The Effect Of The New Company Rules On Real Estate

[churchill]

Although not clear the news rules seem to be quite limited ? Do they effect real estate companies - If not this should be very positive for the market ?

[quiksilva]

Sorry can you clarify, which 'rules' are you referring to?

[churchill]

Sorry can you clarify, which 'rules' are you referring to?

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

A lot of investors in real estate have been worried that the regulations target all firms but it seems not ? from the above " 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, "

Therefor as I asked will these regulations effect investors in real estate and if not will there not be a positive impact on the market . At least until the next round of ammendments or tightening !

[tamaique]

I posted a link to the ammendments here:

http://www.thaivisa.com/forum/index.php?showtopic=100535

Go to page 5 and you can read the lists...

I'm also quite curious about what will happen.

[turnip]

In a word "yes".

It does effect people who own property in Thailand through a nominee company. Although, as Thai apply law is not strictly applied according to statute it may not be such a worry in a months time. Some <deleted> and his mia noi sat down with a bottle of black label and worked out a plan. Sobbered up, they will not be so strict. I cant believe they screw up such a good instream of cash.

But as the rule stands today the only sectors exempt are:

- Tourism

- Retail and wholesale - Insurance

- Banks, finance and credit firms

- Brokerages

- Derivatives

- Manufacturing, exports and industries that have investment privileges

- Agriculture futures - Other services

Property clearly is not exempt.

And

From today, companies that are majority-owned by foreigners and their Thai nominees will have 90 days to report their ownership structures to the Commerce Ministry.

Once the changes become law, these firms will have one year to reduce their foreign share ownership to below 49 percent.

(including i believe voting rights)**

Under the new rules, foreign companies with controlling voting rights in Thai-registered firms will have two years to cut their voting rights to less than 50 percent. Companies can be fined up to 5 million baht or face a daily fine of 50,000-250,000 baht for breaching the Act.

Source: Reuters: http://investing.reuters.co.uk/news/articl...HIP-FACTBOX.XML

The new rules are very much against farang ownership. But i am sure they will clarify in the coming days. If not, the biggest exodus since ...

[quiksilva]

I think we need to get a copy of the actual draft before further speculation.

The picture varies from news report to news report. Does it apply only to sectors 1 & 2?

From what I see the section highlighted in bold below, it looks as though it might not be as bad as I and many others have feared:

FOREIGN BUSINESS ACT

Nominees will be forbidden

Planned amendments give more teeth to laws that restrict business holdings; executives warn of investment backlash

Foreign companies, which have been using Thai nominees to circumvent ownership laws, will be forced to reduce their stakes and their voting rights within specified time limits when the amended Foreign Business Act becomes law.

After deliberating for almost five hours yesterday, the Cabinet approved a draft amendment to the Foreign Business Act designed to create a level playing field and transparency among foreign companies doing business in Thailand.

The amendment aims to end the legal contention over allegations that Temasek Hold-ings of Singapore had relied on nominees to get around the Thai ownership law to take over Shin Corp.

The amendments require foreign business owners to reduce their voting rights to below 50 per cent within one year.

For shareholdings, if they own a stake in their own name that exceeds the limit, they have two years to reduce it. If the exceeded limit is held in the name of a Thai nominee, they have one year to reduce it.

Commerce Minister Krirk-krai Jirapaet said the new law would set a clearer definition on foreign corporate entities.

"The law is designed to create more transparency in the system. It should improve the investment atmosphere," he told a news conference.

Under the amendments, "foreign companies" are defined as those whose shareholding stakes or voting rights exceed 50 per cent.

This law mainly affects foreign companies in the service industry. Most foreign manufacturing companies are exempt, including companies that fall under Board of Investment mandated waivers.

The Foreign Business Law covers three lists of business sectors - deemed critical to national security - subject to the degree of protection. The most protective category is Annex 1, followed by Annex 2 and Annex 3.

Industries listed in Annex 1 include rice farming, forestry, agriculture and protected professions such as hairdressing. Annex 2 comprises national security-related sectors such as telecommunications, handicrafts, media, weaponry, ammunition, military equipment, the culture-related sector, environment, transportation, marine and air transport, domestic aviation, antique sales, salt farming and mining.

Companies operating in industries listed in Annex 3 of the law will be exempt from the rule. Annex 3 includes rice milling, fisheries, forestry, accountancy services, the service business, legal service business, agriculture, engineering, and retail.

However, the retail law will soon be subject to a retail business law to be introduced in the near future.

At present, there are around 8,800 companies under Annex 1 and 2, while another 30,000 companies operate under Annex 3.

According to the draft amendments, companies, which operate under Annex 1 and 2 and which violate the foreign business law, will be required to revise their shareholding structure and voting rights below 50 per cent within a maximum of two years.

For foreign companies, which have used nominees to circumvent the ownership law, they must report their true status to the Commerce Ministry and will be given one year to comply with the law by reducing their stake to less than 50 per cent.

In total, the new law will govern almost 40,000 multinational companies operating in Thailand at the moment.

The Joint Foreign Chambers of Commerce on Monday warned the government to suspend the amendment saying members might withdraw their investments if the new law becomes more restrictive.

"Companies in List 1 and 2, which include large companies, will be affected. The net effect is something that we can't really gauge and we don't know what it is [at the moment]. However, the immediate effect is that it changes the playing rules, and that reduces the confidence of investors," said Peter Van Haren, chairman of the joint foreign chambers.

However, the new law would not affect the legal process in the Kularb Kaew case. Krirk-krai said Kularb Kaew, suspected to hold Shin Corp's shares on behalf of Temasek Holdings, would be subject to the old law.

The Commerce Ministry is still firm on its recommendation to the police that evidence leads the ministry to believe that Kularb Kaew might be a nominee for Temasek of Singapore.

Sources said Cabinet members intensely debated the merits of the law. According to the source, Interior Minister Aree Wongsearaya voiced concern that the new law might provide amnesty to Kularb Kaew. Information and Communications Technology Minister Sitthichai Pookaiyaudom also questioned the implication of the law on the Shin Corp deal.

Foreign Minister Nitya Pibulsonggram asked for Cabinet's comments on how he should explain the new law to foreigners. Eventually, Prime Minister Surayud Chulanont assigned Krirk-krai to explain the issue to avoid confusion.

Surayud also tried to ward off investors' concerns, saying the decision was right and the government would be able to explain it.

He said the changes would not take effect for "some time", as a panel of legal experts needs to review the changes and the government would try to reassure nervous investors.

"We think that it needs to be worked out in detail for the law to be more transparent, and to make investors more confident," Surayud said.

But that failed to console the stock market, which tumbled 2.69 per cent, with the Stock Exchange of Thailand (SET) composite index losing 17.07 points to close at 616.75.

Krirk-krai said he could not say when the law would be enacted as the draft would have to receive the blessing of the Council of State. He expected that it might take three to four months.

Krirk-krai said the amendment would promote good governance and transparency. Foreigners wishing to hold more than 50 per cent in businesses under Annex 2 and 3 could apply for approval on a case by case basis.

The old law imposes a maximum three-year jail sentence and Bt100,000 to B1 million in fines. But the new law would increase the fine from Bt500,000 to Bt5 million.

Director general of the Business Development Department, Kanissorn Navanugraha, said the law should be clearer and the investment atmosphere should be transparent. The department would develop the system of checking company structures and would randomly check to see who was violating the law.

Asked if foreign investors would pull out, Krirk-krai said: "It's their right to invest, but I believe that quality foreign investors will understand this issue."

Petchanet Pratruangkrai

The Nation

I for one feel more comfortable that list 3 is exempt but I really need to see the new law in full.

However, if you own a house through the company structure things maybe looking very bleak for you - unless you can prove that your partners had the means to co-invest in the house. I strongly suggest that if you do own a property in this manner get out and speak to a solicitor.

Its probably not a good idea to speak to the slimeball of a solicitor who is acting as your partner in this venture so speak to several, as not all of them were created equal!

Oh and its not 90 days from today. Its only been approved in principal.

I read somewhere that it will probably be 3-4 months before its enactment.

Edited January 10, 2007 by quiksilva

[trajan]

I think we need to get a copy of the actual draft before further speculation.

The picture varies from news report to news report. Does it apply only to sectors 1 & 2?

I for one feel more comfortable that list 3 is exempt but I really need to see the new law in full.

Oh and its not 90 days from today. Its only been approved in principal.

I read somewhere that it will probably be 3-4 months before its enactment.

No.....the new draft law applies to ALL lists 1, 2 and 3 GOING FORWARD after its enactment. In other words, after enactment of the new law, as a foreigner you cant use the disproportionate voting rights to control a company (and still call it a "Thai" company) which engages in any activities under Lists 1, 2 or 3.

BUT with respect to EXISTING operating companies (as of the date of enactment of the new law), if your activities fall within List 1 or 2, you have a short grace period (1 yr) to correct the shareholding (basically that means finding real Thai joint venture partners who may get great deals on this fire-sale). This means that companies like SHIN and DTAC need to hurry-up and find real deep-pocketed majority Thai partners (which is a tall order)...However, one bright point is that if your activities fall within List 3, then you are grandfathered-in and allowed to keep operating IF you send in a notice and get a certificate...

I heard the new law may take months to be finally enacted because it needs to be vetted by the Concil of State, etc.

Real estate transactions are separate....the Land Offices already have new forms which require declarations and proof of wealth/financial sufficiency etc. of Thai shareholders (if any foreign shareholders/directors are present in the company acquiring the real estate).....

Edited January 10, 2007 by trajan

[trajan]

typo in message above....the "short grace period" is 2 yrs not 1 yr....

[lucjoker]

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

If this is the case,the Thai share holders rule the company,they can even kick you out,or sell your proporty ?

So,lets forget the company thing ?

Put your property on a thai lady ,is this the only (also unsafe) thing to do?

[bkkandrew]

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

If this is the case,the Thai share holders rule the company,they can even kick you out,or sell your proporty ?

So,lets forget the company thing ?

Put your property on a thai lady ,is this the only (also unsafe) thing to do?

Or simply rent and invest in countries that do not practice expropriation?

[churchill]

Jury still out on foreign ownership changes

By Daniel Ten Kate

Foreign-owned property developers are still waiting for more information on the government´s plans to halt the longstanding use of nominee companies to bypass foreign ownership restrictions.

The cabinet on Tuesday approved "in principle" to change the definition of a foreign-owned company to include voting rights or shareholdings. For decades, companies had simply been defined by shareholdings, and many foreigners subsequently set up nominally Thai owned companies in which they controlled the voting rights to sidestep the law.

Finance Minister Pridiyathorn Devakula said Tuesday that companies on "List 1" and "List 2" of the foreign business act would have one year to sell down shareholdings to below 50%, and would get two years to reduce voting rights to below 50%. "List 3" companies would be exempt, as long as they promptly applied for an Alien Business License.

It´s still unclear whether property companies would fall under "List 1" or "List 2" of the Foreign Business Act, which includes sectors vital to national security, culture or other "special" sectors, or "List 3," which includes sectors in which Thais are supposedly not competitive. Both "List 1" and "List 2" prohibit foreigners from owning companies that buy or sell land, while "List 3" includes construction and services, such as leasing.

Legal experts, speaking on condition of anonymity because details remain hazy, said that if property developers are considered to operate in construction or leasing, then they should be fine.

"If it´s true that developers are on List 3, then that could be a good thing," said a legal expert in Bangkok.

If property firms are considered to be in the business of "trading land," then they would need to immediately sell down holdings or restructure voting rights to comply with the law. But that could pose logistical problems for the government, as thousands of companies could be affected.

"It´s really too early to say," said an executive at a firm that deals in property on Koh Samui. "We´re talking about hundreds, thousands of companies that need to be restructured. And they not only need to be restructured, but it must be approved by lawyers and by government officials. We know they don´t have the manpower to do that."

Many property executives are still hoping that the final law, which has yet to approved by a government legal body or passed by the military-installed legislature, will be watered down so that companies can simply apply for a license and return to business. If the worst case scenario hits, then the property sector will likely become the greatest victim in the government´s quest to punish deposed premier Thaksin Shinawatra for his family´s sale of Shin Corp to Singapore-run Temasek Holdings last January.

"This all stems from the government´s efforts to shake down Temasek," the Koh Samui executive said. "It´s like they´re trying to put out a fire with a gasoline truck."

[churchill]

and where is all the money going to go !

Speculators move in as Vietnam deregulates real estate sector

In the eyes of local and foreign investors, the Vietnamese real estate market has entered a period of golden chances.

One of the reasons for the increasingly dynamic development of the market was the State´s promulgation of documents to guide the implementation of the Common Investment Law and the Housing Law, creating a clear legal framework for the sector, which foreign investors have been waiting for.

Another reason was the country´s accession to the World Trade Organisation (WTO), which flung open the door for its finance market - an important gateway for foreign investors to participate in the real estate business.

Deputy Minister of Natural Resources and Environment Dang Hung Vo joined many economic experts in expressing optimism for the real estate market in 2007 after a two year freeze period.

The Deputy Minister explained that the newly felt optimism was based on several factors such as Vietnam´s WTO accession, the US´ ratification of Permanent Trade Normal Relations (PNTR) with Vietnam and a record of official development assistance (ODA) capital pledged by international donors for 2007.

He said these factors enhanced Vietnam´s attractiveness for foreign investment, including investment in real estate.

Vo also said that high participation of foreign investors would help to reduce the prices of houses in Vietnam, which in recent times, have exceeded the financial capabilities of most of the population.

In order to deal with this problem, experts said the State should have incentives for guiding foreign investors in building houses for low-income and poor people.

A stable legal foundation with transparency in real estate-related finance and equality in rights and obligations for both local and foreign investors, as well as priorities for build-operate-transfer (BOT) projects to develop social and technical infrastructure are among what is most needed.

Foreign investment interest in Vietnam´s real estate market has been rising, reflected in major projects in Hanoi and Ho Chi Minh City, invested by developers from the Republic of Korea (RoK), Japan, Singapore and Malaysia.

The Tay Ho Tay (Western West Lake) Co. Ltd from the RoK plans to start building a US$314 million urban area in Hanoi this year.

Construction of the project, which includes 4,800 apartments and villas, is scheduled to be completed in 2013.

The Ho Tay urban area is expected to become a new and modern centre of Hanoi alongside the 300 ha Nam Thang Long urban area.

In Ho Chi Minh City, Singaporean Keppel Land invested US$35 million in the construction of the Saigon Riviera urban area and US$130 million in the Saigon Sports City.

CapitalLand, one of the region´s largest real estate investors, also from Singapore, is preparing to set up a joint venture with two Vietnamese companies to invest US$40 million to build an apartment building on an area of 2.3 ha.

[quiksilva]

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

If this is the case,the Thai share holders rule the company,they can even kick you out,or sell your proporty ?

So,lets forget the company thing ?

Yup. I think its safe to say that the company route loophole is now well and truly closed.

The only real estate interests that are open to foreigners now are limited to: leasehold, condos and shares in property funds. Unless of course you are married, have Thai offspring, or have absolute faith in some other local.

[lucjoker]

Bangkok Post 11 jan 2007

list 3 is exempt ,thai shares have to be more than 50%

The votes are not important,this is "grandfathered"

So no real changes

[lucjoker]

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Global Insights FOREIGN BUSINESS ACT / FOREIGN INVESTOR REACTION

Pridiyathorn tries to ease fears, but foreigners wary

Joint chambers warn of blow to investment

CHATRUDEE THEPARAT & DARANA CHUDASRI

The government is prepared to extend the transition period for foreign-owned companies to comply with the Foreign Business Act if necessary, according to M.R. Pridiyathorn Devakula, the finance minister and deputy prime minister. Authorities would also annually review the business sectors set out under the so-called List 3 of the FBA to determine what sectors are ready for full liberalisation.

M.R. Pridiyathorn and other policymakers yesterday sought to ease investor concerns about the FBA reforms and insisted that Thailand remained open to foreign investment.

M.R. Pridiyathorn: Intention of changes is "not to impede foreign investment or create new obstacles" — SAROT MEKSOPHAWANNAKUL

''The intention of the changes is not to impede foreign investment or to create new obstacles to foreigners,'' M.R. Pridiyathorn said. ''We are actually relaxing the rules in some areas, and clarifying what the law actually is for those companies that don't know right now if they are in the right or the wrong.''

M.R. Pridiyathorn said reports that up to 40,000 foreign firms would be affected by the FBA changes were overblown.

''In reality, only 2,428 companies will potentially be affected. And of these firms, many are exempt due to Board of Investment privileges or because they operate under the [uS-Thai] Treaty of Amity,'' he said. ''Overall, only 1,337 companies are expected to have to restructure, with only 15 being companies listed on the Stock Exchange of Thailand.''

On Tuesday, the cabinet approved a plan to reform the 1999 FBA to address the widespread practice of nominee shareholdings long used to evade the 49% shareholding limit set under the law.

The definition of foreign companies will now be expanded to include either majority shareholdings, both direct and indirect, as well as firms where foreigners hold a majority in terms of voting rights.

Companies in breach of the majority shareholding limit must report to the Commerce Ministry within 90 days and restructure their operations within one year.

Firms in violation in terms of voting rights will be treated differently. Those operating under List 1 and List 2 of the FBA, which includes 22 sectors overall ranging from media, rice farming, transport and mining, would have two years to reduce foreign voting rights to a minority.

Companies currently operating under List 3, which includes 21 sectors, including services, would be ''grandfathered'' with no need to change their voting structures but would have to report their status to the Commerce Ministry within one year.

M.R. Pridiyathorn, who met with representatives of 28 foreign chambers of commerce yesterday, said the government was prepared to extend the transition period for firms to restructure if needed.

''To help reassure the foreign chambers, we will consider in the National Legislative Assembly extending the transition period for companies,'' he said.

''But one must be fair to the government as well. If [foreign chambers] ask for a 10-year period, we can't do this.''

Sectors on List 3 would also be reviewed on an annual basis, he added.

''We have not increased the number of sectors that remain under protection. And exporters and manufacturing companies are completely not involved,'' he said.

M.R. Pridiyathorn said telecommunications companies would also have to restructure if their foreign shareholdings were in violation of the limit. But in terms of voting rights, existing firms such as Advanced Info Service or DTAC would be grandfathered along with other companies operating in sectors under List 3.

The FBA reforms follow last year's investigation into the takeover of Shin Corp by Singapore's Temasek Holdings. The government has said Temasek used nominees to skirt the 49% shareholding limit.

Satit Chanjavanakul, the secretary-general of the Board of Investment, said projects that received privileges from the board would be unaffected by the changes.

Promoted projects were allowed to have up to 100% foreign ownership, and most were operating in manufacturing sectors excluded from the FBA, he said. Even after promotional privileges expired, the companies would continue to be exempt from the FBA rules, Mr Satit said.

But despite the official clarifications, analysts and foreign business leaders said the FBA reforms would continue to weigh on sentiment for the near future.

Peter Van Haren, the chairman of the Joint Foreign Chambers of Commerce (JFCC), said that while foreign investors better understood the government's intentions, few were comfortable with the reforms.

''We will submit new suggestions to the government within two weeks. The position of the JFCC continues to be to scrap List 3 altogether,'' he said. ''Frankly, an extension on the time for compliance does not help much, as foreign shareholders would still have to cut their stakes.''

Mr Van Haren warned that the reforms would definitely impact future investment in Thailand and increase the burden on companies to seek local partners.

But Dusit Nontanakorn, the secretary-general of the Thai Chamber of Commerce, doubted that many foreign firms would cut back their investments.

''They can do so if they want. We can't prevent that. But I'm confident that not many will do so,'' he said.

Prasarn Trairatvorakul, the president of Kasikornbank, said a review of the principles of restraining business competition from foreigners was long overdue.

But given the sensitivity of the issue, the authorities should consider the appropriate timing of any regulatory change.

''The time given for foreign companies to restructure their shareholdings and voting-right privileges isn't too short. But personally, what I believe is even more important is to consider the suitability of the FBA, the appropriateness of the timing and whether the foreign business community genuinely understands the changes or not,'' Dr Prasarn said.

Banluasak Pussarungsri, the manager of Bangkok Bank's macroeconomic analysis centre, agreed that the principles of the FBA should be reviewed.

He added that the vehement opposition to the changes voiced by the foreign business community deserved attention.

''I've never seen foreign investors come together on any one issue quite like this one,'' he said. ''We should listen to what they are saying.''

[quiksilva]

Bangkok Post 11 jan 2007

list 3 is exempt ,thai shares have to be more than 50%

The votes are not important,this is "grandfathered"

So no real changes

Which is great news for a foreign registered business in the service industry but surely thats not so great if you own a house using that structure, as it would be quite difficult to register that company as a foreign business wouldnt it? Or am I missing something here?

The businesses in list 3 are:

Lists Attached to the Foreign Business Act B.E. 2542 (1999)

--------------------------------------------------------------------------------

LIST ONE

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

(1) Newspaper business, radio broadcasting or television station business.

(2) Rice farming, farming or gardening.

(3) Animal farming.

(4) Forestry and wood fabrication from natural forest.

(5) Fishery for marine animals in Thai waters and within Thailand specific economic zones.

(6) Extraction of Thai herbs.

(7) Trading and auctioning Thai antiques or national historical objects.

(8) Making or casting Buddha images and monk alms bowls.

(9) Land trading.

LIST TWO

The businesses related to the national safety or security or affecting arts and culture, tradition, folk handicraft or natural resource and environment.

Group 1: The businesses related to the national safety or security

(1) Production, selling, repairing and maintenance of:

(a) firearms, ammunition, gun powder, explosives.

( Accessories of firearms, ammunition, and explosives.

© Armaments, ships, air-craft or military vehicles.

(d) Equipment or components, all categories of war materials.

(2) Domestic land, waterway or air transportation, including domestic airline business.

Group 2: The businesses affecting arts and culture traditional and folk handicraft:

(1) Trading antiques or art objects being Thai arts and handicraft.

(2) Production of carved wood.

(3) Silkworm farming, production of Thai silk yarn, weaving Thai silk or Thai silk pattern printing.

(4) Production of Thai musical instruments.

(5) Production of goldware, silverware, nielloware, bronzeware or lacquerware.

(6) Production of crockery of Thai arts and culture.

Group 3: The businesses affecting natural resources or environment:

(1) Manufacturing sugar from sugarcane;

(2) Salt farming, including underground salt;

(3) Rock salt mining;

(4) Mining, including rock blasting or crushing;

(5) Wood fabrication for furniture and utensil production.

LIST THREE

The business which Thai nationals are not yet ready to compete with foreigners:

(1) Rice milling and flour production from rice and farm produce.

(2) Fishery, specifically marine animal cultures.

(3) Forestry from forestation.

(4) Production of plywood, veneer board, chipboard or hardboard.

(5) Production of lime.

(6) Accounting service business.

(7) Legal service business.

(8) Architecture service business.

(9) Engineering service business.

(10) Construction, except for:

(a) Construction rendering basic services to the public in public utilities or transport requiring special tools, machinery, technology or construction expertise having the foreigners' minimum capital of 500 million Baht or more.

( Other categories of construction as prescribed by the ministerial regulations.

(11) Broker or agent business, except:

(a) Being broker or agent for underwriting securities or services connected with future trading of commodities or financing instruments or securities.

( Being broker or agent for trading or procuring goods or services necessary for production or rendering services amongst affiliated enterprises.

© Being broker or agent for trading, purchasing or distributing or seeking both domestic and foreign markets for selling domestically manufactured or imported goods in the manner of international business operations having the foreigners' minimum capital 100 million Baht or more.

(d) Being broker or agent of other category as prescribed by the ministerial regulations.

(12) Auction, except:

(a) Auction in the manner of international bidding not being the auction of antiques, historical artifacts or art objects which are Thai works of arts, handicraft or antiques or having the historical value.

( Other categories of auction as prescribed by the ministerial regulations.

(13) Internal trade connected with native products or produce not yet prohibited by law.

(14) Retailing all categories of goods having the total minimum capital less than 100 million Baht or having the minimum capital of each shop less than 20 million Baht.

(15) Wholesaling all categories of goods having minimum capital of each shop less than 100 million Baht.

(16) Advertising business.

(17) Hotel business, except for hotel management service.

(18) Guided tour.

(19) Selling food or beverages.

(20) Plant cultivation and propagation business.

(21) Other categories of service business except that prescribed in the ministerial regulations.

[Mid]

so a current , list #3 company with majority foreign voting rights , 49% foreign share holding is OK ???????????

[Rainmaker]

• EXCH RATES Baht/$ 35.99/12

Bid/Ask

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UnchangedMcKinsey Quarterly

Global Insights FOREIGN BUSINESS ACT / FOREIGN INVESTOR REACTION

Pridiyathorn tries to ease fears, but foreigners wary

Joint chambers warn of blow to investment

CHATRUDEE THEPARAT & DARANA CHUDASRI

The government is prepared to extend the transition period for foreign-owned companies to comply with the Foreign Business Act if necessary, according to M.R. Pridiyathorn Devakula, the finance minister and deputy prime minister. Authorities would also annually review the business sectors set out under the so-called List 3 of the FBA to determine what sectors are ready for full liberalisation.

M.R. Pridiyathorn and other policymakers yesterday sought to ease investor concerns about the FBA reforms and insisted that Thailand remained open to foreign investment.

M.R. Pridiyathorn: Intention of changes is "not to impede foreign investment or create new obstacles" — SAROT MEKSOPHAWANNAKUL

''The intention of the changes is not to impede foreign investment or to create new obstacles to foreigners,'' M.R. Pridiyathorn said. ''We are actually relaxing the rules in some areas, and clarifying what the law actually is for those companies that don't know right now if they are in the right or the wrong.''

M.R. Pridiyathorn said reports that up to 40,000 foreign firms would be affected by the FBA changes were overblown.

''In reality, only 2,428 companies will potentially be affected. And of these firms, many are exempt due to Board of Investment privileges or because they operate under the [uS-Thai] Treaty of Amity,'' he said. ''Overall, only 1,337 companies are expected to have to restructure, with only 15 being companies listed on the Stock Exchange of Thailand.''

On Tuesday, the cabinet approved a plan to reform the 1999 FBA to address the widespread practice of nominee shareholdings long used to evade the 49% shareholding limit set under the law.

The definition of foreign companies will now be expanded to include either majority shareholdings, both direct and indirect, as well as firms where foreigners hold a majority in terms of voting rights.

Companies in breach of the majority shareholding limit must report to the Commerce Ministry within 90 days and restructure their operations within one year.

Firms in violation in terms of voting rights will be treated differently. Those operating under List 1 and List 2 of the FBA, which includes 22 sectors overall ranging from media, rice farming, transport and mining, would have two years to reduce foreign voting rights to a minority.

Companies currently operating under List 3, which includes 21 sectors, including services, would be ''grandfathered'' with no need to change their voting structures but would have to report their status to the Commerce Ministry within one year.

M.R. Pridiyathorn, who met with representatives of 28 foreign chambers of commerce yesterday, said the government was prepared to extend the transition period for firms to restructure if needed.

''To help reassure the foreign chambers, we will consider in the National Legislative Assembly extending the transition period for companies,'' he said.

''But one must be fair to the government as well. If [foreign chambers] ask for a 10-year period, we can't do this.''

Sectors on List 3 would also be reviewed on an annual basis, he added.

''We have not increased the number of sectors that remain under protection. And exporters and manufacturing companies are completely not involved,'' he said.

M.R. Pridiyathorn said telecommunications companies would also have to restructure if their foreign shareholdings were in violation of the limit. But in terms of voting rights, existing firms such as Advanced Info Service or DTAC would be grandfathered along with other companies operating in sectors under List 3.

The FBA reforms follow last year's investigation into the takeover of Shin Corp by Singapore's Temasek Holdings. The government has said Temasek used nominees to skirt the 49% shareholding limit.

Satit Chanjavanakul, the secretary-general of the Board of Investment, said projects that received privileges from the board would be unaffected by the changes.

Promoted projects were allowed to have up to 100% foreign ownership, and most were operating in manufacturing sectors excluded from the FBA, he said. Even after promotional privileges expired, the companies would continue to be exempt from the FBA rules, Mr Satit said.

But despite the official clarifications, analysts and foreign business leaders said the FBA reforms would continue to weigh on sentiment for the near future.

Peter Van Haren, the chairman of the Joint Foreign Chambers of Commerce (JFCC), said that while foreign investors better understood the government's intentions, few were comfortable with the reforms.

''We will submit new suggestions to the government within two weeks. The position of the JFCC continues to be to scrap List 3 altogether,'' he said. ''Frankly, an extension on the time for compliance does not help much, as foreign shareholders would still have to cut their stakes.''

Mr Van Haren warned that the reforms would definitely impact future investment in Thailand and increase the burden on companies to seek local partners.

But Dusit Nontanakorn, the secretary-general of the Thai Chamber of Commerce, doubted that many foreign firms would cut back their investments.

''They can do so if they want. We can't prevent that. But I'm confident that not many will do so,'' he said.

Prasarn Trairatvorakul, the president of Kasikornbank, said a review of the principles of restraining business competition from foreigners was long overdue.

But given the sensitivity of the issue, the authorities should consider the appropriate timing of any regulatory change.

''The time given for foreign companies to restructure their shareholdings and voting-right privileges isn't too short. But personally, what I believe is even more important is to consider the suitability of the FBA, the appropriateness of the timing and whether the foreign business community genuinely understands the changes or not,'' Dr Prasarn said.

Banluasak Pussarungsri, the manager of Bangkok Bank's macroeconomic analysis centre, agreed that the principles of the FBA should be reviewed.

He added that the vehement opposition to the changes voiced by the foreign business community deserved attention.

''I've never seen foreign investors come together on any one issue quite like this one,'' he said. ''We should listen to what they are saying.''

How does this effect or change things for foreigners who have bought property, a small house under a company name 49-51?

[quiksilva]

Most of these firms using these structures were previously considered Thai entities. Lets face it they mostly used nominee shareholding structures and the farang had full control over the firm either directly or indirectly or had majority voting rights.

So since the definition has changed now all of these firms will have to be register as a foreign business.

If the firms operations does not fall within list 3 (and I doubt that they will), it will have to register within 90 days of the law being enacted and will need to restructure to comply with the law.

If that business can not be restructured, it seems to me that it will be a

Edited January 11, 2007 by quiksilva

[quiksilva]

Sorry for the double post (perhaps a mod can add this to my previous posting)

Arkady and others made some great points on this topic over in the business forum that are well worth reading:

http://www.thaivisa.com/forum/index.php?sh...98435&st=15

Edited January 11, 2007 by quiksilva

[bkkandrew]

• EXCH RATES Baht/$ 35.99/12

Bid/Ask

GOLD

10,400

Baht/Baht weight

UnchangedMcKinsey Quarterly

Global Insights FOREIGN BUSINESS ACT / FOREIGN INVESTOR REACTION

Pridiyathorn tries to ease fears, but foreigners wary

Joint chambers warn of blow to investment

CHATRUDEE THEPARAT & DARANA CHUDASRI

The government is prepared to extend the transition period for foreign-owned companies to comply with the Foreign Business Act if necessary, according to M.R. Pridiyathorn Devakula, the finance minister and deputy prime minister. Authorities would also annually review the business sectors set out under the so-called List 3 of the FBA to determine what sectors are ready for full liberalisation.

M.R. Pridiyathorn and other policymakers yesterday sought to ease investor concerns about the FBA reforms and insisted that Thailand remained open to foreign investment.

M.R. Pridiyathorn: Intention of changes is "not to impede foreign investment or create new obstacles" — SAROT MEKSOPHAWANNAKUL

''The intention of the changes is not to impede foreign investment or to create new obstacles to foreigners,'' M.R. Pridiyathorn said. ''We are actually relaxing the rules in some areas, and clarifying what the law actually is for those companies that don't know right now if they are in the right or the wrong.''

M.R. Pridiyathorn said reports that up to 40,000 foreign firms would be affected by the FBA changes were overblown.

''In reality, only 2,428 companies will potentially be affected. And of these firms, many are exempt due to Board of Investment privileges or because they operate under the [uS-Thai] Treaty of Amity,'' he said. ''Overall, only 1,337 companies are expected to have to restructure, with only 15 being companies listed on the Stock Exchange of Thailand.''

On Tuesday, the cabinet approved a plan to reform the 1999 FBA to address the widespread practice of nominee shareholdings long used to evade the 49% shareholding limit set under the law.

The definition of foreign companies will now be expanded to include either majority shareholdings, both direct and indirect, as well as firms where foreigners hold a majority in terms of voting rights.

Companies in breach of the majority shareholding limit must report to the Commerce Ministry within 90 days and restructure their operations within one year.

Firms in violation in terms of voting rights will be treated differently. Those operating under List 1 and List 2 of the FBA, which includes 22 sectors overall ranging from media, rice farming, transport and mining, would have two years to reduce foreign voting rights to a minority.

Companies currently operating under List 3, which includes 21 sectors, including services, would be ''grandfathered'' with no need to change their voting structures but would have to report their status to the Commerce Ministry within one year.

M.R. Pridiyathorn, who met with representatives of 28 foreign chambers of commerce yesterday, said the government was prepared to extend the transition period for firms to restructure if needed.

''To help reassure the foreign chambers, we will consider in the National Legislative Assembly extending the transition period for companies,'' he said.

''But one must be fair to the government as well. If [foreign chambers] ask for a 10-year period, we can't do this.''

Sectors on List 3 would also be reviewed on an annual basis, he added.

''We have not increased the number of sectors that remain under protection. And exporters and manufacturing companies are completely not involved,'' he said.

M.R. Pridiyathorn said telecommunications companies would also have to restructure if their foreign shareholdings were in violation of the limit. But in terms of voting rights, existing firms such as Advanced Info Service or DTAC would be grandfathered along with other companies operating in sectors under List 3.

The FBA reforms follow last year's investigation into the takeover of Shin Corp by Singapore's Temasek Holdings. The government has said Temasek used nominees to skirt the 49% shareholding limit.

Satit Chanjavanakul, the secretary-general of the Board of Investment, said projects that received privileges from the board would be unaffected by the changes.

Promoted projects were allowed to have up to 100% foreign ownership, and most were operating in manufacturing sectors excluded from the FBA, he said. Even after promotional privileges expired, the companies would continue to be exempt from the FBA rules, Mr Satit said.

But despite the official clarifications, analysts and foreign business leaders said the FBA reforms would continue to weigh on sentiment for the near future.

Peter Van Haren, the chairman of the Joint Foreign Chambers of Commerce (JFCC), said that while foreign investors better understood the government's intentions, few were comfortable with the reforms.

''We will submit new suggestions to the government within two weeks. The position of the JFCC continues to be to scrap List 3 altogether,'' he said. ''Frankly, an extension on the time for compliance does not help much, as foreign shareholders would still have to cut their stakes.''

Mr Van Haren warned that the reforms would definitely impact future investment in Thailand and increase the burden on companies to seek local partners.

But Dusit Nontanakorn, the secretary-general of the Thai Chamber of Commerce, doubted that many foreign firms would cut back their investments.

''They can do so if they want. We can't prevent that. But I'm confident that not many will do so,'' he said.

Prasarn Trairatvorakul, the president of Kasikornbank, said a review of the principles of restraining business competition from foreigners was long overdue.

But given the sensitivity of the issue, the authorities should consider the appropriate timing of any regulatory change.

''The time given for foreign companies to restructure their shareholdings and voting-right privileges isn't too short. But personally, what I believe is even more important is to consider the suitability of the FBA, the appropriateness of the timing and whether the foreign business community genuinely understands the changes or not,'' Dr Prasarn said.

Banluasak Pussarungsri, the manager of Bangkok Bank's macroeconomic analysis centre, agreed that the principles of the FBA should be reviewed.

He added that the vehement opposition to the changes voiced by the foreign business community deserved attention.

''I've never seen foreign investors come together on any one issue quite like this one,'' he said. ''We should listen to what they are saying.''

How does this effect or change things for foreigners who have bought property, a small house under a company name 49-51?

See:

http://www.thaivisa.com/forum/index.php?sh...p=1076106

[mark lamai]

clear as mud as usual, just like the visa regs changes last year.

so.....

the most common set up as a thai ltd company with 49% foreign shareholding and voting rights of 51% or more held by the foreign director...

1. is now to be deemed a foreign company

2. if engaged in List 1 or 2 activity, has to change voting rights (within 2 years) so foreigner has maximum 49% voting rights.

and would then be deemed a Thai company again, but the foreigner has of course lost control.

So now it can engage in any activity it wants to.

3. If engaged in List 3 activity, can keep majority voting rights (grandfather clause), but is still a foreign company.

therefore , this type of company cannot

(a) trade in land

( engage in selling food and beverage

© all the others as well in Lists 1, 2 and 3.

is this correct?

if so, it means you can't do anything as a foreign company director and also have control of what the company does.

All the doors are shut i think.

Please correct me if I am wrong.

[Alf Witt]

clear as mud as usual, just like the visa regs changes last year.

so.....

the most common set up as a thai ltd company with 49% foreign shareholding and voting rights of 51% or more held by the foreign director...

1. is now to be deemed a foreign company

2. if engaged in List 1 or 2 activity, has to change voting rights (within 2 years) so foreigner has maximum 49% voting rights.

and would then be deemed a Thai company again, but the foreigner has of course lost control.

So now it can engage in any activity it wants to.

3. If engaged in List 3 activity, can keep majority voting rights (grandfather clause), but is still a foreign company.

therefore , this type of company cannot

(a) trade in land

( engage in selling food and beverage

© all the others as well in Lists 1, 2 and 3.

is this correct?

if so, it means you can't do anything as a foreign company director and also have control of what the company does.

All the doors are shut i think.

Please correct me if I am wrong.

Mark, I think you are very close to the reality here, but you make the common mistake of confusing directors and shareholders. Shareholders have no day-to-day role in making company decisions. That is the prerogative of the Directors. Under Thai law as I understand it a sole Director can be appointed to bind the company in agreements by his signature alone as long as an affidavit to that effect has been lodged with the Ministry of Commerce. There is nothing to say that that Director cannot be a farang.

Certain decisions made by the company can only be made at sharholders' meetings (usually annualy). It requires 75% of shareholders' votes to Increase or reduce the capital; amend the memorandum and articles or place the company in liquidation. There is no risk to these with 51% Thai ownership. So it makes sense to tighten up the mem and arts as much as possible.

The danger lies in the fact that 51% of the shareholders can vote to appoint or remove directors.

My understanding of the law is that 75% of the shareholders can also vote to change the articles of association so that ALL shareholder decisions require a 76% vote. That could be a sensible move to make before the legislation comes into effect. It would mean that a farang holding 49% would need the support of 27% of the Thai shareholders in respect of any decision to be made by the shareholders (note: not the day to day Directors' reponsibilities) but it would have the safeguard that the Thai shareholders could never vote you out of office (except, of course, for misconduct).

I think you are right that you cannot now exercise more than 49% of the shareholder's voting power and avoid being classified as an "alien" company which cannot hold land. So it has to be clear that the Thai Directors have voting power and it would make sense for them to be seen to exercise it. If that is done then it is a Thai company which can own land. Just raise the threshold of the vote requirement. You lose some control but you protect yourself from total loss.

Two further precautions: 1) Have the Thai Company, which owns the land, lease it to you (even if you previously controlled the company); 2) Make sure the money used by the company to buy any assets is loan finance from you which has to be repaid upon demand and that as a condition of the loan as long as the debt remains you are entitled to be a director. It is unlikely that any other Directors could vote to repay you loan without increasing the capitalisation of the company (which requires 75% of the vote which cannot be achieved without you).

If my reasoning is faulty I trust the lawyers in the forum will point it out.

[Dupont]

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

If this is the case,the Thai share holders rule the company,they can even kick you out,or sell your proporty ?

So,lets forget the company thing ?

Put your property on a thai lady ,is this the only (also unsafe) thing to do?

If they did, you would get at least 49% back. If the lady goes, it all goes.

If you bought more than 3 years ago a 51% loss would still leave you with more than you started with as prices have doubled in that time. You woul dhave saved 3 years of rent and ultimately have been a smarter invester than the smug know nothings that harp on with the doom and gloom and told you so.

Let me tell you something. Your rent money paid is dead money and if you have been here more than 3 years and being renting, you are well out of pocket and have nothing to be smug about at all.

By that measure, if I lost 100% of my house, I have saved more in rent payments than the house cost.

If you have rented here for 10 years or more, you have lost an absolute fortune!! Told you!

Edited January 11, 2007 by Dupont

[malcolminthemiddle]

If you bought more than 3 years ago and sold it last week, a 51% loss would still leave you with more than you started with as prices have doubled in that time.

[Dupont]

If you bought more than 3 years ago and sold it last week, a 51% loss would still leave you with more than you started with as prices have doubled in that time.

Your point being.

Why not make a useful comment in regard to this.

My house cost 1.1 million in 2001. So divide this by 72 (months since I bought it) and what you have 15,277 baht. So I have lived in a 4 bedroom house with swimming pool on one rai of land for 15,277 baht per month.

Any renters should tot up what they have LOST in rent over the years and look back to when they first arrived here to see what they could have bought. Also you (renters) pay a fortune for electric as the landlords top up their profits by billing you extortionate amounts per unit for it. Its only 2.4 baht per unit, yet when you rent its usually 2 or 3 times that amount and often more! If you have been here more than 5 years you have lost a fortune continue to do so as you should be living rent free by now.

What I am pointing out to the told you so brigade is that I could lose the house outright and still have made a smarter move than them. This house would rent for at least 50k a month.

On top of this, we still own it and the worst that could happen is that I lose 51% of its current value. If my wife and company shareholders shafted me, I'd walk off with over 3 million baht! which is nearly 200% more money than I started with.

My thrust on these threads is against the type of poster who is posting through ignorance of others situations. The "trendy" opinion prevalent on here is that anybody that bought through any route is a mug that has lost everything and is crying into his beer contemplating going back to Enland skint with his tail between his legs.

Edited January 12, 2007 by Dupont

[lucjoker]

how manny farangs own land and house through a company-nominee structure ?

Lets say arround Pattaya, 100 ? 500 ? 1000 ? 5000 ?...... I have no idee.

Which percentage of farangs living here,bought their house in the ladies name ?

50% 80 % ???I think about 80 % for 1-2 million bht houses

The 7 or up milj bht houses ,i think , are mostly on companies system .

What's your idee on this?

If it's realy a small group (with companies) i would worry.

[Alf Witt]

how manny farangs own land and house through a company-nominee structure ?

If the number of persons who have viewed earlier posts on this issue is of any use as an indication it would seem to be in the thousands.

[trajan]

the definition of "alien" company is being changed in the Alien Business Law (under the current proposed draft)....

HOWEVER, the definition of "alien" is NOT being changed under the Land Code (at least yet)....

therefore, how are people on this thread coming to the conclusion to that the current proposed draft will affect "Thai" holding companies (with Thai majority ownership but diluted voting rights) which own land (but do not engage in any List 1, 2 or 3 business activities under the ABL)??

Edited January 12, 2007 by trajan

[Cyberstar]

Can't say everything is undisputable clear to me, but it's my understanding that the new amendment does nothing but redefine when a company counts as foreign and when it counts as Thai. Before it was Thai if more than 50% of the shares were on Thai hands. The one and only change given by the amendment is that now also more than 50% of voting rights must be on Thai hands for the company to count as Thai.

To this we can add that various politicians say that only about 1,300 Thai companies will be effected and that existing companies operating within list 3 are exempted from the amendment - meaning they don't have to give majority voting rights to Thais to remain Thai ...

There are quite a few posters who boldly (in this and in other threads) claim that the exemption has a different meaning and that list 3 co's also become foreign companies if they don't change their voting rights setup ... Frankly, that's exactly the situation for the 1,300 non-exempted companies (they are also free not to give majority voting rights to Thais, but will be deemed foreign if they don't) --- so, what else would there be for existing list 3 companies to be exempted from if not from the redefinition of Thai vs. foreign?

So - at first sight - the new draft doesn't change status quo for those landowning, non-performing, nominee, shelve companies. However there might be a big, big problem hidden in the requirement that companies on list 3 must register and obtain a certificate if they wish to remain Thai.

Any company (co., ltd.) have to either go and get that certificate or be deemed a foreign company ... The latter cannot own land and as for the former: be certain they'll require a lot of documentation before granting the certificate: list of shareholders, receipts for taxpayments, articles of associations and whatever they'll need to feel certain they're only granting the certificate to legal companies performing actual trading under list 3.