shares.
05Keep the constitutional and contractual documents aligned.
Check the Articles of Association, shareholders’ agreement, subscription agreement and any preference-share terms together.
If the intended economics require differentiated rights, those rights should be placed in the appropriate legal instrument rather than left as an operational instruction to Finance.
06Remember the separate rules for declaring dividends.
Dividends also depend on profits, shareholder approval or lawful interim-dividend authority and statutory reserve requirements. A funding dispute does not replace those rules.
What We Usually Look At
We review the share class, nominal value, amount paid per share, remaining capital obligation, Articles of Association, subscription agreement, shareholders’ agreement, proposed waiver, dividend resolution and whether any preference rights were lawfully created.
Common Traps
Typical mistakes are assuming partly paid ordinary shares receive no dividends, using dividend withholding as pressure to fund, placing the economic restriction only in a term sheet and confusing a shareholder’s unpaid capital obligation with the company’s calculation of a declared dividend.
Practical Next Step
Before agreeing “no dividends until fully funded,” map:
share class → amount paid → statutory dividend basis → remaining funding obligation → intended economics → Articles / contract / waiver mechanism
If the intended economics differ from the ordinary-share rule, solve the structure before the dividend is declared.
Legal Sources
- Thai Civil and Commercial Code, sections 1200–1205 on dividends and statutory reserves.
- Department of Business Development ruling, Letter No. Por Nor 0803/595 dated 30 July 2003, discussing sections 1200–1205 and the shareholder’s right to dividends by reference to the amount paid on each share.
General legal information only. Please seek advice on your specific facts. Laws and regulatory practice may change.