Horace

1 hour ago, Chua said:

Not all Thai people are nominees. AThai person who has the financial wherewithal to be a true partner and investor in the property project and who receives a dividend for their investment can be a  perfectly legitimate majority shareholder in a Thai land-owning company. Even if a minority of the shares are held by Foreign interests, the company is still perfectly legal. Furthermore, the managing director and sole signer of the company can be a foreigner. Furthmore, the Foreigner can have veto rights such that no changes can occur to the company without their approval. A quorum can be defined such that no meeting of the company is valid unless the foreign shareholders are present.  With this proper type of structure Thai land-owning companies can be legitimate according to Thai laws and yet offer a suitable degree of protection and peace of mind for the foreign shareholders.

This is essentially correct.  That is what the law provides.  

The Property law also refers to agents (a concept that is defined in Thai law) and "nominees" a concept that doesn't make any sense in Thai law.  Its hard to imagine a Thai holding property on behalf of a foreigner as an agent of a foreigner (that would be the height of folly).  We shouldn't blame lawyers for this.  They didn't draft these laws  And they should not be called "loopholes" because they drafted into the laws themselves.

4 minutes ago, inThailand said:

And 90 leases are legal too? Another guy trying to promote and sell his unsellable property.

No.  But that is not the issue here.  The issue is that Thai law does restricts "Aliens" from property ownership and engaging in activities restricted under the FBA. An Alien is strictly defined in terms of the nationality of shareholders.  If 50% of the shares are held by Thais, its not an Alien company.  

No one has posted any reference to any law that says event though Thai nationals own more than 50% of the shares, that company is an Alien (not permitted to own land, restricted under the FBA, etc.) if foreigners have superior voting rights or economic rights.  We're now at page 23 of this thread, and no one had yet posted any cite to any law that supports this position.  

If you claim this is such a law, cite the specific law that says this.  

5 minutes ago, janclaes47 said:

I would love to see a link to that source, since in my almost 25 years here I have never seen or heard a government official make such a claim.

Look at the ABB Distribution Co., Ltd. decision in 1991.  Have you attended any of the meetings between the foreign chambers of commerce and the Thai Ministry of Commerce?  In both meetings the government conceded that Thai law, as written, did not criminalize structures where different classes of shares with different voting rights.  

Show me something where the government said different classes of shares with different voting rights are illegal?  Explain why the Department of Business Development still allows registration of such companies if they are illegal?  

1 hour ago, inThailand said:

Holding a property by a foreigner is illegal.

Wrong.  No law says this.  The law says restricts "Aliens" from owning property and engaging in activities restricted under the FBA.  The law very carefully defines Alien companies in terms of share ownership alone - nothing more.  It says nothing about control or economic benefit.

If this is genuine change in policy, the Thai government is criminalizing structures that the law says are legal and that the Thai government itself said were legal.  That is an expropriation of assets.

16 hours ago, Destiny1990 said:

Since everyone knows for decades  abouts these company formations Why first allowing it for 30 years?

Excellent question.  Why the change? 

How can you take a government seriously when its officials came out and assured foreigners that these structures were legal and legitimate, and then change come out and say the opposite?

And remember the Department of Business Development continues to review and approve companies that will either own land or engage in activities restricted under the FBA where shares held by a foreigners will have ownership control and superior economic rights.  The government is approving these structures and then saying they are illegal?  That is great for investor confidence.

HSBC was giving out loans to foreigners to buy property based on these structures in the 2000s.  They were doing so based on express approval of the the government.

If the government is now changing its position, and intends to take away ownership, that is an expropriation of assets.  If they are going to jail anyone, they are basically unilaterally, without any notice, changing the law and then taking away the property and liberty of foreigners based on a unilateral change in the law.

42 minutes ago, Dogmatix said:

 "Section 113 Any person who acquires land as an agent of an alien or juristic person under the provisions of Section 97 or 98 shall be punished with a fine not exceeding twenty thousand baht or an imprisonment not exceeding two years, or both."

The law you cite refers to an agent.  An agency relationship is not the same as nominee relationship.  There is a major difference between the two.  An agency relationship is defined in Thai law and is typically pretty clear cut.  In other words, there is nothing in the Land Act that even purports to criminalize nominee ownership of land by a Thai on behalf of an alien.  The Thai must be an agent. 

Also, a Minister will not have the final word when the penalty for acquiring land as an agent is two years imprisonment.  This law was passed long before "Section 44" was dreamed up.  A Minister, cannot in his or her sole discretion, expropriate property based on his or her finding that there is an agency relationship without any judicial review.

3 hours ago, Dogmatix said:

American lawyers have to pay into funds that will compensate their clients in the event of malfeasance. After a year or two the fund reimbursed the losses of all the divorcees in full.  That is what makes Thailand different.   There is no accountability for lawyers or compensation for their bilked clients.  Basically no rule of law and police, bank managers, prosecutors and judges are all more than happy to join in the scams because they know there is no downside when dealing with cheated foreigners.  

I do agree with this, that is the absence accountability.  IMHO, that is the probably the biggest problem in Thailand.

2 hours ago, Dogmatix said:

Unfortunately that is correct, although using a company structure to buy land is a violation of the Land Code which is much more straightforward in its definitions, as well as a violation of the FBA which still has loopholes allowing foreign management control. 

This is flat out wrong.  The Land Code is not at all straightforward in its definitions.  It does not prohibit foreign management control.  And it does not prohibit foreign economic benefit.  It does not contain a single provision that that refers to control or economic benefit.  It you claim otherwise, provide a cite.  And remember that when Thai law refers to ownership of shares, it means the nationality of the person who owns the shares and nothing more.

Thai law does not have a distinction between beneficial and registered ownership.  That is a common law concept that does not exist in Thai law.  And its near impossible to include it in Thai law because Thai law does not allow for trusts (unless a specific Thai law creates one, which it does not here). You need a legal system that recognizes trusts to make this distinction, and Thai law does not recognize trusts in this area.  Hence, the Land Act is even more problematic when it comes to foreign control and economic benefit.  To bar foreign control or economic benefit, the law has to specifically refer to and bar foreign economic control and benefit.  It does not under the Land Act and the FBA.  But there is express language under other laws referring to control in other sectors (e.g., banking), which shows that that the Thai lawmakers and jurists understand that if you want to bar foreign control or economic benefit under Thai law you need to expressly say that they are barred.  No such bar in the Land Act or the FBA, which means there is no such bar.

This means that the provisions allowing foreign management control and economic benefit are not "loopholes".  The definition of an alien was discussed when the FBA was enacted in 1998, and it was agreed that after much debate and consideration that the definition would not include management control or economic benefit.  The definition of an "Alien Company" was precisely defined in terms of ownership of shares and nothing else.  That was not an accident or oversight. 

It that wasn't enough, a Coup government re-visted this issue in 2006 and tried to change the definition and, in the face of foreign opposition, agreed not to do so.  In other words, the government agreed that the ownership control and economic benefit would not be taken into account when determining if a company is an Alien.  This is further evidence that foreign control and economic benefit is not a loop hole.

A second Coup government in 2014 again tried to change the definition, the Japanese said this was unacceptable, and the government again agreed that ownership control and economic benefit would not be taken into account when determining if a company is an Alien,  

Prior Director Generals of the Department of Business Development spoke at forums attended by foreign investors and expressly said ownership control and economic benefit would not be taken into account when determining if a company is an Alien.  Thailand needed investment, and policy makers recognized that if the law was changed to bar control and economic benefit, it would chill investment.  This was a conscious decision. Thus, allowing foreigners to have management control and economic benefit is not a loophole.  It was conscious decision by the Thai government after considerable discussion and deliberation.

38 minutes ago, JLCrab said:

There is currently no clear definition of what constitutes a Thai nominee shareholders ...

Under present laws and regulations the indication for a nominee shareholder lies primarily in the source of the capital investment and the financial credibility of the Thai national shareholders when forming the Thai company or when transferring land to a company (often at the discretion of the officials involved).

The first sentence of that quote is exactly right.

But there is no law providing that the "source of the capital investment and the financial credibility of the Thai national shareholders when forming the Thai company or when transferring land to a company" determines if the Thai shareholder is a nominee.  This is a practice adopted by the Dept of Bus Development (and perhaps other authorities) when trying to determine if there is an illegal nominee relationship.  In the absence of any clear definition, I guess it's the best they can do.  But it illustrates a serious problem with Thai law.

It also raises a big question.  Why would a law firm like DFDL set up structures where the Thai shareholders could not show the source of the funds or financial credibility?

Or did they just piss off the wrong person?  Some might remember that True filed charges against DTAC alleging it used illegal nominees.  That was just a business strategy to try to cripple a competitor.  

Here, no idea what is really going on.  

23 hours ago, xylophone said:

Be that as it may, but as has been stated many times...……

 

Farangs "buying a house and land" through setting up a Thai nominee company whose specific purpose is to acquire a property and land is illegal...………….. 

 

There is no argument about this and it is stated on the websites of many Thai legal entities.

Oh well, if its stated on many websites, it must be true.  I forgot that "there is no argument" if its been posted on a website somewhere.   

But looking at this in mature and serious fashion, this, of course, still does not tell us what a nominee is, and that is the crux of the problem.  The only thing we can say for sure is that a company is not using an illegal nominee structure simply because the shares held by foreigners have superior economic and voting rights.  That definition was considered and rejected when these laws were enacted.  That change to the definition of a nominee was also rejected several times after these laws were enacted when Coup governments tried to revise the law by closing what they initially claimed was a "loophole".  The government was forced to concede that this feature of the definition of an Alien was not a loophole.  

Claiming that a company is using an "illegal nominee structure" begs the question of what constitutes an illegal nominee structure.  It is certainly not an illegal nominee structure simply because the shares held by a foreigner have superior voting and economic rights.  That issue was settled when these laws were enacted, and when Coup governments (its always military governments that want to do this) have tried to change the definition, they have been forced to admit a company is not using an illegal nominee structure simply because the shares held by foreigners have superior voting and economic rights.

Yup there is a law saying that the use of nominees is illegal, but that begs the question because there is no coherent and clear definition of what constitutes a nominee.  This remains as clear as mud.

16 hours ago, xylophone said:

Horace: Signing a document saying you are holding shares on behalf of a foreigner to make a company appear Thai is no brainer.  That is obviously an illegal nominee relationship.  

 

You yourself stated the above, so you are saying that there are such things as illegal nominee relationships, and that's all that I and others are saying with regards to setting up a company whose specific purpose is to acquire a property and land. 

 

If you sign a document saying you are a nominee, and the law criminalizes nominees, then of course you have violated the law.

But this does not allow someone to add provisions to the law that doesn't exist, such as foreign control or economic benefit, to make a company an Alien that is disqualified under the Land Act from owning land or under the FBA from conducting business in various areas.

When these laws were enacted and several times after they discussed, debated and considered adding these conditions (which are excluded from the law as written), and decided against adding these conditions.  If they can put them back in now because its convenient to do so, take property from foreigners who relied on the law as it was written, Thai law is meaningless.

In other words, the law does not mean what it says.  It means what I want it to say.  This is like something out of Alice-in-Wonderland.  Its unfair and it will scare the crap out of prospective investors.

14 hours ago, Gulfsailor said:

The approach of interpreting law can be seen in the Thai Civil and Commercial Code (TCCC) under Article 4 para 1 which provides that 'the law must be applied in all cases with the letter or the spirit of any of its provisions.' This indicates that the literal and purposive techniques are permitted for use in interpreting codes or written law. It is questionable whether the letter should be considered first, or have to be considered together with the purpose of the law. Both literal and purposive approaches have to be used together because the text itself is ambiguous and it needs to be considered in the context, and also look beyond the text to find the purpose of the law. One should consider the letter and the spirit of law together in order to interpret the law and if the outcome of both approaches is different, the meaning of purposive approach is more important than the meaning of the text itself.

 

So it's legally possible for the Thai government to allow foreign controlled Thai majority companies to operate in Thailand, while at the same time crack down on companies set up solely or predominantly to own property and which are controlled by foreigners, as this goes against the purpose of the law that foreigners cannot own land. 

 

Several problems here:

1.  First, you are citing the Civil and Commercial Code.  The prohibitions we are talking about here are criminal.  You therefore need to look at how criminal laws are interpreted.  We will come back to that in the end, but the point is that you are applying a principle of legal interpretation that doesn't apply here and, as explained in the next point, you are even applying the principle for interpretation of civil laws incorrectly.

2.  Second, how do you know what spirit of a law is?   These laws, as written, say nothing about control or economic benefit.  Those specific issues were debated when the laws were enacted, and it was decided that control and economic benefit would not be included in the definition of an alien.  This was done intentionally after deliberation and debate.  And done on multiple occasions.  Doesn't that tell us that the spirit of the laws is to exclude control and economic benefit?

If not, this means that law-makers can deliberate and debate in detail over a definition (here, the inclusion or exclusion of control and economic benefit), specifically decide against including control and economic benefit, but the law can still be interpreted to include control and economic benefit because that was the underlying "spirit" of the law?  

If that is true, we cannot rely on Thai laws as written.  That means someone can argue that even though the law uses the word, "white", they are able to Devine that law's spirit prefers "black", and the law should be read to say black even it actually says white.  In other words, if what you are saying is true, the language used in Thai law is irrelevant.

And who decides what the spirit of a law is?  Obviously not the legislature or an appointed assembly (these days), since you are claiming we can put control and economic benefit back into the definition of an alien even though the legislature expressly decided against this.  Do we consult a maw-doo (fortune teller) to tell us what the law's spirit prefers?

If you go down this route of legal interpretation, you end up with these sorts of absurdities.  You turn the law into something mystical where you need to consult with witch doctors to communicate with a law's "spirit".  Is that how Thai law should be interpreted?  By ignoring the language of the law and instead deferring to decisions by witch doctors?

3.    You mentioned how laws should be interpreted.  These laws are criminal in nature because they provide for criminal penalties.  Where criminal penalties strict construction must be applied.  This means that a criminal statute may not be enlarged by implication or intent beyond the the language used,

47 minutes ago, adwbkk said:

It is my understanding that a general principle of law is that any device which is designed to circumvent an existing law is itself illegal.  To my simple mind, that means that if you bought a company so that you could own a house then that is illegal.

No idea where this purported general principle of law is coming from (cite?), but there is no "circumvention" of a law if you are complying with a law. 

Thai law expressly defines Alien companies by foreign majority share ownership. These laws expressly do not refer to control or economic benefit.  Indeed, the government considered including a reference to control and economic benefit several times, but decided against doing so.  Since the law does not refer to control or economic benefit and the government expressly decided several times against including control on benefit in the definition of an Alien company, how can foreign control or economic benefit make a Thai majority owned company "Alien"?  

If the law was intended to restrict foreign controlled companies from owning land or engaging in activities restricted under the FBA, the relevant laws should have been drafted so that the definition of an Alien includes control and economic benefit.  They do not.  Moreover, the issue of control and economic benefit has now been considered several times, and rejected several times.  

If economic benefit and control are added to definition at this point, the economic interests of foreigners are being expropriated.  If the Thai government does not compensate foreigners for this expropriation, it tells investors that they cannot expect the Thai government to act fairly and protect their interests.  The Japanese certainly understand this,.  

24 minutes ago, crazykopite said:

would imagine that the Government would have to employ at least a 1,000 well educated individuals to go through every single company in Thailand it would then have to go though the courts which could take years and years why they don’t allow foreign buyers to hold a small plot of land of no more than a rai has always baffled me no doubt there are those in very high places who own land and property around the world it’s a case of Do as I say not what I do . When I came to Thailand more than 12 years ago I came knowing that any money that I spent over here regardless wether it be on property , cars or boats was dead money because let’s face it any of us could be kicked out at any time and every year when I come to renew my extension of stay I tell myself that this will be my last one and I will move on to a more welcoming neigbouring country . Deep down I know I should have done it a few years ago when the present government came into power but a little bit of me thought that change was on its way . As my wife always says it’s the land of smiles because they like your money end of .

Good point.  I would probably triple that number.

Saying the law on nominee ownership is ambiguous is being generous.  Its circular.  

And if they change the law to eliminate a right foreigners currently enjoy (e.g., control and profit), that is an expropriation.  In other words, if you criminalize a structure that is currently legal, you are taking rights from an investor, and that is an expropriation.  This is a can of worms that the Thai government should not want to open.

The more comments I see here, the more I think that there is something unique to the matter involving.  I can't see a wholesale change of the law and policies.  It would be a disaster for Thailand.

1 hour ago, Gulfsailor said:

"In recent years, the MOI has adopted a strict enforcement policy and issued a series of regulations to limit the use of Thai land-holding companies by foreign investors. Local land registry offices now require Thai shareholders to provide evidence of the funding source for capitalization of any Thai corporation with foreign shareholders (or foreign directors) engaged in land development. The local land registry office has the power to examine the shareholding of such companies to ensure that control over the company is actually being exercised by the Thai shareholders and requires evidence which proves that the source of funds is from the Thai shareholders if there is foreign shareholding (or if any directors are foreign citizens)."

This is a policy of Ministry of Interior.  Is there a law that says that Thai citizens must have control over a company that owns land?  What section of the Land Act says this?  

If there is such a section, when was it enacted?  If enacted after the prohibition on foreign ownership of land, its an expropriation of a right - namely the right of control. 

37 minutes ago, xylophone said:

A). This from the Land Department Minister (office of)...........

 

 "If it is appears that the company is having foreigner as shareholder or Director or if there is a reason to believe that it is nominating the Thais to hold shares for the foreigners, the officer is to investigate income of every Thai shareholders in the legal entity by looking into their work history of what kind of work they have done and what monthly salary they earned, all of these proved by evidence.

 

 If the purchased is funded by loan, then loan evidence must be provided. If after the investigation, it is led to believe that the application for land ownership is circumventing the law or any individual is purchasing land to the benefit of foreigners under the Land Act 74, paragraph 2, the officer is to investigate the case in detail and report to the Land Bureau to be waiting for further advise from the Minister".

 

Isn't this circular? 

It talks about a situation where it "appears" that foreigner is "nominating Thais", but it does not define what the term "nomination" means.  If you dissect the language, you will see its simply a tautology.  A nominee relationship is something that appears to be a nominee relationship.  Sort of like the famous quote about obscenity: "I can't define it, but I know it when I see it"

If simply doing something for the benefit of a foreigner makes a Thai a nominee of foreigners, this leads to ludicrous results.  More important, Thai law does not distinguish between registered and beneficial ownership, which means the word "benefit" here cannot be construed to mean a beneficial relationship".  Thai law doesn't distinguish between registered and beneficial relationship because it does not have a general concept of "trust".  

In fact, Thai law is hostile to the whole concept of trusts. Thai Civil and Commercial Code Section 1686 initially said trusts "shall have no effect whatsoever".  It was amended to allow trusts if created by statute, and then only one statue was enacted to provide for the creation of trusts, and that was for capital markets.  Otherwise, you can't have trusts, which means you can't have distinction between registered and beneficial ownership, which means the whole reference to "benefit" in the text you quote does not refer to a relationship where the foreigner is the beneficial owner (enjoys the benefits of ownership) while the Thai is the registered owner.  Doesn't work under Thai law.

And then looks what happens if if it appears there is a nominee relationship: its a reported to the Land Bureau to be "waiting for further advise from the Minister".  No mention of what the Minister is supposed to do once he or she receives this report. And, more important, it does not clearly state some test the Minister is supposed to use to determine if there is, in fact, a nominee relationship.  

This is also the whole problem with the FBA's definition of a "nominee".  It basically says a nominee relationship is a nominee relationship. 

And this sound sound like an internal guideline rather than a law.  I don't see any reference to anything in the Land Act on this, but I do see the prohibition on foreign ownership.  This sounds like a guideline officers are supposed to use to determine if there is a nominee relationship.  But it doesn't say what is a nominee relationship.

11 minutes ago, xylophone said:

AFAIK the law states that any Thai director/holder of shares in a company which owns a house in "conjunction" with a foreigner has to be able to show the amount of funds they personally invested,

This is not a law.  The Department of Business Development stated that, going forward,  if a company is investing in area restricted to Thais, the Thai shareholder must show that he or she has sufficient funds to pay for the shares he or she is buying. 

Directors don't have to own shares.  They don't have to invest in anything.  So what amount funds does this non-existent law require them to show?  They are not investing anything.

Have not seen this in the English language press, but the Thai press (see link) is reporting that three offices of a regional law firm were raided by the Thai Department of Special Investigations and other agencies on 15 August 2018 in connection with the alleged use of nominees to own land and to operate restricted businesses under the Foreign Business Act.  I have heard about a few cases here and investigations, but I don't recall ever hearing that three offices of the same law firm were raided by the DSI.

As many of you know already, foreigners are generally prohibited from owning land in Thailand. There are some exceptions, but it is often not easy to meet the requirements for those exceptions. Some foreign parties therefore try to circumevent these legal restrictions by using so- called “nominee structures”. There is debate and confusion about what constitutes an illegal nominee under Thai law. In addition, foreign investment is often controlled by a range of legislation, cabinet policies, trade association regulations, laws and other controls. Criminal penalties potentially apply for violating some of these controls and laws.

But I have never read or heard about any reports of coordinated raids (Bangkok, Phuket and Koh Samui) on the same law firm for evidence of the use of nominees.  I have seen threats of crackdown, but never anything like this. 

Is this some unique one-off matter?  Or this are the authorities really cracking down across the country on companies which they believe are using "nominees"?  If the latter, I suspect many companies will need to look hard at their shareholding.  Anyone know? 

https://news1live.com/detail.aspx?NewsID=9610000081423

Why would assaulting another person not be a crime?  Its assault.  If there are domestic problems, work them out through a therapist, elders or the divorce courts.  But no one should be given free license to commit battery on another person.

Just a suggestion, but aren't their more pressing issues with the Thai educational system?  Many of our office staff are grads from Chula, and they really believe its a world class university among the top 10 in the world.  This is a moral certainty since their Dean told them this is true.  But when you look at the international rankings, you will see that Chula is tied at 539.  No Thai university makes it even into the top 500 universities in the world.  This comports with their analytical skills at work.   https://www.usnews.com/education/best-global-universities/search?region=asia&country=thailand&name=

42 minutes ago, overherebc said:

50 minutes ago, FritsSikkink said:

"Labour law doesn't apply to teachers."

It does

 

"Contracts that state 'no severance' to be paid."

A law supersedes a contract

 

"New contract every year means no severance."

Not true, labor office looks at the period a salary has been paid

 

"Severance only paid if the salary is higher than xxxx."

No true, there is no limit in the law

That's what I posted.

Examples of the crap that people believe.

???

They believe it because employers and their counsel will often aggressively outright lie about employee entitlements.  Thais often know the law so employers, IMHO, tend to be much more aggressive with foreigners since they don't know the law.  In fact, the Labour Department in Thailand will provide assistance to employees, including foreign employees (there could be a language problem, so bring a translator).  Thai law is very pro-employee, but you would not know that when you listen to some Thai employers.

On 8/6/2018 at 8:58 AM, nausea said:

ounds about right; interestingly, your example destroys the myth of "lazy" Thais, at least at the working class level. 

Good point about working class level.  I'd like to see a similar analysis of how "hard" the Red Bull heir or the Singha  "let them eat cake" heir worked or works to earn their fortunes.

1 hour ago, grollies said:

Why would I want to download the seekingalpha app just to finish reading the article?

You wouldn't.  Plenty of material about this in other media sources.  Whether you believe the comparison is apt is another matter, but you don't need the app (pun intended) to learn about the comparison.