Thailand To Limit Foreign Stake In Firms To 50 Per Cent

[bubba]

Anyone know (Sunbelt?) if they plan to apply this folly to BOI promoted firms who have been given permission for majority or 100% foreign ownership, thus abrogating the terms of the BOI agreement? If so, I know for sure of one more company that will be packing its bags.

[reddevil_06510]

As a warning shot the news of the last 2 days has been rather ominous.

However, we must wait until the full and final legislation is presented as anything can happen between now and then. As with the uproar over the new/old visa rules this could be all for nothing.

Remember, THIS IS THAILAND, which loosely translates to... if you have enough money and enough connections you can do anything you want.

Stay tuned for the next exciting episode of As Siam Burns......

[birago23]

GREAT MOVE! Really daring!

Tell the world: THIS IS THAILAND and with one go

get the SET crashing

the baht tumbling down, so that no Thai can even afford to make holidays in Laos

have all foreign companies withdraw their money from Thailand

closing of hundreds of companies within the next year

kicking Thailand off world's number one place of lowest unemployment

provocing a new military coup by yet another absolutely brainless decision

Great work for just one morning!

So bye bye Thailand, I enjoy coming back to your beautiful sunny beaches. Then at least I will be able to afford your 5 star hotels and be able to sip champagne on the beach with a baht worth nothing.

Mickey Mouse Country!

[quasimodo]

The 50-per cent cap will only apply to companies that deal with areas considered important to national security, or that have an impact on natural resources or Thai culture, he said.

Seems the Thais are just stopping anyone else doing a Taksin and selling the telephone networks etc.

[gdhm]

Hi Guys. All very interesting. I have been holding back moving a large amount of cash from the U K. Watching:

Bad polotics, Bombs, Army take overs, bad stock market management by the Gov, The south going up in smoke.

But no! still the baht strong. Any thoughts on this latest crap, will it weaken the baht and let me move my cash!

Happy new year from France

pip

This is an interesting comment for me too. Not because I have anything to gain specifically, but I too do not understand the logic of a strong baht with a tumbling Stock Exchange and all that has gone on recently. I would have expected the Baht to be hit badly. I cannot think what can give confidence in the Baht at this moment in time of turmoil on several fronts.

Please can someone who understands currency and stock markets summarise the possible reasons for a strong baht.

This is a serious question as I wish to understand.

Regards, Dave

[thaitanic]

Your missing the fact that 49% share owners could hold the majority of voting shares.. That way they could still control and manage thier investment safely.

Excuse me for being thick, but which official bit of paper displays the "voting rights" for a Thai limited company? As far as my "company papers" seem to show, I only own 49% of the shares of "my" limited company, and therefore I only have 49% of the voting rights. And my "protection" is the set of proxy papers in my safe that have been pre-signed by the other 6 (Thai) shareholders. Confused.

[lingyai]

GREAT MOVE! Really daring!

Tell the world: THIS IS THAILAND and with one go

get the SET crashing

the baht tumbling down, so that no Thai can even afford to make holidays in Laos

have all foreign companies withdraw their money from Thailand

closing of hundreds of companies within the next year

kicking Thailand off world's number one place of lowest unemployment

provocing a new military coup by yet another absolutely brainless decision

Great work for just one morning!

So bye bye Thailand, I enjoy coming back to your beautiful sunny beaches. Then at least I will be able to afford your 5 star hotels and be able to sip champagne on the beach with a baht worth nothing.

Mickey Mouse Country!

There will be some impact but hardly a crushing blow to Thialand. Plenty of companies will be staying.

[ZZZ]

Hi Guys. All very interesting. I have been holding back moving a large amount of cash from the U K. Watching:

Bad polotics, Bombs, Army take overs, bad stock market management by the Gov, The south going up in smoke.

But no! still the baht strong. Any thoughts on this latest crap, will it weaken the baht and let me move my cash!

Happy new year from France

pip

This is an interesting comment for me too. Not because I have anything to gain specifically, but I too do not understand the logic of a strong baht with a tumbling Stock Exchange and all that has gone on recently. I would have expected the Baht to be hit badly. I cannot think what can give confidence in the Baht at this moment in time of turmoil on several fronts.

Please can someone who understands currency and stock markets summarise the possible reasons for a strong baht.

This is a serious question as I wish to understand.

Regards, Dave

After the new 30% rule most investors need to buy 30% more Bath, if more Bath is being bought the value of the Bath will go up.

Also, with all this negative spin there are some people looking for some nice bargins. IF this clears up in a year the Thai stock market could be the big winner this year.

[kmart]

The Minister of Finance was quoted, "Why should we postpone it when we have worked on it for three months. This is Thailand," he added.

Can someone expound on what he means when he says that?

It means they're playing the Nationalism card to justify stupid and unfair measures to take what they have never had the discipline to earn / develop themselves. "This is Thailand" it seems, is a cover-all catchphrase for anything dodgy or ridiculous in this increasingly Kafka-esque country.

[husky]

Excuse me for being thick, but which official bit of paper displays the "voting rights" for a Thai limited company? As far as my "company papers" seem to show, I only own 49% of the shares of "my" limited company, and therefore I only have 49% of the voting rights. And my "protection" is the set of proxy papers in my safe that have been pre-signed by the other 6 (Thai) shareholders. Confused.

That is one way to do a company set-up. Another way is to issue two classes of shares with specified voting rights. Then the minority owner can control the company via his class of shares. This is perceived to be safer since the other set-up can be undone if all of the other shareholders have a meeting and decide to make changes to the company (ie, issue new shares, change directors, etc). The proxy concept implies that you trust the other shareholders not to put a scheme into play to unwind your position in the company. Edited January 9, 2007 by husky

[CymruAmByth]

Your missing the fact that 49% share owners could hold the majority of voting shares.. That way they could still control and manage thier investment safely.

Excuse me for being thick, but which official bit of paper displays the "voting rights" for a Thai limited company? As far as my "company papers" seem to show, I only own 49% of the shares of "my" limited company, and therefore I only have 49% of the voting rights. And my "protection" is the set of proxy papers in my safe that have been pre-signed by the other 6 (Thai) shareholders. Confused.

Unless you specifically requested "PREFERENCE SHARES" from your lawyers during the set-up period of your company, you will have "ORDINARY SHARES."

I only own 14% of 'my' company, but my (preference) share allotment equates to 140 shares versus 86 owned by the rest of the shareholders. I will be watching this space to assess what happens over the next few weeks/months.

MOST IMPORTANTLY...I am the only director and the only signatory...especially on the bank account!

[stacker10]

Thailand to limit foreign stake in firms to 50 per cent

BANGKOK: -- Thai government will limit foreign investors to holding no more than 50 per cent of the shares or the voting rights in companies here under legal changes approved Tuesday, Finance Minister Pridiyathorn Devakula said.

"Foreign investors who altogether hold more than a 50 per cent stake in a company must lower their stake within a year," Pridiyathorn Devakula said after a cabinet meeting.

"Foreign investors who hold more than 50 per cent of voting rights must also reduce their voting rights within two years,"he added.

The 50-per cent cap will only apply to companies that deal with areas considered important to national security, or that have an impact on natural resources or Thai culture, he said.

The cabinet approved the changes to the Foreign Business Act "in principle" on Tuesday.

Surayud said the government's top panel of legal advisers would continue to work on the details of the law to ensure precision and transparency.

"The Council of State is authorized to work on the details to make the law precise and transparent, without any need to be resubmitted for cabinet approval again," he told reporters.

"It will take some time for the law to take effect," he added.

The Cabinet approved Tuesday the foreign business law amended by the Commerce Ministry.

The amended act would include the requirement on the voting rights of the board members and increase the penalty for violators.

Netpreeya Chumchaiyo, deputy government spokesman, said after the Cabinet meeting that the Council of State is assigned to review the draft amendments.

Earlier, Joint Foreign Chambers of Commerce warned that the amendment might affect their decisions to do business decision.

Commerce Ministry and Finance Ministry are scheduled to make seperate press conference at 3pm.

Earlier Finance Minister Pridiyathorn Devakul vowed to press ahead with legal change that could overhaul the way foreign companies do business here despite warnings of potentially disastrous economic fallout.

Pridiyathorn insisted that foreign companies would not be scared off by the final version of the law, which has not yet been released.

Foreign business community in Thailand has urged the government to postpone the changes for at least six months.

"Why should we withdraw it? They have not yet seen the details. If they had seen the details, I am sure that they would be happy," Pridiyathorn said.

"Why should we postpone it when we have worked on it for three months. This is Thailand," he added.

The minister was speaking after attending the cabinet meeting which will consider the changes.

Pridiyathorn said he had consulted some foreign investors about the changes to the Foreign Business Act and more than half of them had found the new rules acceptable.

"I myself will talk with them. I have held talks with many investors but they have not seen all of the details and the commerce minister cannot disclose the bill before the cabinet gives its approval," he said.

"We have a record of welcoming foreign investment. We are not hostile to them. Foreign investors have made Thailand develop and we are certainly still adhering to this policy," he said.

The revised law is expected to redefine shareholder rights and ownership structures for local subsidiaries of international firms.

Companies have traditionally set up their operations in Thailand so that the local subsidiaries are nominally owned by Thais but controlled by foreigners.

-- AFP/The Nation 2007-09-09

[davidsetagaya]

how much you want to bet some 'very important people in Thailand' buy up AIT shares when Temasek is forced to dump them?

[thaitanic]

Excuse me for being thick, but which official bit of paper displays the "voting rights" for a Thai limited company? As far as my "company papers" seem to show, I only own 49% of the shares of "my" limited company, and therefore I only have 49% of the voting rights. And my "protection" is the set of proxy papers in my safe that have been pre-signed by the other 6 (Thai) shareholders. Confused.

That is one way to do a company set-up. Another way is to issue two classes of shares with specified voting rights. Then the minority owner can control the company via his class of shares. This is perceived to be safer since the other set-up can be undone if all of the other shareholders have a meeting and decide to make changes to the company (ie, issue new shares, change directors, etc). The proxy concept implies that you trust the other shareholders not to put a scheme into play to unwind your position in the company.

Thanks for clarifying that. Well actually I bought a company "off the shelf" from a lawyer 4 or 5 years ago and changed the name and the nature of the business. I have never met the other 6 shareholders and I presume they don't even realise they still own shares in a Thai company. They might even be dead for all I know.

[rexall]

Nibble, nibble, nibble, nibble. . . Where will it lead? When will it stop? Up to now, one might have been accused of being paranoid and spinning conspiracy theories. However, over the past few months a pattern is clearly emerging of limiting falang interest, participation, and presence in the Kingdom. Whether it is an outright campaign of xenophobia or merely a lot of people hitching a ride on the bandwagon, there are forces in high places which regard regard foreigners as threatening in some way, and are taking steps to deal with that threat. One assumed that this was due largely the mindset of the Thaksin government, but now it appears that assumption was largely errnoeous. If the trend continues, if the reputation of Thailand as being falalng-unfriendly becomes imbedded in the mindset of the public, no good will come of it, at least not for Thailand.

Oh, well. Sigh! Nothing to be done about it. Watch and see what happens. Don't paint yourself into any corners. Have an escape route in place in case the shit really hits the fan one day.

It is kind of interesting viewed from a detached perspective like watching a movie.

Aloha,

Rex

[PeaceBlondie]

Thaksin and the TRT did not invent Thai xenophobia; they parlayed it into a stranglehold on the govt., until there was a counter-strangling. Xenophobia has been alive and well for a long time. It does appear to be getting more obvious.

[Oliver Reed]

Thailand....tiger economy...how about the mouse that roared.

University education in Thailand, is anybody graduating in business economics here?

I bet the Vietnamese and Cambodians are rubbing their hands, at yet another masterstroke from the law makers of Thailand.

If you were ever going to make it...you would have made it by now...pride comes before a fall, and if you are too proud to admit that farang investment is crucial to your countries future, then go ahead and carry on with policies like this, and see the business disappear.

[opothai]

well well well

we will see very quickly how the rights of the falang will be protected,

as i see it when the switched on thai investor gets to understand the possible implications of these changes, there could well be an influx of claims from thais against thier falang partners to gain more money and rights from any given falang owned company.

we will see the greed come to the fore, imho

[goatfarmer]

Hi Guys. All very interesting. I have been holding back moving a large amount of cash from the U K. Watching:

Bad polotics, Bombs, Army take overs, bad stock market management by the Gov, The south going up in smoke.

But no! still the baht strong. Any thoughts on this latest crap, will it weaken the baht and let me move my cash!

Happy new year from France

pip

This is an interesting comment for me too. Not because I have anything to gain specifically, but I too do not understand the logic of a strong baht with a tumbling Stock Exchange and all that has gone on recently. I would have expected the Baht to be hit badly. I cannot think what can give confidence in the Baht at this moment in time of turmoil on several fronts.

Please can someone who understands currency and stock markets summarise the possible reasons for a strong baht.

This is a serious question as I wish to understand.

Regards, Dave

The baht is strong for two reasons: first there is a strong local demand for the baht, probably from local traders who need to sell dollars (or other foreign currency) in order to spend money in Thailand. (The absence of a strong fall after the capital control measures of the BoT suggests that speculation is not a factor driving the price of the baht.) The second reason that the baht is rising is simply that the dollar is falling against most major currencies. At its present level, the baht has encountered strong five year resistance. It is highly likely to 'top' at the current level and begin a gentle retreat. However, if we see a break above (or below, depending on your orientation) 35, who knows where it will go. There's a good chart of the baht on my website, the URL of which I believe, by the rules of this forum, I am prohibited from revealing. However, you'll find it by doing a google search: asia, stock market, chart and go to the Thailand page.

[henningj]

Thai government will limit foreign investors to holding no more than 50 per cent of the shares or the voting rights in companies here under legal changes approved Tuesday, Finance Minister Pridiyathorn Devakula said.

I really wonder who is going to pick up 50% of the shares in Coca Cola Company Thailand Co. Ltd. after this. Or 50% of IBM, or Jotun, or, or... -?

/ henningj

[bluie]

The Minister of Finance was quoted, "Why should we postpone it when we have worked on it for three months. This is Thailand," he added.

DOS'NT THAT SAY IT ALL

[dee123]

We have made a new law which may or may not effect you or you business. It may or may not become effective and it may or may not be written more strongly or more weekly depending on this trial balloon which may or may not hold air and may or may not be released. Please continue to carry on business as usual while we may or may not decide to activate or deactivate this new legislation, believe me when you actualy see the way its written you fill very confident about, till that time which may or may not ever happen please hold your breath and try to relax, There may or may not be more information soon or you may or may not ever hear about this again after this pre trial balloon possible release public notice of the possibility of action or inaction concerning every person who may or may not have money.

I am happy to announce that internet gaming will not be effected by current legislation so those who are wasting their lives by burning out their brains playing anime golf and ragnarook can continue to live in a fantasy world where all stories end well.

i decided a long time ago thai law was a snake;waitng in line for my visa listening to another expat explaining what to do if you wanted to buy property or business etc etc.the only good advice i took aboard then then and still remains the same is whatever you invest in thailand be prepared to lose,eg eggs and basket!!!!!!

[fxe1200]

Watch the baht in the coming days and months............

It is about time that the Thai politics, do a little more to weaken the Baht. The loss of around 7 per cent since April 2005 is a shame for the country. Lets go back to 50 Baht per Euro. That is even easier to calculate for everybody and a little "Thank you" for those farangs who permanently spending their money in Thailand.

[brain150]

Thai government will limit foreign investors to holding no more than 50 per cent of the shares or the voting rights in companies here under legal changes approved Tuesday, Finance Minister Pridiyathorn Devakula said.

I really wonder who is going to pick up 50% of the shares in Coca Cola Company Thailand Co. Ltd. after this. Or 50% of IBM, or Jotun, or, or... -?

/ henningj

As I understand, none of the major foreign players is affected by the new regulations as they all probably do have a proper set up for foreign investmentship in Thailand.

In general it would be quite usefull for everybody to stick to what is KNOWN by now more than speculationg what PERHAPS might be ... if you read the details then there are quite some limitations on who is really affected by the new regulation and who is liable to reorganize the shareholder-structure of his company.

Basicly it can be said that the new regulations just try to bring allready existing law back in order (which was turned arround by "smart" lawyers who turned the existing law just upside down).

It might be said that rightnow the information is very vague and there is a huge overreaction like allways.

Surely it´s not very smart to make a policy of changing regulations up and down on a fairly regular basis, but yet again - the regulations are not even finished yet, neither are they active law yet.

Still it´s very disturbing and somehow quite typical for the current political circumstances in Thailand.

[x3mist]

I cannot simulate anything yet with what's going to happen, but I wonder how much confidence I can put into the companies that can be paid in maintaining our voting power as foreigners.

How would this law affect in companies that does this selling and buying businesses here in Thailand if it takes it's effect?

Edited January 9, 2007 by x3mist

[Choscura]

"chuay! chuay! pom payayayam tot tae luat maa ok!"

"help! help! I tried to fart but blood came out!"

[LaoPo]

I'll bet a lot of large Japanese, HK- and S'pore companies -and Western companies-are scratching their heads now...

A few questions:

1. they have to go 'down' to 50% of the shares -owned by foreigners/companies- so: WHO are they willing to sell their surplus shares to? Their biggest competitors ?

2. at what prices ?

3. Are they willing to invest more money in Thailand ?...

4. Are 'new' investors willing to invest in Thailand ?

5. 50%/50% shareholding is like a marriage, a top accountant once told me...impossible, especially if the major money-funders (investors) can't have a majority sharing vote.

Result:

A non-workable new Thai law which has serious implications for the future of Thailand which in fact is a step back- instead of forward in Thai economics.

It's a protectionistic Law and such Laws NEVER work

LaoPo

[Paul MBMG]

As many posters have mentioned there are a wide range of options available for minority shareholders to exercise absolute effective control. The use of various proxies is generally the weakest (these are often not enforceable, subject to challenge or are revocable). Restrictions over actual voting rights was one of the better strategies under the current laws, especially if used in conjunction with the more robust and enforcible proxies such as share transfers linked to loan agreements. Many companies set up by farangs over the last few years have been done in such an improper and haphazard way that they have failed to take advantage of the protections afforded by the current laws - but still it's a more restrictive law even if too many people didn't make use of such protections.

The impact of the changes will be felt mainly at the extreme ends of the business chain - multinationals will find the new environment less flexible and the really small operations will now understand the complexities of the legislation and hopefully seek out better quality advice. Ironically this could lead to the overall quality of farang SME structures improving.

There seems to be little doubt that this spotlight on share structures is related to the fallout from the Temasek acquisition of AIS. It would appear to have become a political football that is being kicked over that particular battleground by everyone in Thailand right now.

In terms of the currency question, this relates more to Dollar weakness than to Baht strength right now. Baht has benefitted from solid economic fundamentals relative to the US (just about everywhere has attractive economic fundamentals relative to teh US right now) but has not significantly strnegthened against Sterling, Euro, Swiss Franc, AUD etc during this time. Stock valuations are discounted estimates of the future cash flows of individual businesses which in the short term are subject to more whimsical capital flows than most other asset classes (especially in many parts of Asia where stock is generally held for relativelly short terms). The correlation between currencies and stocks frequently breaks down because these are driven by different considerations.

[jbowman1993]

As many posters have mentioned there are a wide range of options available for minority shareholders to exercise absolute effective control. The use of various proxies is generally the weakest (these are often not enforceable, subject to challenge or are revocable). Restrictions over actual voting rights was one of the better strategies under the current laws, especially if used in conjunction with the more robust and enforcible proxies such as share transfers linked to loan agreements. Many companies set up by farangs over the last few years have been done in such an improper and haphazard way that they have failed to take advantage of the protections afforded by the current laws - but still it's a more restrictive law even if too many people didn't make use of such protections.

The impact of the changes will be felt mainly at the extreme ends of the business chain - multinationals will find the new environment less flexible and the really small operations will now understand the complexities of the legislation and hopefully seek out better quality advice. Ironically this could lead to the overall quality of farang SME structures improving.

There seems to be little doubt that this spotlight on share structures is related to the fallout from the Temasek acquisition of AIS. It would appear to have become a political football that is being kicked over that particular battleground by everyone in Thailand right now.

In terms of the currency question, this relates more to Dollar weakness than to Baht strength right now. Baht has benefitted from solid economic fundamentals relative to the US (just about everywhere has attractive economic fundamentals relative to teh US right now) but has not significantly strnegthened against Sterling, Euro, Swiss Franc, AUD etc during this time. Stock valuations are discounted estimates of the future cash flows of individual businesses which in the short term are subject to more whimsical capital flows than most other asset classes (especially in many parts of Asia where stock is generally held for relativelly short terms). The correlation between currencies and stocks frequently breaks down because these are driven by different considerations.

Way too many big words in there for me. So glad I'm just a poor teacher. Im going to go play with my baby, and let you all you big important investors piss and moan some more.

[LaoPo]

Thailand revises business rules

The Thai government has announced plans to tighten rules regulating foreign businesses - a move analysts say could damage an already shaky economy.

excerpts:

"Such a radical change of this law will lead to a further erosion of business confidence," said its president Peter van Haren.

Thai stocks fell nearly 3% after the proposals were published

But according to the draft proposals, industries such as retail, tourism, banking and insurance - in which foreign firms have substantial interests - would not be affected as they are governed by other laws.

This would exclude firms such as Tesco and Carrefour from any impact.

source:

http://news.bbc.co.uk/2/hi/business/6243663.stm

LaoPo