Integrity Legal

Posts Tagged ‘Thai Nominee Shareholders’

12th November 2014

For many the idea of setting up a business in Thailand is desirable if for no other reason than the thought of waking up and going to work every morning in one of the most idyllic countries in the world. In the past, many foreign owned businesses in Thailand were structured in such a way that they avoided some of the more stringent provisions of the Thai Foreign Business Act. In most cases Thai nominee shareholders were used to own the majority of a Thai company thereby ensuring that the company was considered “Thai” for purposes of the Act. However, this practice became illegal pursuant to section 36 of the currently enforced version of the Foreign Business Act as quoted below:

“A Thai national or a juristic person, not being a foreigner under this Act, who assists in or aids and abets or participates in the operation of a foreigner’s business specified in the Lists annexed hereto where such foreigner is not permitted to operate that business or who operates the business jointly with a foreigner in the manner holding it out as the former’s sole business or who acts as a foreigner’s nominee in holding shares in a partnership or a limited company or any juristic person with a view to enabling the foreigner to operate the business in circumvention or violation of the provisions of this Act, or a foreigner who allows such act to be committed by a Thai national or a juristic person that is not a foreigner under this Act, shall be liable to imprisonment for a term not exceeding three years or to a fine of one hundred thousand Baht to one million Baht or to both, and the Court shall order the cessation of the assistance or the aiding and abetting or order the cessation of the joint operation of the business or order the cessation of shareholding or partnership, as the case maybe. In the case of violation of the order of the Court, the violator shall be liable to a fine at the daily rate of ten thousand Baht to fifty thousand Baht throughout the period of the violation.”

Notwithstanding the fact that the use of Thai nominees is illegal, the practice persists. This fact was recently noted in a Bangkok Post article on the topic. However, in some cases discerning whether a company is utilizing nominees or simply structuring itself in such a way so as to provide security to foreign shareholders can be difficult. Therefore, when structuring a company in Thailand it is often prudent to seek the advice of competent legal advisers to in order to ensure that one’s business practices comport with relevant laws and regulations.

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27th August 2009

In recent news the Thailand property market has been placed under increased scrutiny for fear that foreigners are using Thai companies as a way of owning land and thereby circumventing the de facto prohibition placed upon non-Thai citizens seeking to buy Thai real estate. In some cases, the Thai government authorities are forcing companies which are not in compliance to sell their Thai property.

In a recent edition of the Bangkok Post, the aforementioned phenomenon was reported on at length:

“If the investigation [by the land department] reveals that the firm holding the land have an illegal shareholding structure, the Lands Department will ask it to transfer the plots within 180 to 365 days.Recently, the Lands Department found a company in Phuket whose foreign ownership exceeded the legal limit. The firm had formerly registered with a legal ownership – with foreigners holding a 49% stake and Thais the balance. However, it later increased its capital, with foreign nationals taking up all new shares, making it ineligible to own land. After the department learned about this case, it took action to have the firm transfer the land it owned.”

The situation described above is the classic case of a scenario in which those operating the Thai company opted for the expedient route without making certain that the legalities were respected. There are ways in which Thai companies can own land, but they must be carefully structured in order to comport to the laws of the Kingdom of Thailand. That being said, one should not try to set up any type of corporate device purely for the purpose of getting around the laws of the Kingdom of Thailand.

It remains to be seen whether this increased scrutiny will continue, but those wishing to acquire property in Thailand ought to be aware that there are other perfectly legal methods of acquiring interest in Thai real estate. Long term Thailand leases can be a benefit to those wishing to acquire a leasehold. For those who insist upon obtaining a freehold title to a piece of Thai property, foreigners are entitled to take freehold title to a Thai condo. However, there have been regulations passed recently which place more restrictive legal definitions upon what is considered a “condo.”

There is also a very specialized property instrument known as a usufruct, which allows the usufructuary to hold a lifetime usage right in the structures located upon a designated piece of property. Some people opt to split the title to a house from the title to the land. This can be very difficult, but has been done when executed by professionals.

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