Alf Witt

Given the current climate of change in Thailand along with the new visa rules, lack of government coupled with the economic climate here... would you buy a Grade A Condo in a good location for about 4.5 million baht?

Yes or No?

There are lots of other considerations, but limiting this reply to the ones you are concerned about -

Visa rules depend upon your own personal ability to get an appropriate visa. Some people may have to leave Thailand because their only option is the 30 day visa run which is no longer viable. Generally they will not be the people who comprise the farang market for real estate.

The polictical changes are unlikely to affect every day life here - in essence, one Thai government usually turns out to be much like the other. The only caveat here is if Mr T. returns too soon and there is unrest in the North as a result, that could affect Thailand economically and in terms of its attraction to "visitors".

On balance I would say, yes, go ahead if the deal is OK otherwise.

Good luck.

from this side of the pond, we see the decline in tourism and influx of money from over here.

daily news warns tourists about the floods and fires and the unstablility in the region. How it can go up now is an indication of manipulation. Everyone is saying "what the heck, lets do tijuana"

This flux in the economy is another red flag for tourists over here. Just my opinion based on the local talk here in california.

Sure, flooding etc. has an affect on the Thai economy, but don't you think GB's adventures in Iraq - burning billions of US dollars is weakening the US economy and is the major cause of the dollar's decline? That will prove to be both a political and economic disaster for the USA but you voted for it when you had the chance to get rid, so, som nam na.

I voted for Alf.

Actually, to be fair, Tuschno, most Americans I have met here or elsewhere outside the USA have been a lot wiser than those I have met in the USA. I suspect the fact that the sensible ones have left the country is not too much of a coincidence. Even non-Americans are affected by the strength/weakness of the $$ however.

My friend is considering buying a new house which is in a Thai company name. I don't want to get into the argument whether this is right or wrong, but he asked the question, could he leave the shares that would be in his name to his son in a will.

How would that effect the directorship that was in his name or is this just so complicated a situation that he would be better getting the 30 yr lease option and leaving the lease in the will. Any help would be Greatfull

A good question. I don't know the answer, but I suspect it would help those who do to know whether your friends son is an adult or a child and whether he is Thai or farang. Also I am fairly sure it would have to be a Thai will drafted in the Thai language.

from this side of the pond, we see the decline in tourism and influx of money from over here.

daily news warns tourists about the floods and fires and the unstablility in the region. How it can go up now is an indication of manipulation. Everyone is saying "what the heck, lets do tijuana"

This flux in the economy is another red flag for tourists over here. Just my opinion based on the local talk here in california.

Sure, flooding etc. has an affect on the Thai economy, but don't you think GB's adventures in Iraq - burning billions of US dollars is weakening the US economy and is the major cause of the dollar's decline? That will prove to be both a political and economic disaster for the USA but you voted for it when you had the chance to get rid, so, som nam na.

1) It is possible to have a foriegn company registered in Thailand. It is expensive to do and comes with many restrictions

2) A foriegn comapny registered in Thailand can not own land with a value less then 40,000,000 baht like a hotel for instance.

3) Any attempt to get around these restrictions buy using Thai nationals who have no financial stake in the company(nominees) constitutes fraud.

4) Changing the mix of Thai nationals from 51/49 to 61/39 to 100% and then change after land registration is not a way to make it legal, it is soley an attempt to escape detection.

5) At any time, in a period of elevated nationalism, the Thai government can decide to enforce these laws and confiscate any land held in this( Thai Corp with nominee shareholders) fashion.

6) Thailand is in a state of extreme nationalism

7) Governments repatriating land from foriegners has happened in Mexico, South Africa and Zimbabwe amoung many other places.

8) If a foriegn national complains to their own embassy after their company owned land is confiscated, the reply will be 'Som nom na "

P

Hi Pgrin,

I have been asking anyone here to establish the accuracy of what you say in your item 3) without success so far. Many people assert it to be true and I am asking for the text of the Thai law which supports that contention.

I cannot find the word "nominee" anywhere in legislation and words like that need to be defined in law so we know what we are talking about.

The Foreign Business Act sems to be what people are misquoting.

Here is a direct quote from the Thai Government's official translation of the Act as to what is illegal for a Thai: "holding shares on behalf of the foreigners in order for the foreigners to OPERATE A BUSINESS in avoidance of or in violation of the provisions of THIS ACT". In this context that is "TRADING in land". It says NOTHING about OWNING land.

What law are you relying upon, please, in making your statement in paragraph 3?

Read post 38

all Thai partners or shareholders shall submit (information concerning) the source of capital together with request for registration. Such documents shall identify the amount of money equivalent to the money thatcame in for investment or share ownership of each partner or shareholder as detailed below:

1. Copy of deposit bank book or bank statements retroactive 6 months, or

2. Documents issued by the Bank to certify the financial status of the partners or shareholders, or

3. Copy of evidence showing the source of money for investment or holding shares.

In order to register a Thai/Farang company with majority Thai shareholders the Thai nationals have to prove that they contributed funds and the source of those funds. If they can do this then they are real shareholders. I have yet to see a business plan where a Thai person of means would find it financially sound to invest in a company that exists soley to provide a house for a farang.

P

OK pgrin, I have read it. With respect, you can clearly see more content in it than I can. It is a government instruction to the local company registration offices (CRDs) as to what documents NOW have to be produced to register a 49/51 company. So without producing these documents you can not NOW register such a company. That is no surprise given recent events, but what does it say about those who have existing companies? Nothing that I can see. What I read is this: "The Registrar HEREBY stipulates rules". That means that he is doing it NOW. I also read the words "Effective from 15 August 2006". That means it is NOT retroactive.

The only thing that will happen under this Order, in the future, is if the proper documents are not produced the Commercial Registration Department will reject the application and not register the company - they will not lock you up for fraud. Just like a visa application if you don't have the right documents. Where does it mention "fraud", please? Where does it stipulate penalties for people who have existing companies going back years? Where is the word "nominee?" It does not, as far as I can find appear anywhere in Thai law and the only PRE-EXISTING law that people are "mis"quoting is the Foreign Business Act which stipulates penalties for running PROHIBITED businesses ONLY (which includes TRADING in land).

Please stop worrying people with false information. There are things to be concerned about and we have to examine them, the document you cite is clearly one of those items and I am grateful to you for having sight of it. (More please, posters - where is the Land Code?) But please do not add your own "law" and state it as fact, thank you. It only serves to complicate and confuse.

...

to OPERATE A BUSINESS

...

Please explain why you think that starting a company is NOT the same as operating a business?

It is at the start of registering the business you will have the problem. You need proof you are not using nominees.

AFTER the company is formed buying land is not a problem. But you need to maintain a real operating business. If not ,like just owning land, it is not a real business and it will be investigated.

In the past this was not enforced, now it is somewhat enforced. No GUARANTEE that tomorrow or later it will not be 100% enforced.

It is not a small risk, it is a live changing risk. Why take it?

And please don't give examples about how people are doing it now, they are in it for the profit (buying and selling very quickly), or are extremely low on correct information.

Hi Khun Jean,

I have never suggested that starting a company is not the same as operating a business. What the Law says and what the recent Ministerial Direction is targetted at is farangs who operate "PROHIBITED" businesses (there are 3 lists of what these are and include things like making Buddha images and rice farming) and the relevant one is "TRADING in land" which means buying and selling land commercially. If you buy a loaf from Tesco Lotus you are not "trading" in bread.

It is illegal for a Thai to assist or hold shares on behalf on a foreigner to enable him to break this law. For example if a farang is sitting in the back shop making Buddha images and Khun Lek or Noi is out front selling them. The same applies if the farang is running a company mass producing Buddha images. If he has Thais holding the shares on his behalf so that the farangs' contribution to the nominal capital of the company is more than 49% then they are both acting illegally and can be fined and jailed. This is what people are referring to when they talk about Thai "nominees", but theyare mis-quoting the FBA which does not use the word "nominees" and is about (and only about) those PROHIBITED businesses. It does not address the question of a Thai company simply "owning" land.

If you quote a law to assert that something is illegal you have to read the Act in its entirity to be sure that you are not quoting out of context which is what people have been doing in other threads so I started this one to establish exactly what the law and the Ministerial Directions are saying.

From this and your earlier post you also seem to be of the impression that I am advocating that people should adopt this method now or in the future. I am not. I am trying to establish the legal vulnerability of those farangs who have already gone down the 49/51 company route and are in that situation now. They are being panicked by misinformation.

I'm also not saying that there is nothing to worry about. Maybe there is. I am saying lets find out and, for that purpose I am trying to pool accurate and verifiable facts and "knowledge" here so that we can make a true assessment which is why I wanted to avoid yet another thread with unsubstantiated barstool wisdom. That wisdom is flawed and inaccurate, but I'm not yet sure how flawed as I have not yet had anyone direct me to an English language translation of the Land Code or to point me to any legal text which supports the argument that the law I have referred to above extends beyond the ambit of "prohibited" businesses.

Yes, I agree with you. A 49/51 company probably has to operate as a company but it does not have to operate a "prohibited" business.

1) It is possible to have a foriegn company registered in Thailand. It is expensive to do and comes with many restrictions

2) A foriegn comapny registered in Thailand can not own land with a value less then 40,000,000 baht like a hotel for instance.

3) Any attempt to get around these restrictions buy using Thai nationals who have no financial stake in the company(nominees) constitutes fraud.

4) Changing the mix of Thai nationals from 51/49 to 61/39 to 100% and then change after land registration is not a way to make it legal, it is soley an attempt to escape detection.

5) At any time, in a period of elevated nationalism, the Thai government can decide to enforce these laws and confiscate any land held in this( Thai Corp with nominee shareholders) fashion.

6) Thailand is in a state of extreme nationalism

7) Governments repatriating land from foriegners has happened in Mexico, South Africa and Zimbabwe amoung many other places.

8) If a foriegn national complains to their own embassy after their company owned land is confiscated, the reply will be 'Som nom na "

P

Hi Pgrin,

I have been asking anyone here to establish the accuracy of what you say in your item 3) without success so far. Many people assert it to be true and I am asking for the text of the Thai law which supports that contention.

I cannot find the word "nominee" anywhere in legislation and words like that need to be defined in law so we know what we are talking about.

The Foreign Business Act sems to be what people are misquoting.

Here is a direct quote from the Thai Government's official translation of the Act as to what is illegal for a Thai: "holding shares on behalf of the foreigners in order for the foreigners to OPERATE A BUSINESS in avoidance of or in violation of the provisions of THIS ACT". In this context that is "TRADING in land". It says NOTHING about OWNING land.

What law are you relying upon, please, in making your statement in paragraph 3?

Alf has made fine points I often think we are missing the historical perspective to the recent on the face of it "enforcement", of existing legislation.

Do the Thai powers that be want to force the likes of little me out of my home ? They didn't seem to feel that way until an interim administration applied the EXISTING law, to stop a certain ex-PM and his cronies from committing what amounted to the rape of the countries national assets.

While they were on, was it not unreasonable to apply this EXISTING legislation to try to draw a line under some absurdly blatant land grabbing on Islands, which again by existing law amount to National Parks ?

If we were in their position, would we have not done the same ?

As of yet there is no evidence whatsoever of the application of this EXISTING legislation on any single TV member who just wishes to be left alone on his little piece of heaven and contribute to the local economy.

If anyone has such evidence please post it so I can run around Pong shouting "the sky is falling".

Please do not feel I am putting my head in the sand and hoping things will just go away, far from it, my whole retirement plans ( IE: my life ) are at risk here. I just can't see the motivation for the Government to persecute the likes of me which would surely send a message about investing in Thailand which would take more than a generation to correct.

I agree with you that it is, as always in Thailand, the political and vested interests that are behind this but there is a high potential for collateral damage. I believe that "what you don't know CAN hurt you" so my focus is to try to establish as accurately as possible just how vulnerable the farang who has used one of these companies is. If he is using nominees to TRADE in a prohibited business (land) then I am sure he is as vulnerable as Shin and Singtel, but I'm not sure it extends beyond that either legally or politically. The latter we can only wait and see, the former we can establish to a degree of reasonable certainty in terms of what the law actually says. I saw an article in the press the other day which was saying that if others got off the hook then that should apply to the Shin deal also. I guess that is their dilema and it is probably what is exercising the minds of those in power now. Mr. T had already worked that one out. There is a strong body of opinion that would like to see him prosecuted but the price could be substantial damage to the Thai economy through loss of the entire farang corporation development capital (all the major hotels and resorts in Phuket etc.) plus a knock on effect in the tourist industry not to mention half the lawyers in thailand being reported by farangs for negligence. I'm sure it is the subject of a lot of discussion in the ivory towers. Unlike an earlier poster I do believe that this board will be monitored by the political factions. It's like a vulnerability study post facto. Anyone who has lived in Thailand a long time recognises the act first, think later reaction of the powers that be here and the "I don't really know what to do, so I'll close the doors" reaction of local government offices.

I think thats pretty much the situation we are in now but I'd still like to be as certain as possible about what the law actually says.

PROVE me wrong somebody!

I think you are 100% right.

And you can prove it to yourself by forming a company and buy some land.

Don't forget to report back how it went.

OK, let me share a bit more research with those who are interested:

Here is the relevant wording extracted from the Foreign Business Act which I have found. The quotes in parenthesis are the precise wording of the Act. The remaining text is my comment.

"His Majesty King Bhumibol Adulyadej has been pleasantly pleased to proclaim that it was expedient to improve the law governing the business operation of foreigners."

Note: The Act is about the "business operation" of foreigners. Not about land.

WHAT THE ACT IS ABOUT: Viz. businesses in which a foreigner may not participate:

THE RELEVANT ONE BEING -

"LIST ONE

The businesses not permitted for foreigners to operate due to special reasons:

(9) Land trading."

THE ANTI NOMINEE LAW:

"Section 36. Any Thai national or juristic person that is not a foreigner under this Act, aiding or abetting or taking part in the business operation of the foreigners whose business falls under the Lists attached hereto and the foreigners are not permitted to operate the business or taking part in the business operation of the foreigner by showing that he or it is the sole owner of the business or holding shares on behalf of the foreigners in any partnership or limited company or juristic person in order for the foreigners to operate the business in avoidance of or violation to the provisions of this Act, including the foreigners allowing Thai nationals or juristic persons that are not foreigners under this Act to do so, shall be punished with an imprisonment of not exceeding three years or a fine from 100,000 Baht to 1,000,000 Baht or both, and the Court shall order a stoppage of the aiding or abetting or order a stoppage of the joint business operation or order a stoppage of share holding or a cessation of the partnership as the case may be. Violators of the Court's order shall be subject to a punishment with a fine of 10,000 Baht to 50,000 Baht per day throughout the period of violation."

So it is perfectly clear to me that this Act and the "nominee" question (note that the word nominee is not used) is all about foreigners TRADING in land as a business and it is illegal for a Thai to front for him or hold shares for him to enable him to TRADE in that way.

Even the definition of a Foreigner is limited to this particular Act.

DEFINITION OF A FOREIGNER:

"Section 4. In this Act:

"Foreigner" means

(1) Natural person not of Thai nationality.

(2) Juristic person not registered in Thailand.

(3) Juristic person registered in Thailand having the following characteristics.

(a) Having half or more of the juristic person's capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic parson.

( Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.

(4) Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2) or (3), or a juristic person having the persons under (1), (2) or (3) investing with the value of half or more of its total capital."

WHAT IS MEANT BY CAPITAL:

""Capital" means the registered capital of a limited company or paid-up capital of a public limited company or the money invested in a partnership or juristic person by its partners or its members."

So it does not include loans, even if provided by a foreigner.

Now I am not saying that there is not similar legislation in force regarding companies which merely own land as distinct from trade in land, I am just saying that so far I have not found it and no one on this forum has pointed it out to me. I am satisfied having read this Act from beginning to end that it does not address that issue.

I'm sorry about the long posts, but if we are to stand a chance of understanding this matter accurately they are necessary.

I still remail to be convinced that the anti nominee provisions apply to someone who is not involved commercially in the "land business" which is a business prohibited to farangs under the Foreign Business Act and which the Ministerial Direction referred to in my first post was aimed at.

The following is the advice of a respected law firm given last year as to the existing law. I know that Ministerial directions were issued earlier this year but it has been made clear that hey contained no new law. If someone knows differently or if the substantive law has changed I'd like to hear about it as it is very material to understanding whether the 49/51 company structure is legal or not. I remain to be convinced by those who assert that it is not but who have not establiehed that.

Quote:

"It must first be pointed out that the anti-nominee provisions referred to are found in the Foreign Business Act, 1999 (“FBA”) and not in any of the land legislation, the principal one being the Land Code, 1954 (“Code”)."

"The anti-nominee provisions in the FBA prohibits unlicensed foreigners or a Thai person(s) acting on behalf of unlicensed foreigners, from owning and/or operating businesses that are restricted under the FBA".

So, if this is so there is nothing in the Land Code that prohibits the use of nominees and the FBA prohibition relates to restricted businesses viz. dealing in land as a commercial venture.

PROVE me wrong somebody!

Posts 16 & 17 say mostly everything. Clause 3, Section 3 of the Ministerial Regulation establishing the Commercial Registration Dept allows the Registrar to prescribe rules by law. He has done so ( Reg. No. 102 B.E.2549). Hence the new rules.

Do you have a link to the text, please?

Alf

I cannot be bothered doing a massive cut and paste, so I'll quickly summarise how I see it.

1. You are indeed correct is saying foreigners in almost all cases cannot own land. That however has not stopped many legal devices aimed at getting around this law. In particular, as the TRT machine has fallen down, it has become increasingly clear that massive pieces of land are now in foreign ownership (the property developers) and many of the TRT politicians are the ones that had a hand in creating this situation; the civil service were previously unable to do much about it, but now that they can, they are responding and admittedly they haven't communicated it perfectly, but commenting about that here on a webboard for non Thais is a complete waste of time. If you are serious about doing something about it, write a letter in Thai to someone appropriate.

The issue of foreigners owning land is the issue; much like talking about prostitution or drug use, just because they are illegal doesn't mean they aren't occuring. And if you go down to Phuket and walk around, you will find a hel_l of a lot of projects that appear to have no Thai ownership at all. If you go onto various property sites, you'll have property developers telling foreigners how to structure a system to 'own a property' to 'lease a property for 90 years' and so on. That's why people are talking about foreign ownership, because, simply, there are foreigners here who own things.

2. A company is 'bogus' when it does no trade and is set up solely to lose money and is a vehicle to own property. If a company is legitimate, it is generally recognised to be an entity engaging in some business activity for the purpose of generating shareholder value, engaging in some business activity, with shareholders who have contributed equity to hold shares. By Thai law, generally a company must be majority owned by Thais 51% except for treaty of Amity and BOI exceptions where 100% foreign ownership is allowed.

If a property company exists solely for the purpose of owning a house, with no foreseeable way to generate income, and has majority shareholders who do not appear to have not contributed equity and have no voting rights, then the case can be made that the company is bogus in that it does not appear to be engaging in any business activity requiring the major asset. If the shareholders do not appear to be actively participating in the company and have not appeared to have invested equity and they do not appear to receive any benefits from capital gain or income, they are considered to be simply there to act in the interest of another shareholder; if you want to know more about what a nominee is there are plenty of 'how to' finance websites around the world to explain what they are. Use of nominees has been extensively used to bypass the spirit of the law, and in the case of property when you combine the two together, for the foreign owner it means that they can own land in perpetuity via their company; two wrongs in effect.

They are not shareholders 'plain and simple' when they have not invested equity, when they do not have voting rights and when they do not appear to have any ability to exercise their own decisions. It is important to determine how someone paid for their shares in order to assess the legitimacy of the share distribution, and subsequent voting rights structure. Typically a common stock holder has the right to vote on major issues, a claim on a share of the assets, right to transfer ownership of shares, right to dividend, opportunity to inspect accounts and right to sue the company - if the shareholder only holds pref stock, then the mix is a little different; but in the event there is a shareholder holding stock in a company with no chance to make money or get a return, and it is clear that they didn't invest the money themselves, then that is fairly clear evidence that the company shareholding structure is a sham, and if it is a sham used to breach 49% ownership directly, then under current law it is illegal.

Now if the company actually does trade, then it is a whole different story. But in most cases, the foreigner is simply trying to get around a law, and for that they should be punished under current laws. If the govt wants to let foreigners own land, let them change the law.

The Foreign Business Act 1999 defines a foreign business as 1/2 or more of its capital owned by foreigners even if encorporated in Thailand, or half or more of the value of capital invested being invested by foreigners even if more than half the capital is held by Tai nationals.

When we combine this with Sec 86 of Thai Land Law which prohibits foreign ownership by an individual or entity we can see why the current nominee structure is causing problems.

A shareholder who is a nominee shareholder that has borrowed money with the shares offered as security is expressly illegal in the Foreign business act 1999; I can get hold of the THai acts for you to read (they are written in THai), my own Thai law reading skills suck. Being a nominee shareholder and use of a FBA I think, and possibly also the Land Act.

THIS is where the nominee issue kicks in; the foreigner has contributed more than half the value of the capital invested, then it is a foreign business by definition under the act and cannot own land. In the case of a nominee shareholder, it is the foreigner that is providing all the capital, and maintains ownership voting control over the stock in return.

The same act specifies that companies which own land in the same act must by 51% owned by Thais unless they have specific promotional exemption (usually BOI).

Your post is making a case for why foreigners should be allowed to own land. There are reasons why this may or may not be a good idea, and why it should be restricted. If you want to debate that, then fine. but if you want to discuss the law as it currently stands, I suggest you study some basic company law, and get a copy of the Foreign business Act to understand specifics for Thailand.

You might also want to learn about some concepts regarding how law develops specifically regarding ambiguity, precedents and interpretation. There is some interesting stuff there :-)

I never studied property law, I preferred IP law and commercial law; however law can be very very fun to study, I suggest you learn a bit about property law as the concepts are much the same in most countries. Combine that with some company law, and you'll 'get' what is going on here.

A useful post with good clear arguments, thanks.

However, I have great difficulty in accepting any suggestion that in these circusmstances the foreigner owns the land.

The land is registered in the name of the company. The foreigner is not (unless he is misguided) trying to claim "ownership" of the land. Yes, as you say, there are foreigners who own "things" but not land. Foreign land ownership is simply not possible except in rare cases outwith the ambit of this discussion.

I take your point that if it is not set up properly that the company could be deemed to be a "foreign" company and would be prohibited from land ownership but that still does not mean that the foreigner owns the land the company still owns the land albeit illegally and the land could as a result be forfeited.

What you are suggesting is that if a foreigner has control of a Thai company that owns land then he, the foreigner, owns the land. I think that is not so or the whole concept of the limited liability company would be meaningless. Control does not equal ownership - did you ever rent a car or use one under a lease agreement? That often repeated suggestion about farang "ownership" is damaging to all the farangs who find themselves in this position especially so because of its inaccuracy.

If a company is deemed to be "foreign" by virtue of its capitalisation then it cannot own land, legally. I can see that, but the foreigner still does not own the land - he never will unless the law is changed its impossible under Thai law as I see it. If the farang fully accepts that and he has no intention to try to "own" the land but he would like to enjoy the use of it. Where is that illegal, please?

So obviously you have to avoid the company being considered "foreign" and the key to that as you point out is capitalisation. Therefore half or more of its capital must be owned by Thais. So, the farang fully accepts that the Thai shareholders own 51% of the capital in the company. If a farang lends the money to the Thai and holds his shares as security in these circumstances, as you point out, it is illegal. Accepted. But if the Thai shares are paid up and the farang has no claim on the money that was used to purchase them that does not apply. Correct?

If, however, a farang lends money to the company (N.B. not the shareholder) then it does not fall foul of the above prohibition. The money is not the company's 'capital' because it is a liability of the company (the debt has to be repaid). So as long as the farang does not breach the 49%-51% capital rule the company remains a Thai company with the right to own land.

Who says the Thai shareholder has no chance to make money from his shareholding? I have already pointed out that he has. Anyway, what is the big obstacle to paying a dvidend occasionally? Would that make you happy that the shareholding was not a "sham" as you put it?

And who says that the company is "set up" to make a loss? A very large assumtion. It seems to me sensible that the company leases out the land and then provides maintenance, gardening, security services etc. and ideally has a couple of Thai employees to do that. (They may also be shareholders and help to create the income from which dividends can be paid).

I accept that for someone new to the real estate market in Thailand to go down this route now may not be the best choice, but there are many, many persons out there who are already in this situation. It does not help their cause to use words like "foreign ownership of land" when there are, as I see it, at least very reasonble ways to look at it otherwise. That is what I am trying to achieve here. Look at the law and the facts. Where are these persons weak? Where are they strong? Its not all doom and gloom. Stay "jai yen" and avoid the verbal pitfals of talking about ownership of land by farangs etc. Accept that we don't but play the strengths of our argument. If push comes to shove I suspect that the Thai lawyers who established these companies are going to start arguing it this way as well, otherwise they are even more liable criminally and civilly and professionally than the farang if the doom merchants are right or have their way.

To achieve this again I say if you know of law which contradicts what I say let's hear about it so we can put it under the microscope.

I don't think we are too far away from each other in understanding, Steveromagnino. There may be some worst case scenarios out there but it doesn't necessary apply to all and it does not mean that all should be perceived in that light. Nor does it mean that it is too late to make sensible changes!!! The same view can look different if you shift your viewpoint.

Thank you Nadia 2. That is very useful. I will take some time to consider it.

Hi GaryA and FatBoySlim.

I have no connection with the real estate business. I can see how you allow unsubstantiated guesswork to lead you astray. It is the facts in issue and the relevant law that is of importance here not my profession, although, without disclosing that, I do have a lifelong experience of analysing information.

I can easily accept that there are two elements to evaluating information - one is "what is being said?" and the other is "who is saying it?" Unfortunately it is in the nature of these forums that most of the time we only have the former.

But my proposition is essentially very simple: to those who say that the Thai company route is illegal please point to the law. My research has led me to the conclusion that it is not illegal, but I am not a Thai lawyer, so to that extent I have reservations and therefore as I have said, seek corroboration. If no one comes up with some verifiable information to demonstrate that it is illegal (which is the objective of this thread) then my belief will be strengthened. So to all of those posters who have been asserting that it is illegal - just find me one who has the original source that substantiates it - not too much to ask, huh? Remember weapons of mass destruction anyone? Generally if you cannot find something that you think exists it probably doesn't. The Thais are not trying to hide the law here, even if many of their officials and even ministers think (or more probably, wish) it was something other than it is, so it shouldn't be a difficult task for all the wise ones here.

I am surprised that someone from the USA should suggest that it the "intent" of the law that matters. Sorry, but it is the wording of the law that creates its certainty, otherwise you put power in the hands of officials and authority to make it up and change it on the hoof. You must stop at a green traffic light - oh sorry, I intended to say red so prosecute everyone. A simplistic example but it illustrates the point. That is why legal draughtsmen spend months drafting laws which are amended and re-amended before they are passed by parliament and for Royal assent.

The above is my understanding and analysis and mine alone. I seek corroboration of its accuracy and its conclusion from those who know, perhaps better? But reasoned arguments please not 'off the wall' opinions or something you or your mate overheard in a bar.

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And, worst, you are so pedantic and so... full of shit, I mean, it's unbelievable.

For 0.01 millisecond, I thought that you wrote originally the thai laws... and even that you might be a thai lawyer. But then, right after, reality was back : it was just a nightmare.

Thank you cclub75 for your valuable and insightful response to this matter. I now realise that understanding legal issues should be regarded as a trivial pursuit. I am indebted to your genius and your contribution alone makes my joining this forum worthwhile.

The above is my understanding and analysis and mine alone. I seek corroboration of its accuracy and its conclusion from those who know, perhaps better? But reasoned arguments please not 'off the wall' opinions or something you or your mate overheard in a bar.

3 319 words

15 673 characters

And, worst, you are so pedantic and so... full of shit, I mean, it's unbelievable.

For 0.01 millisecond, I thought that you wrote originally the thai laws... and even that you might be a thai lawyer. But then, right after, reality was back : it was just a nightmare.

As a hitherto unregistered observer of these forums I have noticed that some topics which generate a lot of heat suddenly die a death without any real answer or resolution of the issue. A lot of steam is generated by some posers* who seem to enjoy airing their "knowledge" of Thailand, its laws and politics but, on closer analysis, their opinions, often expressed as fact, are seriously flawed. Often they have misunderstood the real issues. I also have to say that announcements by Thai Ministries are often made in a way that causes panic because they have failed to express their objectives with clarity and have failed to consider the impact of misinterpretation or "loose" interpretation of their statements. Farangs get confused and panicky when they interface with Thai local officials who themselves are unclear about what their leaders have announced and are who are, as a result, inconsistent in their implementation of and explanation about what the law or regulation really is. The Thai Ministries' 'impact study' in relation to any new announcement always seems to take place 'after the event' when damage to foreign opinion and the Thai economy has already set in (sadly, often as a result of misunderstanding) fuelled by inaccurate or sensationalised media reports and by forums such as this where facts and real knowledge are buried under huge piles of misinformation, bovine excrement, paranoia from xenophobic Thais and venom from disillusioned farangs. For example, what happened to the various discussions about land ownership by Thai companies using nominee shareholders? I would have thought that this was an important issue for many farangs (and for Thailand) but the discussion seems to have run out of steam without any real light having been shed on the issue despite the widespread concern it generated and the consequential economic damage to the real estate market and potentially the tourist industry as foreigners form negative opinions about Thailand and its legal system. (I can already hear the wise guys answering "This is Thailand, we told you just wait and the problem will go away", but issues like these have a habit of resurfacing and causing more damage and panic at a later date, not to mention a lot of disinformation being left for posterity on the World Wide Web.

So my message to Thai Ministries is this - please do an impact study before you make far reaching announcements even if you are just re-stating existing law because many people do not understand the message in the way you intended it to be received. This is true not only of farangs but apparently of your own officials. So for the sake of the image of and ultimately the economy of Thailand please get it right first time round (read - impact study!!!) and when you make the announcement consider the old but wise adage - "Step 1: Tell them what you are going to tell them, Step 2: Tell them, Step 3: Tell them what you have told them". Do it in a way that even idiots can understand because it is always good policy to assume that unless you do so in many cases it will be misunderstood and/or misinterpreted with unpredictable and uncontrollable results (have a look at some British Civil Service public notices - they really know how to get their message across without ambiguity and without appearing to be patronising.) Do it like that for Thailand and thereby avoid any negative PR effects caused by misunderstandings!

As for posters on this forum (N.B. the word *'posers' in the 2nd sentence above was a typo but I left it because it seemed in many cases equally apt) - if you have some relevant 'knowledge' to share, that is a valuable and welcome commodity, but if you are expressing an opinion please do not dress it up as 'knowledge'. That can be unhelpful and in some cases dangerous (especially cumulatively). Also, please take the trouble to try to understand and analyse the real issue before rushing to print so that the forum may generate some light rather that increase the confusion.

I would like to illustrate what I mean by the "nominee shareholder" issue and, even at this late stage, hopefully get some genuinely knowledgeable answers that would assist all users of the forum to be be sure about the impact of the Thai government's announcement: Much of what I saw communicated on this matter, both in the press and in this forum, talked about how foreigners could or could not "own" land in Thailand, and/or how they were circumventing the law to do so. There was much discussion about what was often described as 'bogus' companies, and it was stated with some frequency that using 'nominee shareholders' was 'illegal' in Thailand. The announcement was described as a "new law" when in fact it was a Ministry of Interior instruction about existing law and about that laws application in very specific circumstances, but it was discussed as if it had general application. It was apparent that the majority of journalists and posters had either not read it before commenting on it or had read it and failed to understand it.

Here is my own analysis (N.B. not my unconsidered 'off the wall' opinion) of the reality of that issue in which I have tried to stick to the facts and the law as I understand them to be. I do acknowledge that either my understanding of the facts and / or the law may, of course, be flawed and I would therefore welcome any input or correction from knowledgeable persons (e.g. the lawyers on the forum) - please correct me if I have got something wrong in relation to either fact or law.

1) Except in very exceptional circumstances (not relevant to this issue) Thai law prohibits the ownership of land by aliens (i.e. non-Thai nationals). - I have no difficulty with that simple proposition - its fact!

2) It is also a fact that many lawyers in Thailand have established Thai companies at the request of foreigners (the shareholding issue is considered below) and that frequently land is registered in the name of these companies, which quite clearly means that the company owns the land. - What please is wrong with that, per se? What please, is "bogus" about a properly registered Thai company so established? What is wrong, please, with a Thai company owning land - for that is the fact and the reality? Those farangs (and Thais - including even Ministers) who talk about farangs owning land "through" or "via" a Thai company are at best confused. In Thailand as in any other jurisdiction a company is a separate legal entity from its shareholders and directors and its assets are quite distinct from theirs. It is extremely unlikely that this could be interpreted any other way as it would upset the whole basis on which commerce is conducted both in Thailand and worldwide. So, please, in this discussion can we leave out any references to foreigners "owning" land - they don't - it’s that simple. If land is registered in the name of a Thai company it is the Thai company that owns the land - simple, no argument, final. (Lawyers - real ones - please correct me if I am in any way wrong here).

3) Legally, as I understand it, a foreigner can own a maximum of 49% of the shares in Thai company. It is a fact that many lawyers have set up structures where Thai nationals have held shares (for want of a better word) allegedly as 'nominees' of others (foreigners, no doubt). It has been stated frequently in this forum that using nominee shareholders is illegal. Is that really so? Can someone point to the relevant legal authority - statute or case law either in English in Thai language? As far as I can establish, using nominees (read 'front-men') to establish or run a business of a type from which foreigners are legally excluded is illegal, but I know of no other prohibition in relation to nominee shareholders. One of the businesses (N.B. "businesses" - not the use land for residential or domestic purposes) from which foreigners are excluded is trading in land (i.e. buying and selling land commercially, sub-dividing and reselling the sub-divided plots etc.) and it was this area of illegality at which the Ministry's announcement was directed. So where is the problem in that announcement for a farang director and or shareholder of a Thai registered company which owns land on which he (the farang) resides? There is no problem that I can detect in the Ministry's announcement per se - only if you are conducting land transactions as a business.

4) The real issue with which we should be concerned must be does the "nominee shareholder" prohibition extend beyond these circumstances. Even the Ministerial direction which had people panicking suggests that it does not. It refers (without condemnation) to foreigners establishing such land owning companies to use the land for residential purposes but who later change it to start dealing in the land commercially - it is the change in the way that the company is used (viz. to engage in a prohibited form of business) which was specifically and solely condemned. Again, lawyers please indicate if the nominee prohibition extends beyond these specific circumstances and quote the relevant legal source. My research has indicated that it does not but I cannot read Thai so I rely on secondary sources only, but there has to be a definitive answer "yes" or "no". If "yes" please quote the relevant legal authority.

5) What about the question of how a shareholder (nominee or otherwise) financed his shareholding? Is that really relevant? Not if I am right about 3 above and probably not in any case. We have, I hope, already established that the assets of a company are quite distinct from those of its shareholders and directors. How the shareholder financed his shareholding and how the company financed its acquisition of the land are two quite separate matters. A farang (who may be a director, shareholder, neither of the two, or both) can, as far as I know, legally lend money to the company which is then owed as a debt by the company to him in his capacity as lender (not as shareholder or director). To investigate how a (Thai) shareholder was able to finance the purchase of a company's assets is as loopy as asking a shareholder in Thai International how he managed to buy a fleet of aircraft. Again, as I see it those who confuse these issues (including journalists) are precisely that - confused.

6) What characterises a shareholder described as a "nominee" (personally I avoid the word as it generates the confusion I have described above)? Typically he grants another the right to vote on his behalf by proxy (so who is in fact the nominee?). Again, as far as I am aware that practice is perfectly legal in Thailand as in every other jurisdiction in the world. It is the way shareholder meetings are conducted. What please is wrong with a shareholder agreeing to vote the same way as another person and asking him to exercise that vote on his behalf? In any event it is not shareholders who make the company's purchasing decisions (in relation to land or anything else) it is the company's directors upon whom such matters fall and there is nothing (I am aware of) in Thai law that prevents a farang being a director of a Thai company and acting accordingly. A shareholder's voting rights are generally very limited to matters relating to how the company is established and organised and in no sense as to how it is run from day to day and what it purchases or sells. Again I draw the analogy of a shareholder in Thai International - don't expect to have too much say on how the company is run and on what or how many aircraft they buy.....and..........I bet, on the issues where a shareholder does have a say, proxy voting is permitted!! Again, I would suggest that those who describe the Thai shareholders in the companies in question as "nominees" are muddying the waters and creating confusion and misunderstanding in a similar way as when they talk about foreigners "owning" land. These shareholders have agreed to become shareholders and they are recorded as such at the companies registration department on the official documents, so they are true shareholders and that, I would suggest is a fact whatever your perception of it may be or whatever terminology you may choose to use. So has anything illegal happened yet? In these circumstances, if anyone can be described as a nominee it is the person exercising the vote of the Thai shareholder. It is quite another matter for a farang to engage in a business which is prohibited to him and use a Thai to "front" for him. In that case the Thai is indeed a 'nominee' and it is that behaviour which in Thai law is illegal both for the farang and the Thai.

7) What also seems to be in question is the motivation of the shareholders in becoming shareholders in the companies we have described. Normally, a shareholder's motivation would be to participate in any dividend that the company may pay, but many (especially non-public) companies never or infrequently pay dividends. A shareholder's duty or obligation is, if called to do so, to pay up the full value of the shares for which he has subscribed. That is all - nothing more. In the event that the company is dissolved, a shareholder has a right to a share in its remaining assets (if any). (That would be of course, after any debts, including loans, had been paid or repaid in accordance with the lending terms). The company, as we have seen, is the owner of the land and in the event that it is dissolved any proceeds from the disposal of the land less all the company's debts etc. would belong to the shareholders jointly. That could be nothing, or it could be a considerable amount, depending on the value of the land and how the company was managed etc. But even a so called "nominee" shareholder whose name was recorded on the company documents would have such a right if there was a positive balance sheet. That right would be hard to argue with and the word "nominee" would suddenly be absent from the description - so let's get real and stop talking about nominees now. So there is (potentially, at least) a big incentive for a Thai to volunteer himself as a shareholder in a company, financed by a farang, which owns land in Thailand even if he is never paid a dividend. Even if the company leases the land to another, who knows what might happen in 30 years (or less)? The Thais love to gamble - which is what all shareholding is essentially about in reality. So I am still searching for the illegality here. Just because a shareholder may never reap any dividends or other rewards from his shareholding does not make that shareholding or the company "bogus". If that were so half the companies in Thailand would be "bogus". Lawyers, please comment if you see it differently. (Please note: I would like to keep away from any discussion about the merits or wisdom of choosing to establish a company in this way vis a vis financing land in your girlfriend/wife's name etc. That is another topic. I am purely concerned to establish whether those who have gone down this route are at risk from legal repercussions as has been frequently suggested but, as far as I can see, not established.)

8) The other yardstick of the Ministry of Interior proposes to judge is investigation of how the Thai shareholder was able to afford his shareholding (don't please confuse this with the value of any land owned by the company - please see above). This would seem to be a no-brainer. What does it matter legally unless he stole it? What if the farang paid for them on his behalf? Is there anything illegal in that per se? Yes, it may be in the farang's interest to do so and yes the Thai may be content (even happy about that) - that is how business is conducted - I win - you win. Where is the illegality, please? What law states that the money used to buy shares can not be a loan or a gift? In any event a company needs 7 shareholders and its nominal capital is normally B1m of which 51% needs to be subscribed for by Thais. That is B510,000 of which only 20% needs to be paid up when the company is established. That is B110,000 between say 6 Thais or a little over B18,000 per shareholder. I have met bar-girls who can make that sort of money in a week (not all of them, I agree, so please let’s not discuss that one here!). The point is that it is within the financial means of most persons whose names are likely to appear on company documents unless you picked your fellow shareholders up off the street. Its evidential value is close to zero contrary to what the scare stories suggest. And again, my perennial question is, in any case where is the illegality? In fact, even if the money was stolen it would not affect the validity of the registered shareholder as a shareholder, his problems would lie elsewhere. The shareholder is a Thai national, he wants to be a shareholder in the company (for whatever motivation or even for none at all), his name is duly entered on the record and filed with the competent authority, and the required value of the shares has been paid (from whatever source). End of story as far as his legality as a shareholder in the company is concerned.

9) As far as I can see, this arrangement, far from being a circumvention of Thai law, is in fact in strict compliance with it. The anti farang lobby may not like it, but that does not make it illegal. Someone asked why, if such arrangements are illegal, the lawyers who set them up are not worried about being sued for negligence. That should be your biggest clue. Also, it may be politically expedient to appear to bash farangs over land "ownership" and / or to make them feel that they have acted illegally in their "ownership" of land, but that is politics, not law.

Conclusion:

Please stop talking about farangs owning land - they don't, its impossible in 99.99999% of cases.

Please stop talking about "bogus" companies - they are properly established legal entities.

Please stop talking about "nominee" shareholders - they are "shareholders" plain and simple (they may be amenable to allowing a farang to exercise their vote in which case it is the farang who is their nominee).

Please stop worrying about how the Thai shareholder paid for his shares - it is totally irrelevant.

Please do not confuse the ill-considered opinions of Thais (some in official capacities) who are anti farang "owning" land, or probably just anti-farang, and the opinions of the doom-and-gloom disillusioned farangs who predict the end of Thailand and the world.

Please take care: Ministers - how you express your concerns; pundits - the "knowledge" you impart to others; just because something is widely believed to be true does not make it so.

The above is my understanding and analysis and mine alone. I seek corroboration of its accuracy and its conclusion from those who know, perhaps better? But reasoned arguments please not 'off the wall' opinions or something you or your mate overheard in a bar.