Integrity Legal

It recently came to this blogger’s attention that the Department of Special Investigations in Thailand have undertaken a raid on various offices of those reportedly engaged in the maintenance of corporate structures utilized for the sole purpose of allowing foreigners to enjoy use of Thai real estate. The text of the announcement from DSI was originally published in Thai. We have undertaken a translation of the announcement in order to provide clarity for what could be considered an important issue for expats in Thailand. The translation is below:

DSI in collaboration with the Institute of Communication Science and the Board of Investment are currently investigating a group of Law Offices in the Phuket, Suratthani and Bangkok area that seem engaged in ‘camouflaged’ corporate structures acting as nominees on behalf of foreign shareholders.

As per government policy to actively pursue foreign investors using Thai nominee companies to own land in order to protect the nation’s interests.  On the 15^th of August 2018, Police Colonel Paisit Wongsmuang, the head of DSI; and Police Major Suriya Singhokmol, his second in command; in collaboration with The Institute of Communication Science and the Board of Investment obtained a warrant to search 4 offices as follows:

1. The first team led by Piya Watnawarangul (special agent investigating civil embezzlement) searched the premises of the Office’s Phuket Branch located at 393/4-5 Moo 1 Soi Bantao 1 Srisuntorn Rd., Chengtalay Subdistrict Thalang District, Phuket.  The premises appeared to be the work place of the Thai Nominees and a suspected location for falsifying documents for the purpose of camouflaging nominee activities.
2. The second team led by Worapoj Maihom, searched the premises of the Office’s accounting branch located at 123/9 Moo 5 Chengtalay Subdistrict Thlang District, Phuket.  The office appeared to provide accounting services for the Nominee companies.
3. The third team led by Jakrapop Klinhom searched the premises of the firm’s Samui branch office located at 17/10 Moo 1 Taweeratpakdee Borpud Sub district, Koh Samu District, Suratthani .  The premises were apparently the work place of the Thai Nominees and a suspected location for falsifying documents for the purpose of camouflaging nominee activities.
4. The fourth team led by Mr. Taweewat Surasit, searched the premises of the Bangkok Branch located at Rajanakarn Building, 3 Floor AA Sathorn Rd, Yannawa Subdistrict, Sathorn District Bangkok, and the work place of the Foreign Managing Directors.

The search yielded copies of documentation, computer data and hardware that will be used as evidence in court proceedings.

Additional information found at each premises showed that the foreign investors seemingly purchased over 80 plots of real estate, consisting of land, vacation homes and houses.

Sources also reveal that the firms seem engaged in nominee activities that allow a large number of foreign investors to buy and sell land in Southern Thailand such as Surat Thani, Pangna, Phuket and Krabi with such activities grossing over 2 billion baht per year.

The investigation has found that the group has used Thai employees to incorporate Thai companies.  These Thai Corporate Entities in turn are used to hold shares in other companies for the purpose of allowing foreign investors to buy land.  These activities are in violation of the foreign business act (1999).  Using Nominees to hold land on behalf of foreign persons or entities has a negative impact on national interests and the real estate industry.  DSI will continue to actively pursue and shutdown such activities.

Please note that the above translation should not be viewed as a definitive interpretation of the underlying announcement and is solely for informational purposes. It should also be noted that the matter has yet to be fully settled via adjudication and the final outcome of the case remains to be seen.

The reader of this posting should note that Thai authorities are becoming increasingly efficient and sophisticated in their law enforcement endeavors. This is clear from the increasing number of immigration raids and the heightened scrutiny of officers throughout the Thai civil bureaucracy on issues ranging from revenue assessment to traffic ordinances. Clearly, it is a time to be mindful not only of the formalities inherent in the letter of relevant laws, but the policy considerations which embody the spirit of those laws as well.

Tags: Board of Investment, BOI Company, BOI Company Thailand, Foreign Business Act, Foreign Business License, Land Holding Company Thailand, Thailand BOI Company, Thailand Business Registration, Thailand company, Thailand company registration, Thailand Holding Company, Thailand Nominee Company, Thailand Property Company, Thailand Real Estate Company
Posted in Thailand Property, Thailand Real Estate | No Comments »

In a previous posting on this blog regarding partnerships in Thailand, Thai Ordinary Partnerships and Thai Registered Ordinary Partnerships were discussed. There is another type of partnership structure in Thailand which may be more familiar to those from Western countries: the Thai Limited Partnership. Limited Partnerships have been a method of structuring an enterprise in jurisdictions such as the United States, the United Kingdom, and the Commonwealth nations for quite some time. Meanwhile, jurisdictions in the Eurpoean Union allow for similar structures. Thailand was a relatively late jurisdiction when it came to allowing for use of such structures, but now it may be possible for promoters of a business to form this type of partnership.

A Thailand limited partnership generally consists of, at a minimum, at least one Managing Partner who manages the business and at least one Limited Partner. Depending upon the unique circumstances of a given business enterprise there could be one or more managing partners and one or more limited partners. Although managing partners are personally liable for partnership debts, limited partners are not persoally liable for partnership debts and are only personally liable for the their capital contributions, especially if said contributions have been removed, in whole or in part, or if said contributions were never submitted. It should be noted that limited partners may lose some degree of their limited liability if the limited partner engages in the managment of the partnership or allows his or her name to be used in the Limited Partnership’s legal name. Limited Partnerships in Thailand must register their partnership agreement with the Ministry of Commerce in the same manner as a Registered Ordinary Partnership. As a general rule, Limited Partnerships are taxed in much the same manner as Registered Ordinary Partnerships.

Limited Partnerships which include a foreign national may be subject to the provisions stipulated in the Foreign Business Act. Therefore, where a foreign national owns a majority interest in a Thai Limited Partnership the Partnership may need to apply for a Thai Foreign Business License. However, American Citizens wishing to structure a limited partnership in Thailand may be eligible to obtain an Amity Treaty Certificate for the partnership pursuant to the terms of the US-Thai Treaty of Amity. If a foreign national owns simply a minority interest in a Thai limited partnership as a limited partner, then the partnership may not be required to obtain a foreign business license. However, the foreign national would not be able to manage the limited partnership.

Limited partnerships are able to be converted into limited companies so long as such conversion complies with relevant Thai corporate law.

For information regarding Thai Limited Companies please see: Company Registration Thailand.

Tags: American Amity Treaty Thailand, Amity Treaty, Amity Treaty Certificate, Amity Treaty Company, Amity Treaty Limited Partnership, capital contribution, Foreign Business Act, Foreign Business License, Limited Partner, limited partnership in Thailand, limited partnerships in Thailand, Managing Partner, partnership agreement, partnership agreement Thailand, partnership in Thailand, Partnership Liability, Partnership Limited Liability, partnerships in Thailand, Thai Foreign Business Act, Thai Foreign Business License, Thai Limited Partnership, Thai Limited Partnerships, Thai Ministry of Commerce, Thai Ordinary Partnership, Thai Ordinary Partnerships, Thai partnership agreement, Thai Registered Ordinary Partnership, Thai Registered Ordinary Partnerships, Thailand Foreign Business Act, Thailand Foreign Business License, Thailand Limited Partnership, Thailand Limited Partnerships, Thailand Ministry of Commerce, Thailand partnership agreement, US-Thai Treaty of Amity, USA-Thailand Treaty of Amity
Posted in Amity Treaty, Thailand Business, Thailand company, US Citizenship | No Comments »

The US-Thai Treaty of Amity is an agreement between the Kingdom of Thailand and the United States of America that provides benefits for Thai investors and businessmen in the USA and also provides economic benefits to Americans in Thailand. The most important benefit conferred by the Treaty of Amity is the right of Americans to form a Treaty of Amity Company. A Treaty of Amity Company is a corporate structure similar to a Thai limited company.

The major difference between a Thai limited company and an Amity Treaty company is the fact that an Amity Company can be one hundred percent owned by non-Thais provided the owners are American Citizens. Under Thai law there must be at least three shareholders, but one shareholder could virtually own the Amity Company outright by owning 99% of the shares in the company.  

The content written heretofore begs the question: why is American ownership such a big deal? For those unfamiliar with the Thai legal system, a statute known as the foreign business act stipulates that a Thai company must either be majority Thai owned or an application for a foreign business license will be necessary. Foreign business licenses are somewhat difficult to obtain. That being said, the Amity Treaty preceeds the Foreign Business act and its provisions supercede the foreign business act.

A major issue regarding the Treaty is the fact that it only applies to Americans. No other group of foreign nationals is accorded the same level of economic protection as that conferred upon Americans doing business in Thailand under the Thailand Treaty of Amity. As a result, many prospective business owners from nations other than the USA often ask if it is possible to utilize nominee American shareholders in a Thai company in order to meet the technical requirements of the US-Thai Treaty of Amity.

In theory, such a scenario was once possible. However, amendments to the foreign business act have made nominee shareholders expressly illegal. Also, the Foreign Business Office of Thailand has determined that only an American or a Thai is allowed to be the Managing Director of a company with protection under the US-Thai Amity Treaty.  The upshot of both of these rules is that, as a practical and legal matter, only Americans or Thais can own a majority position of a Thai company with Treaty benefits.

For more details about US-Thai Economic Relations please see: Amity Treaty Thailand

(Nothing herein is meant to act as in the place of competent legal advice from a licensed attorney. No Attorney-Client relationship shall be formed between the writer and any reader of this piece.)

Tags: Amity Company, Amity Treaty Company, Foreign Business Act, Foreign Business License, Thai LLC, Thailand limited company, US-Thai Treaty of Amity
Posted in Legal Opinion, Thailand Business | No Comments »