Horace

8 minutes ago, OldSiamHand said:

 

I wonder if this is reading too much into the reference to "transaction" in Section 798. 

 

While it is true that the "transaction" ultimately concerns the purchase of land by a Thai company with a Thai nominee, the agency being created is  whereby a Thai agrees to provide its services as a nominee shareholder of the Thai company.  The Thai shareholder isn't involved in the actual purchase of land, but is behind the scenes acting as agent for a foreigner to make the Thai company appear Thai.  Agreeing to act as a nominee shareholder is not a transaction that "is by law required to be made in writing."  Never considered this issue before so just throwing it out there.

This could be correct.  But if the Thai shareholder is an agent of a foreign shareholder in agreeing to act as a shareholder, that Thai shareholder, as an agent, must follow the express or implicit instructions of the foreign shareholder while acting as a shareholder (CCC Sec. 807), provide information to the foreign shareholder on the shares the Thai shareholder is holding (CCC Sec. 809), hand over monies received by the Thai shareholder connection with the agency, the holding of shares of in the company (CCC Sec. 810), etc. 

A Thai shareholder in a preference share structure has none of these obligations.  The Thai shareholder does not have to follow the instructions of the foreign shareholder (implicit or express), a Thai shareholder does not have to give information to the foreign shareholder on his shares and a Thai shareholder does not have to hand over dividends he gets from his shares in the company.

Round hole / square peg.  And not the only one in Thai law.

11 minutes ago, OldSiamHand said:

These discussions seem to be mixing two different concepts.  A company with nominee Thai shareholders created to show compliance with the FBA or Land Act are no doubt illegal (putting aside the problem with the definition of nominee).  A company with bona fide Thai investors (not nominees by any reasonable stretch despite problems with the definition of nominee) holding a majority of the shares of a company is not illegal, even if such Thai shareholder has diluted voting rights.

Agree, except I would substitute the word "are" for the words "seem to be".

4 minutes ago, OldSiamHand said:

Nobody can provide a plausible answer because there simply isn't one.  At this point you're just pissing in the wind with many of the posters here - they have a feeling that something is wrong with the structures in common even though they are perfectly legal (and as you mention considered explicitly by the authorities at least twice in the past with respect to voting control vs mere percentage ownership).

Agree.  The question was rhetorical.  The posters have a "feeling" that something is wrong, but can't articulate what is wrong.  You can't force someone to divest their holdings in land or impose criminal penalties based on a feeling that there is something is wrong. 

50 minutes ago, Arkady said:

This law expressly states that acting as an agent to buy land on behalf of a foreigner is a criminal offense. So what does that mean? What actions in relation to the purchase of land for a foreigner would constitute a criminal offense under this section?

The agent would have to be appointed (CCC Section 797), and since this transaction concerns land, the appointment would need to be in writing (CCC Section 798).   In other words, applying the CCC, the Thai shareholder would need to sign a document saying that he or she has authority to act on behalf of the foreigner, and is buying shares on behalf of a foreigner.  I can't imagine any sensible Thai lawyer drafting or any sensible person signing such a document. 

This is one of the reason I think the prohibition on foreign acquisition of land under Thai law is unworkable.  If this is a criminal offense, the law has to be construed strictly in accordance with its terms.  I don't see how a Thai shareholder holding shares with diminished economic and voting rights is an "agent" of a foreigner.  If the Thai shareholder is an agent, he would, for example, need to be obligated to follow the instructions of the foreigner.  A Thai holding shares with reduced voting rights does not have to follow the instructions of the foreigner.  He can what he wants.  He can vote against the foreigner.  In other words, the Thai is not an agent.

59 minutes ago, Dogmatix said:

But so far you have only been explicit in what you believe does not constitute criminalty under the Land Code

If the law does not expressly state something is criminal, it is not criminal.  In other words, we should not have to rely on the law to tell us what we can do.  We rely on the law to tell us what we cannot do.  This is particularly true when the law imposes criminal penalties.  That is how I look at things.

4 hours ago, Cadbury said:

Debt and corruption and self-interest is part of the national process of the country going down the gurgler.

It is only presently held afloat by foreign investment and technology and that will decline progressively the longer the junta remains in power. 

An honourable saviour of some sort is desperately needed. Heaven knows, their are plenty of dishonourable pretenders about.

 

 

I think the plan is to expropriate foreign investments.  That will allow the elite to maintain their high-so life styles.  If a foreign investor complains, scream and rant about how foreigners are trying to take over Thailand.  This strategy has worked for decades and I am sure it will be employed again.

Not to be too cynical, but will this lead to an uptake in staffing for the  night time "entertainment" industry

The rules change and are made up out of thin air as and when convenient for powerful Thais.  And promises and contracts mean nothing.  Two examples:

1.   You sign a contact to supply product or supplies to a Thai company.  The Thai company requires your strict compliance with the contractual terms, but when you ask that they live up to their end of the bargain by, say, paying what they owne, you become a "difficult Farang" who does not understand Thai ways.  If you go to through the opaque court, you will pay a fortune, the odds will be stacked and it will take 10+ years for the ruling (which will likely be against you). If you go public, the Thai company will press criminal defamation charges against you, and you will be paying enormous sums to simply stay out of prison.  (Hint: best way to avoid this is to have disputes settled by arbitration by a respected international arbitration body).

2.   Thai law may permit you to do something (the language will be clear on this) , and you have been reassured countless times by countless officials that you can safely invest here because they would never expropriate your investment, but on a dime, the law will changed, and your property will be expropriated.  Your complaints will fall on deaf ears because this is Thailand you must follow Thai laws.  But the laws can be retroactively changed at any point if its in the interest of a powerful Thai to do so.   You are not allowed to complain about the change.  See first example.  (Hint: Best way to avoid this is to press your country to enter into a bi-lateral investment treaty providing for international arbitration of investor-state disputes)

1 minute ago, Dogmatix said:

You haven't answered my question as to what is your interpretation of Section 113 of the Land Code that  criminalises agents who act to facilitate land ownership by foreigners.  How should "agent" be interpreted in this clause. 

  I just posted that an the term agent is defined in the Thai Civil and Commercial Code.  I don't see why a different definition would apply.  If one does, the Land Code should say.  It does not.  Hence, you look at how agency relationships are created in the Thai Civil and Commercial Code.

23 minutes ago, Dogmatix said:

You have explained several times that the CCC definitions of agent and principle mean that Thais who allow their names to be used as shareholders by foreigners to set up companies that qualify as Thai without investing any of their own money cannot be considered as agents and therefore cannot be held criminally liable in the context of Section 113 of the Land Code.  That being the case, I would like to know what your interpretation of "agent" as used in Section 113 is and exactly what would constitute criminal behaviour in facilitating foreign ownership of land.  It is hard to imagine that a Thai law proscribes prison sentences for a crime that doesn't exist.  So there must circumstances where Thais or others could be guilty of acting as agents.

 

If a preference shareholder is not an agent, what about about those who have no money but let the foreign register ordinary shares in their name.  Could they be deemed to be agents following the foreigner's instructions to sign various documents? 

I think you are confusing my (a) summary of what some claim constitutes a nominee with (b) an agent.  The two are as different as night and day.  An agency relationship is defined in Title XV of the Thai Civil and Commercial Code (CCC).  The CCC sections in this Title say that an "Agent must act according to the instructions of the principal".  CCC section 809 requires the agent to give an account to the principal.  CCC section 810 provides that an agent must hand over all monies received out of the agency.   Agents are liable to principals for their acts. This list goes on.

A shareholders with diminished voting and economic rights does not have to do any of these obligations.  A Thai shareholder in a preference share structure can vote as he chooses.  He doesn't have go to give an account to other shareholders or anyone else.  He can keep all the money (dividends) he receives.  The Thai shareholder has no liability or obligations to the foreign shareholder. The Thai shareholder is simply another shareholder in a company. None of the obligations of an agency relationship apply to a Thai shareholder in a preference shareholding arrangement.  The obligations of an agent are all set out in the CCC. 

I don't see any provisions barring preference shareholding arrangements, and no one has pointed to any provisions of the CCC, FBA or Land Act referring to preference shareholding arrangements.

That is the problem I keep pressing on.  There is a definition of an agent in the CCC, and its pretty clear.  It also pretty clear that a Thai shareholder with preference shares is not an agent.  But nothing about these other principles you and other have raised about "Thais acting on behalf of foreignors". and "sham companies" have ever been explained.  No one has ever pointed to any Thai law on this.  Instead, they claim the company is a sham, and then argue because the company is a sham, the shareholders must be sham shareholders.  But no one has yet pointed to any law about sham companies. 

That is why I see this whole line of argument is putting the cart before the horse.  

13 hours ago, xylophone said:

Can a Thai national own land on my behalf? 

Answer No. It is illegal for foreigners to use a Thai person (juristic or natural) for this purpose and illegal for Thai nationals to act as an agent or owner on behalf of a foreigner, (section 96 of the Land Code Act). The Thailand Land Department even issued a warning in English on their website that this structure would be a criminal offence against the Criminal Code (section 267) and the Land Code Act (section 111).

This is coming to an end so I will keep this limited.  The words "an agent or owner on behalf of a foreigner" begs the question. 

Agency is obviously a problem and it is not used in a preference share structure since an agent is obliged to follow the instructions of his or her  principal.  A preference share holder can vote his or her shares as he pleases.  He can vote against the foreign shareholder.  A preference shareholder is therefore not an agent.

Is the "Thai person" owing land on behalf of a foreigner?  The meaning of this language is vague.  We obviously disagree about what this means, but I don't think it can be legitimately disputed that the Land Department's interpretation of this vague language has obviously changed over time.  And that's the problem. 

If it meant one thing in 1999 when the Land Department allowed foreign controlled companies to own land because the Thai economy was languishing, and it means something else today, the application of today's definition on a structure set up 20 years is an expropriation.  I know you will disagree, but I am confident the markets will not.

30 minutes ago, Arkady said:

Officials politely turning a blind eye at foreigner chambers of commerce meetings over 20 years ago wouldn't amount to a legal precedent, even if they were important in Thailand's legal system.  At any rate there is no official document stating that Land Dept officials considered the structures legal at the time.

 

If rule of law matters so much to foreign investors they should adhere strictly to the law and not look for loopholes to circumnavigate it or not be unhappy if Thailand decides to enforce its laws properly.

 

The law says "Aliens" cannot engage in activities restricted under the FBA (absent certain exceptions) or own land (absent certain exceptions).  The term Alien, at least in the FBA, is defined by the nationality of the shareholders.  It does not refer to voting control or economic rights.  In fact, the Thai legislature considered adding control or economic benefit in 1998, but decided against doing so.  That was deliberate decision.

Can you now point to a specific Thai law that says the courts should look at voting control or economic benefit - or something else more than the nationality of the shareholders - when determining if a company is an Alien?  Criminal penalties apply for violations of these laws, so a reference to the "spirit" of the law does not work. Also, a policy enacted, say, in 2006, cannot affect a company formed in 1999. 

If there is a specific law that says this, I would like to see it?  Provide a cite.  Please also explain why the Department of Business Development allowed these companies to be registered when the shareholders were listed by nationality and the company's objects listed activities subject to the FBA?  Finally, why did the Land Department allow these companies to buy land in the first place when it was apparent in the company registration documents that foreigners controlled the company and had superior economic rights (in other words, I am not talking about the scam that apparently occurred in Koh Samui in more recent times).  I am talking about before 2006. I must have asked these questions a dozen times, and no one has yet provided a plausible answer.  Can you do so?

1 hour ago, OldSiamHand said:

It's a very good "big picture" thought IMHO, however the authorities apparently have other priorities.  Getting back to the raid in question, has there been any updates on why it was carried out?  I'm still guessing it is still a one-off (disgruntled investor/competitor/client) and does not reflect any change in policy by the higher ups. 

Good question, and we still don't have an answer.  

I don't doubt the claim about what they do in Koh Samui now.  But we still don't know why they raided DFDL.

My policy concern is this: if older structures that were legal back in 1997/1999 are being treated as though they are illegal now, that is a big problem.  Remember,  shortly after the financial collapse of 1997 the Land Department not only knew exactly how these structures were formed, but senior Land Department officials sat on panels where they were openly discussed.  That is quite different from the situation described in Koh Samui, where it sounds as though lawyers or property agents were engaged in some unlawful, or at least sharp, practices to deceive the authorities.   And, of course, DFDL was presumably not dealing with 20 year old company structures (I guess).

I know some here claim that these structures have always been illegal, but that is simply untrue.  No one said that 20 years ago. More important, no one has yet cited a law that says they are illegal.  All I see is the loose use of terms like "sham company". etc., without any reference to a law that defines a "sham company" or even mentions "sham companies".    

I also see references to practices (not new laws) that have been implemented since 2006, and that seems legitimate.  I can understand new guidelines that prohibit foreign investment in new structures set up going forward.  But if the law is being retroactively changed and new laws are being applied to structures that were openly accepted as legal 20 years ago, that is an expropriation.  

And of course there is still the big question about why the DSI needs to be brought into this.  I would have also thought the authorities had other priorities. 

1 hour ago, Gulfsailor said:

On Samui they certainly aren't. What happens is that a company is set up with no foreign shares and no foreign director. Company then purchases the land and land department thinks everything is dandy. Immediately after the land purchase the foreigner gets 49% of the shares with preferential voting rights and becomes the sole director. 

No familiarity with what happens on Koh Samui. 

I know that in Bangkok, in the years after the financial crisis when Thailand had not yet recovered, if foreigners held 49% of the shares or less in a company and Thais held more than 50% of the shares, that company could easily buy property.  No questions asked.  These sales were openly promoted at seminars where senior Land Department officials spoke at foreign chamber of commerce meetings.  The focus was purely on restoring value to the Thai property sector.  No one looked at voting or economic rights.  The Land Department only cared about the nationality of the shareholders.  Not only that, Thai banks - yes, Thai banks - would provide mortgages to finance land purchases by these companies after the Thai bank's own lawyers reviewed the company structure.   

I appreciate that practices can change, and almost certainly have changed since the financial crisis.  That's fine.

But I find it alarming that structures that were considered legal and accepted by the Land Department (when they were absolutely familiar with the structure of the companies) to buy land, are now considered "illegal" and at risk of expropriation by the government.  Yes, you can change the policies going forward.  But you cannot fairly force foreigners to divest themselves of these holdings based on allegedly illegal nominee structures when the authorities themselves - when Thailand was having serious financial problems - came out confirmed that the structures and transactions were perfectly legitimate.   

If they can expropriate property when this occurs, then the rule of law in Thailand is meaningless and they can expropriate foreign investments whenever it suits their interests.  Will big investors notice?  Yes, they will.  Why? Because  the country managers of some of Thailand's largest foreign investors bought property using these very structures.   The rule of law matters if you hope to attract foreign investment.

1 hour ago, mogandave said:

Again, I think you are being disingenuous. I have been following this thread, and as far as I know, no one has indicated foreigners operating legitimate businesses had anything to worry about.

You keep making this stuff up, much like when you compare companies like Toyota with shell companies that only exist to facilitate foreign ownership of real property.

Is your position so weak you have to resort to intentionally confusing the two?

I do not want to see anyone lose their property, but the idea there will be a huge backlash resulting in legitimate companies pulling out of Thailand because some people involved with circumventing the law get caught is ridiculous.

OK, I will ignore the gratuitous ad hominem attacks and keep this simple and civil.  I am hoping you are capable of doing the same.

You assume some businesses are legitimate while others are not.  Where in Thai law do you find a find a definition of the term "legitimate" business". Be specific. How is a company operating in the service sector or a company that owns land any less "legitimate" than Toyota? 

You claim I am "confusing the two".  If I am really confusing the two, there there must be a principled basis for distinguishing between legitimate and illegitimate businesses that is written into Thai law.  Tell us all what that distinction is?  Give us all a cite to the Thai law that make this distinction.

You assume that businesses are "circumventing" the law, but you never explain how they are circumventing the law when they are complying with all of the written requirements for registering a business, paying taxes and conducting their business.  Explain that?  Provide specific cites to Thai law.

If these businesses are really illegitimate businesses circumventing the law, why did the Thai authorities register them in the first place?  Its apparent in the registration papers what the business will do, who owns the business, the shareholding rights of the shareholders of the business and the nationality of the shareholders.   If company buys land, all of these details about the company are provided when the land acquisition is registered with Land Department. Why aren't land purchase registrations rejected if this is all illegitimate?  The same is true when they operate a business. If they were "illegitimate businesses", why did the Thai authorities register them in the first place?  Why did they allow them to do so for decades?  

Finally, why is this such a big deal?   Why the DSI raids on businesses engaged in legal activities (e.g., rendering services, operating restaurants) and foreign retirees with all of the other shenanigans we see here?  Aren't their more important problems in Thailand?

9 hours ago, janclaes47 said:

I don't think Tesco owns 100% straight out, but they do it through a legal construction of one or more Thai companies.

The retail sale of goods is not subject to the FBA if the total capital is 100 million Baht or a minimum or 20 million Baht per store.  Originally the DBD said "capital" meant "registered capital" (significant because only 25% of registered capital needs to be paid-in), but then, a few years later, did a total reversal and said capital meant paid-in capital.  This interesting for two reasons.  First, because this not an "exemption" from the FBA; instead the FBA's restrictions simply do not apply if the minimum capital rules are satisfied.  Second, the DBD flat our reversed a prior decision on minimum capital that retailers had relied on setting up operations in Thailand.  Those type of reversals are always wonderful for creating the impression that Thailand is a safe investment environment and the rule of law actually means something. 

Someone above said this and I have said this as well, but I don't see why there is such an obsession with foreigners purportedly "evading" and "circumventing" the FBA.  Doesn't Thailand have more serious problems?  Say, a 300 million Baht loan by a massage parlor owner employing trafficked under age girls to a Thai ex-police chief?  A crappy education system? Just about everything to do with Koh Tao?

Just a thought, but wouldn't, but wouldn't it be a better use of Thailand's resources to go after these problems rather than foreigners with management control of businesses that employ Thais (and pay their taxes and comply with Thailand's pro-employee labour laws, unlike many Thai controlled businesses) or retired foreigners living in villas owned by Thai majority owned companies?  Why the venomous vigilante like attacks on foreign business operators and foreign retirees while other, real problems (think energy drink scion plowing down a police officer with no arrest warrant against him for five years after this death and then, when an arrest warrant is finally issued, simply flying out of the country "unnoticed") are essentially ignored and swept under the table?  Just a thought.

2 hours ago, Dogmatix said:

hese brings us back to the original post re the raid on DFDL in Phuket because there seems to be a connection, regardless of whether TC Blue Dream Limited was a client of DFDL.  In formulating specific targets for knee jerk reactions to events Thai police often opportunistically select targets that are unrelated to the event but are on someone's sh*t list for some other reason.

This highlights another concern I have about these "nominee" claims.  The concept is so vague (even if there is disagreement on what the term "nominee" means, I think we can agree it is subject to legitimate argument), that it lends itself to opportunistic enforcement. 

Agree that the Chinese are prone to pay bribes and tend to set up structures in a crude manner.

9 hours ago, Dogmatix said:

If it came to all this, you could be pretty sure they would legislate the sham villa owning companies into oblivion.  Nobody would be sticking up for them and it wouldn't even be a blip for the Thai economy. 

Interesting post.  I am not sure why this is revolving around villa owning companies.  It started with the comments on the raid on DFDL. My comments have been about changing definition of an Alien so that structures that were legal become illegal.  Its the principle that bothers me.  A taking of a property interest is an expropriation no matter what the nature of the business.  There is no reason to do it unless that business is creating problems.  And I don't see the problem here, but I do see problems with plenty of other businesses here, and they don't involve foreign ownership, but instead involve environmental degradation, human trafficking and corruption.

I don't have any interests in Koh Samui villas or any other villas, but I do think an expropriation of villa owning companies would not be good for Thailand.  Tourism is becoming increasing important to the Thai economy. and this sort of expropriation does sends the wrong signal to visitors.  Also, I can't see how this sort of move helps Thailand. What "problem" is this type of move fixing.  Why change the law to fix a "problem" that does not exist? 

Doesn't Thailand have bigger problems?  A dodgy educational system, corruption, a reputation for double standards when dealing with foreigners, etc.  How does an expropriation of a villa where a foreign retiree lives helping Thailand? Indeed, rightly or wrongly, this sort of move will harm Thailand's on the "double standards" issue.  And for what?  How are Thailand's real problems improved by expropriating the villas of foreign retirees?

Seems like a recipe for bad press to me.

Everyone here (except me) seems to focus on villas in Samui.  So its obviously  important to them.  I think any expropriation of any kind in Thailand (and we are talking about an expropriation) would further harm Thailand's already shaky reputation when it comes to observing the rule of law.  And I don't think you can honestly predict with confidence that it would not be a blip.  You really don't know.  Let's be honest: none of us do.  So why mess with it when it does not solve any real problems here?

2 hours ago, mogandave said:

So now you’re comparing Toyota and Hitachi to a guy setting up s shell company to circumvent the law.

The Japanese Chamber and Embassy opposed the proposed changes to the definition of an Alien Company. All foreign chambers and embassies opposed the proposed changes. How do you make a principled distinction between a small investor and a big one? The same law applies to both. If one is a “cheater” the other is also a “cheater”.

When you call them “cheaters” you’re putting the cart before the horse. If these structures are already illegal, why did the Thai government press three times to change the definition of an Alien Company? 

And what about about SMEs and IT start ups? By adopting protectionist laws you’re eliminating the challenges that will make Thai SMEs and tech companies more competitive.

Your taking learning and job opportunities away from Thais. That’s not fair to middle class Thais who can’t afford an expensive university education overseas. Why should average Thais suffer so that vested wealthy local interests are protected from international competition? 

By the same token, why shouldn’t Thai property owners be free to sell their property to foreigners if they offer higher prices? Why the press to keep less privileged Thais poor?

Free and open markets - including property markets - make the economy more robust and help immunize economies from the collapse I saw here in 1997. They reduce opportunities for corruption. They provide opportunities for growth and development. Why should these opportunities be denied to the vast majority of Thais?

1 hour ago, mogandave said:

 

Why would it be an economic disaster for Thailand?

 

Why would anyone investment in a less developed country that has expropriated property?  Your investment is not safe, and Thailand relies on foreign direct investment.

In 2014, when the government proposed changing the definition of an Alien so that a company would be considered an Alien if foreigners had management control or economic control, the then Thai Minister of Commerce met with representatives of the foreign chambers of commerce.  Within the first 10 minutes of the start of the meeting, the chair of the Japanese Chamber of Commerce in Thailand said that if the proposed changes were made, the Japanese would stop investing in Thailand and many Japanese companies, including name brand auto companies, would pull out of Thailand.  Hundreds of thousands of high paying jobs would be gone forever.

After that, a representative of the Japanese Embassy stood up and said that the Japanese Chamber had the full support of the Japanese government and that the Japanese Chamber was right.  He also said that if these changes were adopted, the Japanese government would proactively warn Japanese companies against investing in Thailand.  Japanese investment makes up a bit more than half of the foreign investment in Thailand, and foreign investment is crucial to Thailand's economic development.

After the Japanese sat down, you could hear pin drop in the room.  The Thai Minister of Commerce looked forlorn, but asked for comments from the other foreign chambers.  Every other foreign chamber voiced complete agreement with the Japanese.  The US, all of the European chambers, the Singaporeans, etc. There was no dissent.

The proposed plan to change the definition was instantly dropped.  The Ministry of Commerce sent notes to foreign embassies in Thailand saying that there would be no change. 

The same laws that apply to big companies apply to small investors.  You can't make a principled distinction between the two.  You can't trust a government that expropriates investments, irrespective of their size. 

If the Thai government changes its position now after accepting what some here mistakenly call nominee structures (I disagree with that term and description) and reassuring foreign investors as recently as 2014 that there would be no change , foreign investors will know that the Thai government cannot be trusted.  Thailand already has a very bad reputation on complying with international obligations and transparency (corruption) issues.  Investment already suffers as a result.  But if these steps are adopted, foreign investors will not only avoid new investments in Thailand, but pull out altogether.  The Thai government knows this.  Somkid has admitted this to Ambassador Davies.

Now consider Thailand's work force, infrastructure, record on protection of intellectual property rights and CPI ratings.  The work force is poorly educated.  The elites may be very well educated, but the men and women who will work in the  increasingly advanced factories that are being built now and in the future lag far behind workers in other SE Asian countries.  The work force is aging and declining in size.  Thailand's record on enforcement of intellectual property rights is poor. Why risk valuable intellectual property in Thailand if it can be expropriated?  

Thailand's score on Transparency International's Corruption Perception Index (CPI) equals Indonesia and has declined since 2014.  Thailand is looking to the Chinese for help on infrastructure (China's extortionist terms for investment is fodder for whole new thread, but its been covered in the financial press).  That is a sign of desperation. Its growth is lagging behind its neighbors.

If Thailand wants to grow and meet the expectations of its growing middle class, its needs a stronger service sector.  The service sector will continue to lag behind other countries if protectionism prevents competition.  A small group of the elites, the vested interests, may prosper from protectionist policies, but the other 99% will suffer, including the Bangkok middle class.

This is not the time for Thailand to even bluff about expropriating foreign assets. 

52 minutes ago, Dogmatix said:

In 2007 the amendments to the FBA that would have enlarged the definition of alien companies to include those where foreigners had effective management control was defeated in the appointed legislature not because of rational arguments as this but because a militant faction in the NLA that wanted much tougher controls of foreign businesses than in the amendments bill decided to boycott the vote at the last minute as a protest against the supporters of what they regarded as an overly soft bill.   This cloud seems to have past again in 2014 but it will probably come again as it pops up every decade or so.  Eventually they will probably get around to freeing up the services sector to large investments and ditching the preference shares, which would have implication for land ownership, as that will never be freed up.  

 

Be all that as it may, we have not been focusing on large companies with real businesses and preferences that are wanted in Thailand and are useful to the economy.  We have been focusing on shell companies set up solely to buy one house for one foreigner without substantive Thai shareholders and no operating business and usually without any preference shares, which the Land Department has been defining as alien according to its own internal rules at the discretion of the Interior Minister since 2006, as provided for in the Land Code.  

 

It seems pointless to say that the Land Code should have been written in 1954 with a definition of alien company being one controlled by preference shares and that it is now too late to have a change of heart and go back on that because foreigners have already bought land on that basis.  In 1954 there were no preference shares permitted in Thailand and foreigners were allowed to own land under treaty.  The Alien Business Decree only came into being in 18 years later.  At any rate the Land Code has a different definition of an alien company from the FBA that came later.  Under the Land Code a company is alien where foreigners own more than 49% of the shares are held by aliens or the majority of its shareholders are aliens.  In the FBA a company is alien if more than 50% of its shares are held by foreigners without regard to what proportion of shareholders are aliens.  So much for saying that definitions used under different laws must be consistent. 

A few quick points.

I don't know what happened in the NLA's deliberations in 2006.  But it's irrelevant.  What we see is an elected legislature considering voting control and economic control in 1998 when the FBA was enacted, and deciding against it.  In 2006/7, the exact same issues and arguments are raised, and Thai government does not change the definition.  In 2014, the exact same issues comes up again with the same arguments, and the Thai government again abandons the proposal.  Having considered and rejected proposals to change the definition of Alien to include voting control and economic control at least three separate times, how can they now plausibly change the law?  If they do so, the rule of law means nothing in Thailand.

I don't know when preference share holding first came up, but I know the ABB Distribution case (shares with different rights) came up in the early 1990s.  If the authorities wanted to change the law to require Thai control and economic benefit in companies that own land, they could have changed the definition in the early 1990s and grandfathered in companies that already had these structures.  They did not do so.  Most of the construction that seems to bother people happened well after the 1990s.   Further, Thai banks were still granting mortgages to foreigners to finance land acquisitions circa 2001-2004. No objection at all from the Bank of Thailand.  There was a big booth in Don Mueng Airport next to a TAT office and an immigration office that was advertising and promoting foreign ownership of land.  No objection.

My problem is with a change in the law where foreigners are forced to divest ownership and control in companies that were registered legally and treated as if they were legal for decades.  Forcing a divestiture now is an expropriation.  Its unfair and it will scare investors.   The same law that applies to a villa with an infinity pool in Koh Samui (alas, I don't have one) applies to Tesco and DTAC.  I don't see how you can make a principled distinction between the two.  

If Thailand wants to change the law going forward, that is another matter.  Grandfather in the existing structures, which means they remain and there is no gradual divestiture, as was proposed in 2006/7 (that is just a slow expropriation).  The new laws can only apply to new companies formed after the new laws are enacted.  Companies formed before new laws are enacted are not required to make a divestiture.  Share owning rights remain the same.  Otherwise, the government has an expropriation and that is not only wrong, but would be an economic disaster for Thailand. 

On 8/17/2018 at 9:53 AM, webfact said:

The raids were conducted in relation to the use of foreingers using Thai nominees to allow matters like land purchase and the operation of businesses restricted under the Foreign Business Act. 

In the original article that started this thread, it says the raid were conducted "in relation to the use of foreigners using Thai nominees to allow matters like land purchase and the operation of businesses restricted under the Foreign Business Act".

We've had 480+ posts, but I have yet to see one cogent description of what constitutes a "Thai nominee" backed up by a provision of Thai law. Its really that simple and I think I can summarize the main points of my argument in an equally clear fashion.

The government has admitted several times that there is a problem with the definition of a "nominee" in Thai law.  The government said there was a problem with the definition of a nominee in 2006 and 2014 before an audience of several hundred members of the foreign chambers of commerce.  They argued that they only way to "clarify" the definition of a nominee was to change a definition in another provision of Thai law; specifically the provision of Thai law that defines an "Alien" company.  Alien companies are defined simply as companies where a majority of the shares are owned by foreigners. Thai law does not allow Alien companies to own land and restricts their ability to operate businesses subject to the Foreign Business Act.  But the definition of an Alien says absolutely nothing about superior voting rights or economic benefits.

Decades after these laws were enacted with these definitions, the government said it wanted to change the definition of an Alien company so that a company was considered an "Alien Company" if foreigners had voting control or superior economic rights.  The foreign business community said it was unfair to change the definitions in laws that had been around since 1998 (FBA) and earlier in the case of the Land Act, and that foreigners relied on these definitions and announcements by government officials stating that preference share structures were legal when the made their investments. 

The foreign community said that if the Thai government wanted to include control and economic rights in the definition, it should have done so when the laws were enacted.  The FBA was enacted in 1998 and, when it was enacted, there was debate and argument by Thai legislators about including foreign voting control and economic benefit in the definition of an Alien company.  The Thai legislature decided against doing this because of fears it would chill foreign investment in Thailand.  Then World Bank WTO Director-General Supachai Panitchpakdi lobbied hard against making this change.  No change was made to the definition of an Alien Company in the FBA.   The proposed changes only came decades later. 

My point all along is that you cannot now insert foreign voting control or foreign economic benefit into the definition of an Alien Company.  The government adopted a definition of an "Alien Company" that expressly excluded voting control and foreign economic benefit when these laws were adopted decades ago.  If a company is now treated as if it is an Alien Company simply because foreigners have superior voting control or economic rights by claiming that these features alone make the Thai shareholders "nominees" of foreigners holding shares with superior voting or economic rights, that change to the law is an expropriation of rights.  Its an expropriation since Thai law already defines "Alien Companies" by majority share ownership and its been legal for foreigners hold shares with superior voting and economic rights since the FBA and the Land Act was enacted.  

5 hours ago, Eligius said:

That's it. No chance for Pheua Thai now. Once they come out with this kind of policy (which is actually a sensible plan, in and of itself, in my view ), the militaristic Powers That Be will become apoplectic and pull every trick in the book to block Pheua Thai's inevitable march to victory (in a free and fair election - which will never happen here under the ju

Maybe.  You are absolutely right about the Powers that Be becoming apoplectic.  

But you are right in saying this does makes good sense, and in the long run I am optimistic that good sense will prevail.  I may be worm food by the time good sense prevails, but I think it will ultimately happen.

22 hours ago, Dogmatix said:

The minister has absolute discretion under the Land Code to consider a company as alien and reject its application to purchase land.

That was a response was long. Winded just reading it.  But to make it brief and understandable, this one sentence sums it up your position: the Minister has absolute discretion to determine if a company is an Alien precluded from purchasing.

If true, the Minister could decide a company owned by the CP Group, SCB or anyone at all is an Alien and cannot buy land. No rules or principles to consider. That is what absolute discretion means.

You are claiming the Minister can decide any company is an Alien precluded from buying property, and his decision cannot be challenged.  If so, so much for the rule of law.

Its interesting to read this thread and see how we got to this rather amazing claim.  The argument went like this:

Assertion:  "The Thai shareholders are nominees because they are investing in a 'sham company'"

Question: "How do you know the company is a 'sham company?'"

Answer: "Because Thai nominees are holding shares in the company."

Question: "How do you know the Thais are nominees?"

Answer: "Because they hold shares in a Thai company."

And now, because this is obviously circular, we have a Minister with absolute discretion, which cannot be challenged, who can declare that any company is an Alien Company that is barred from owning land.  

Parsed down to understandable text, that is the argument when it is stated clearly.