Crackdown on foreigners using Thai nominees: DSI raid offices of law firm in Bangkok, Phuket and Samui

[janclaes47]

Just now, Horace said:

How can you take a government seriously when its officials came out and assured foreigners that these structures were legal and legitimate

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

[Horace]

1 hour ago, inThailand said:

Holding a property by a foreigner is illegal.

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

 

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

[inThailand]

5 minutes ago, Horace said:

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

 

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

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

[Horace]

5 minutes ago, janclaes47 said:

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

 

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

 

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

[Horace]

4 minutes ago, inThailand said:

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

 

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

 

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

 

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

[GinBoy2]

1 hour ago, Dogmatix said:

 

In Spain, where there is no restriction on foreign land ownership, the houses of foreigners (mainly Brits) got bulldozed not because they had used shell companies or nominees but because they had been deceived by developers (also mainly Brits) with connivance from local officials to buy houses in areas not zones permitted for residential development.  In most cases they were blocking the view of the sea or causing other undesirable environmental impact. The parallel with Thailand is the connivance of local or government officials in allowing the illegal foreign ghettos to be planned, marketed, sold and built.

 

Mexico is a closer parallel to what has happened and might happen in future.  Foreign land ownership is permitted only if it more than 50km from the ocean or 100km from the borders.  However, many foreigners (mainly Americans) have been lured into using nominee structures such as trusts and companies to illegally buy beachfront property.  There have been cases where dawn raids by hired security guards were ordered by judges to evict gringos from their illegally owned beach front homes and hotels with police standing by enjoying the show.  

I had a friend from San Diego that had this happen to him.

 

Problem is, folks when they move to third world countries, be it Thailand or Mexico, don’t really get it that the judicial system isn’t really there to dispense justice, rather more to reward their paymasters.

 

In relative terms though, I have to say, I’d rank Mexican justice quite a few notches above Thailand!

 

Just remember, you ain't in Kansas anymore

[Horace]

1 hour ago, Chua said:

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

 

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

 

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

[xylophone]

4 minutes ago, Horace said:

No one has posted any reference to any law that says event though Thai nationals own more than 50% of the shares, that company is an Alien (not permitted to own land, restricted under the FBA, etc.) if foreigners have superior voting rights or economic rights. 

But you are arguing a different point to those on the thread who are discussing the property and land ownership by a shell company (nominee company).

 

The point you make does not take into consideration the fact that the Thai shareholders may not be real shareholders, but shareholders in name only, with no financial interest, no financial input and no financial gain other than being paid under the table by a lawyer.

 

Furthermore the "company" in which they are "shareholders" conducts no business whatsoever and is formed purely for the purchasing of a house and land.

 

A foreigner may not form a company whose specific aim is to own property and conducts no business whatsoever – – surely that's the long and short of it.

[Horace]

4 hours ago, Dogmatix said:

At any rate I am unconvinced that either the Land Department or the criminal court would feel obliged to take the Civil and Commercial Code definitions of “agent” and “principal” into account in pursuing a criminal action under the Land Code which unfortunately provides no definition of the word “agent”, implying that it is ultimately up to the criminal court to interpret it in this context. 

 

If that is the only definition of agency and principal that Thai law has, how can a court legitimately come up with some new definition?  Is it just going to make one up for purposes of the Land Act?

 

Is that how Thai law works now?  If Thai courts start to make stuff up out of thin air, than Thai law loses any legitimacy it might have had.

 

If it does that, the law, by definition, is criminalizing structures were previously considered legal.  What does this tell investors? 

 

This is why Thailand continuously loses international disputes.  This why it lost the WTO case with the Philippines (which basically decided that Thai customs law was a farce), the investor state case with Walter Bau where a certain jet was seized in Germany and the Preah Vivhear Temple case twice. You can't make up and change laws to suit your goals.  If you do, you have no law and you will be treated as a lawless rogue state.  Does Thailand really want to go down that route?

[thaibeachlovers]

Excellent news. I hope all those farangs that thought they were too smart to get caught lose everything they cheated to get.

Been quite a few on TVF over the years telling us how clever they are.

[Horace]

13 minutes ago, xylophone said:

The point you make does not take into consideration the fact that the Thai shareholders may not be real shareholders, but shareholders in name only, with no financial interest, no financial input and no financial gain other than being paid under the table by a lawyer.

 

It doesn't matter.  There is no such thing as a "shareholder in name only" under Thai law.  Recall the discussion about the difference between registered and beneficial ownership, and Thai law does not recognized a difference between the two?  It really is that simple.

 

 

[xylophone]

4 minutes ago, Horace said:

 

It doesn't matter.  There is no such thing as a "shareholder in name only" under Thai law.  Recall the discussion about the difference between registered and beneficial ownership, and Thai law does not recognized a difference between the two?  It really is that simple.

 

 

OK so going down that route the whole "company" set up is a sham because it has only money invested by a foreigner to buy house and land? And surely that's what is forbidden...….but what you are saying is that because "nominee" is not clearly recognized in Thailand, the law can't be applied? But there are definitions of nominee in the following and irrespective of what they are called , it is the principle and structure which also determines the legality or not??

 

When you skip the practical legal issues and problems of running a Thai business in Thailand as a foreigner (work permit, the requirement of having an office, business objective, filing taxes, having Thai shareholders and the requirements and restrictions under the foreign business act) and stick to this specific question 'can it be a front for land ownership' the answer is definitely not. A Thai company cannot be a front for foreign land ownership. A company formed with this purpose is 100% illegal under the land code act and void under the civil code. The company would be considered the juristic person who acquired ownership on your behalf (illegal under section 96 Land Code Act). You will be considered the principal and actual owner under the chapter agency of the civil and commercial code. The land will be considered your property through the company, and therefore you acquired land in Thailand without permission (section 94 of the Land Code Act). You may be able to circumvent the law, Thai lawyers may even assist you, but if you get caught there are serious penalties involved which could include fines, imprisonment (penal code) and deportation out of Thailand (immigration act). A Thai company is not an alternative for foreign ownership of land.

 

AND this from Thailandlawonline……….

Limited Company
nominee shareholders in a Thai company

A limited company in Thailand must have a minimum of 3 shareholder at all times. Thai nationals operating a business under a company often use nominee shareholders to complete the number of 3 shareholders in the limited company. There is no general restriction for Thais that prohibited the use of nominee shareholders in a business. This is different for foreigners. Foreign investors are prohibited from using nominee shareholders in a Thai company under the foreign business act. Also bearer shares (shares owned by whoever holds the physical share certificate) are prohibited.

Foreigners are not free to operate businesses in Thailand. Foreign natural or juristic entities that want to operate a businesses in Thailand can in some cases, and following a strict procedure, have a foreign business license or permit granted in accordance with the Investment Promotion Act (through the Board of Investment of Thailand), the Foreign Business Act (through the Department of Business Development), a treaty or other laws. Such companies can be 100% foreign owned and will be allowed to operate a specific (licensed) business in Thailand as a foreign company.

Nominee shareholding structures

Nominee shareholding structures in a Thai company (as a juristic person) are commonly used by foreigners to circumvent the licensing procedure and general restrictions under the Foreign Business Act or other laws prohibiting specific business categories for foreigners. Nominee structured companies with foreign participation and control are set up as majority Thai owned to be classified as Thai companies and as such not to be restricted by foreign ownership or foreign business laws. The foreigner is usually given absolute control through the limited company's preferred shares structure. The drawback is that the Thai shareholders could be deemed 'nominees' acting on behalf of the foreign investor (meaning that the company is Thai on paper only, legally the company is foreign by majority foreign ownership as the actual owner of the shares is the foreigner). The use of Thais as nominee shareholders by foreigners is strictly prohibited under the Foreign Business Act.

Section 36 (foreign business act) 'A Thai national or juristic person that assists a foreigner in avoiding the Foreign Business Act by means of holding shares as a nominee or being a nominal owner of the company, shall (including the foreigner allowing Thai nationals or juristic persons to do so) be liable for a fine of 100,000 to 1,000,000 Baht and/ or imprisonment of up to three years'.

Any suspected use of nominee shareholders by foreigners should be forwarded to the police and ultimately to a court to determine if in a specific case nominees are used by the foreigner.

Definition of a nominee shareholder

The Thai partners or shareholders must comply with the Business Registration Rules (applied by the DBD) when forming a company with foreign shareholders involved, and in such case must submit evidence of financing used to hold shares, including bank statements and other documents. Business registration rules for Thai companies with foreigners involved could be circumvented by setting up a 100% Thai owned company and only in a later stage involve the foreign investor in the company.

There have been plans in the government to amend the foreigner definition in the Foreign Business Act, and by this way solving the nominee problem in Thailand. Under current laws and policy it is relatively simple (but illegal) for foreigners to operate restricted businesses by using Thai nominee shareholders and controlling the company through preference shares and majority voting rights in the company

Sample definition of nominee

• a) A nominee shareholder, being either a natural person or juristic person, who is registered as the holder of shares in the partly foreign owned company but who does not actually invest in the company, nor has the financial means to pay up his shares, nor has a beneficial interest in the company, nor has any form of control in the company.
• b) Is there an intention to evade the law? Indicators would be:
  • - how is management control in the company structured,
  • - is there a loan investment supplied or guaranteed by the foreigner (did the Thai shareholder actually invest in the company),
  • - unbalanced voting rights attached to shares held by the foreigner giving him absolute control,
  • - and the flow of funds from dividends paid by the company to the shareholders.

Foreigners who want to operate a business through a majority Thai owned limited company should comply with the business registration rules, which are aimed at preventing the use of Thai nominee shareholders.

[janclaes47]

59 minutes ago, Horace said:

 

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

 

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

You are mixing up 2 different things.

 

A company with foreign shareholders, which runs a legal business, is legally allowed to own a property.

 

I recall that the BOI even allows foreign investors that invest a certain amount of money to own a limited size of property for residential purpose.

 

A company with foreign shareholders, that is setup with the sole purpose of owning a property, is and has never been legal

[Horace]

25 minutes ago, janclaes47 said:

ou are mixing up 2 different things.

 

A company with foreign shareholders, which runs a legal business, is legally allowed to own a property.

 

OK, running a restaurant or gas station is a "legal business"   If what you are saying is true, a company with foreign shareholders that runs a gas station or restaurant can own property, rightt?  But if the company is running, say, a casino (not a legal business in Thailand), then a foreign owned company cannot own property?

 

That is what you wrote.  Are you sure you want to stick with this claim?

[janclaes47]

14 minutes ago, Horace said:

 

OK, running a restaurant or gas station is a "legal business"   If what you are saying is true, a company with foreign shareholders that runs a gas station or restaurant can own property, rightt?  But if the company is running, say, a casino (not a legal business in Thailand), then a foreign owned company cannot own property?

 

That is what you wrote.  Are you sure you want to stick with this claim?

 

No that is NOT what I wrote, don't put words in my mouth to enforce your flawed claims.

 

Here is again what I actually wrote, try to read it S L O W L Y , or get some assistance.

 

A company with foreign shareholders, that is setup with the sole purpose of owning a property, is and has never been legal

[mogandave]

Wrong.  No law says this.  The law says restricts "Aliens" from owning property and engaging in activities restricted under the FBA.  The law very carefully defines Alien companies in terms of share ownership alone - nothing more.  It says nothing about control or economic benefit.
 
If this is genuine change in policy, the Thai government is criminalizing structures that the law says are legal and that the Thai government itself said were legal.  That is an expropriation of assets.

Governments criminalize all manner of things they previously said were legal.

[Horace]

2 minutes ago, mogandave said:

Governments criminalize all manner of things they previously said were legal.

 

Some do.  And when they do, they can't legitimately claim that the rule of law matters much in their country. 

 

They can also risk having their assets seized overseas.  That is what happened in the infamous Walter Bau case.  A jet was seized outside of Munich after the Thai government refused to comply with an international arbitration award arising out of an investor-state dispute, and the prevailing party seized Thai assets in Germany.  There were screams of outrage in Thailand and all sorts of crazy threats (that made Thailand look ridiculous, but accomplished nothing else), but in the end Thailand paid the award plus several million extra Euros in interest.  In other words, by refusing to comply with international law, Thailand not only had to pay the an award (actually more than the actual award), but also lost face and credibility among foreign investors,  Indonesia and countries in South American did the same, and their economies and the people who lived in those countries paid a high price. Very foolish move.

 

If a country does not comply with its own laws, that country will have serious problems attracting investors.  The return on investments needs to be higher to justify to justify investing in a country where there is scant respect for the rule of law.  This should come as a surprise to anyone, but for some reason Thai decision makers (not the technocrats, but the vested elites who actually make decisions) don't seem to get this.

 

Right now, Thailand is trying to attract investment by claiming that it does protect investor's rights.  Taking away property rights from foreigners and arbitrarily expropriating their property puts the lie to that claim.

[Horace]

2 hours ago, xylophone said:

There have been plans in the government to amend the foreigner definition in the Foreign Business Act, and by this way solving the nominee problem in Thailand.

 

If the definition of a nominee is clear, why does your quote say that the government has plans to change ("amend" means "change", but simply sounds nicer) the Foreign Business Act.  If I amend a contract, I have changed the contract, and I need the other side's consent to do so.  Likewise, if this "amendment" or, if we are honest with our language, change, of the definition of a nominee takes away rights that foreigners have enjoyed for decades, the government is expropriating rights of foreigners.

 

If the definition of a "nominee" is clear, why does it mean to be changed?  Why pussyfoot around what you are doing by calling it amendment instead of a change. 

 

When the government previously tried to "amend" the FBA in 2006 and 2014 (Coup governments), the foreign business community stood up, and the government stood down, conceding that it would not change the law.   

 

When the FBA was enacted in 1998, there were proposals to have a tighter definition of nominee, but the government made a conscious decision not to do so because it was concerned that this would deter investment.  Now, 20 years later, after foreigners have made investments based on the existing definition, the government cannot pull the rug out from under investors by changing the definition of a nominee.

 

When your playing a game of chess or football, you can't unilaterally change the rules because you don't like the outcome.  If try to do that, you will be rightfully called out as a sore loser and cheater.  This was tried in 2006 and 2014, and when the foreign business community said "no", the government did more than blink.  It abandoned any public plans to change the law altogether.

 

I don't know what happened with DFDL, but if this is an end run around the law, as written, in the FBA, without any public announcement or discussion, it will do tremendous harm to Thailand's economy. 

[Horace]

1 hour ago, janclaes47 said:

 

No that is NOT what I wrote, don't put words in my mouth to enforce your flawed claims.

 

Here is again what I actually wrote, try to read it S L O W L Y , or get some assistance.

 

A company with foreign shareholders, that is setup with the sole purpose of owning a property, is and has never been legal

 

I quoted what you wrote.  What law says that a company established with the sole purpose of owning property is illegal?  Give me a cite.

[mogandave]

 
Some do.  And when they do, they can't legitimately claim that the rule of law matters much in their country. 
 
They can also risk having their assets seized overseas.  That is what happened in the infamous Walter Bau case.  A jet was seized outside of Munich after the Thai government refused to comply with an international arbitration award arising out of an investor-state dispute, and the prevailing party seized Thai assets in Germany.  There were screams of outrage in Thailand and all sorts of crazy threats (that made Thailand look ridiculous, but accomplished nothing else), but in the end Thailand paid the award plus several million extra Euros in interest.  In other words, by refusing to comply with international law, Thailand not only had to pay the an award (actually more than the actual award), but also lost face and credibility among foreign investors,  Indonesia and countries in South American did the same, and their economies and the people who lived in those countries paid a high price. Very foolish move.
 
If a country does not comply with its own laws, that country will have serious problems attracting investors.  The return on investments needs to be higher to justify to justify investing in a country where there is scant respect for the rule of law.  This should come as a surprise to anyone, but for some reason Thai decision makers (not the technocrats, but the vested elites who actually make decisions) don't seem to get this.
 
Right now, Thailand is trying to attract investment by claiming that it does protect investor's rights.  Taking away property rights from foreigners and arbitrarily expropriating their property puts the lie to that claim.

Is there a country that does not make illegal things that were previously legal?

[janclaes47]

20 minutes ago, Horace said:

 

I quoted what you wrote.  What law says that a company established with the sole purpose of owning property is illegal?  Give me a cite.

I'm not your lackey, but it took me 0.54 seconds with google to proof that you are spouting drivel

 

https://www.samuiforsale.com/real-estate/nominee-structured-companies-and-transfer-of-land.html

 

A limited companies formed merely as a vehicle to own land on behalf of a foreigner is as a structure void because its purpose is to circumvent laws prohibiting foreign land ownership (section 150 civil and commercial code) and illegal under land laws because of its intention of land holding on behalf of a foreigner (section 113 Land Code Act.

 

https://www.thaicontracts.com/ask/28-other-questions/37-property-ownership-by-foreigners-via-thai-limited-companies-allowed.html

In 2006 new regulations for the land offices were established preventing land ownership registration by such nominee structured limited companies (the business registration departments received similar instructions). The reason for these new regulations were the widespread misuse of Thai companies and illegal use of Thai nominee shareholder structures by foreigners for property and business acquisitions that were normally restricted for foreign ownership.

Currently the Thai government is actively investigating the Thai shareholders in partly foreign owned limited companies owning property in Thailand.

Nominee shareholding structures

The use of Thai nominee shareholders by foreigners is illegal, not only under the land code act but also under the foreign business act. When a nominee shareholding structure exist, the shares held by the Thai nominee shareholders will be deemed held by the foreigner (as with bearer shares) and the Thai limited company therefore considered foreign. Pursuant to section 97 under 1 the company will be considered foreign and therefore as a foreign company illegally and without permission holding land.

[Horace]

6 minutes ago, mogandave said:

Is there a country that does not make illegal things that were previously legal?

 

Short answer: no.  Longer, fairer and more useful answer: its a matter of the nature of the change, the degree and the rationale for the change.

 

For example, if a country imposes a speed limit or some other safety regulation that criminalizes an act that was legal, it is making something that was legal now illegal.  So, I get your point on that. But its making this change for a legitimate (or, at least, facially) legitimate reason - public safety.

 

But taking away someone's property is another matter.  And what is the reason for taking away the property?  Foreign control is not harming anyone (actually, it probably improves the environment and increase tax compliance, but that's another matter).  And taking foreign control away after the matter was duly considered and the country's leaders reassured foreigners they wouldn't do this, is even worse.  Its, to put it mildly, suggestive of less than honest intent.

 

[JLCrab]

As referenced in Post #1, the DSI and BOI 'raids' were predicated on that:

 

"Nominees have increasingly been used to circumvent the laws on foreigners owning land in Thailand and other business related matters."

 

So I guess soon enough we'll find out if such circumvention is the official State sanctioned policy regarding foreigners holding such assets in the Kingdom.

[mogandave]

 
Short answer: no.  Longer, fairer and more useful answer: its a matter of the nature of the change, the degree and the rationale for the change.
 
For example, if a country imposes a speed limit or some other safety regulation that criminalizes an act that was legal, it is making something that was legal now illegal.  So, I get your point on that. But its making this change for a legitimate (or, at least, facially) legitimate reason - public safety.
 
But taking away someone's property is another matter.  And what is the reason for taking away the property?  Foreign control is not harming anyone (actually, it probably improves the environment and increase tax compliance, but that's another matter).  And taking foreign control away after the matter was duly considered and the country's leaders reassured foreigners they wouldn't do this, is even worse.  Its, to put it mildly, suggestive of less than honest intent.
 

And when a farmer has a going concern and the state diverts their water?

Or when zoning changes are made running businesses out a a particular area?

While I agree it is not likely the government will step in and grab everyone’s property, thinking it impossible is foolish.

People here use prostitution being allowed as an example, yet these places get raided and shut-down all the time.

[Horace]

34 minutes ago, janclaes47 said:

I'm not your lackey, but it took me 0.54 seconds with google to proof that you are spouting drivel

 

https://www.samuiforsale.com/real-estate/nominee-structured-companies-and-transfer-of-land.html

 

A limited companies formed merely as a vehicle to own land on behalf of a foreigner is as a structure void because its purpose is to circumvent laws prohibiting foreign land ownership (section 150 civil and commercial code) and illegal under land laws because of its intention of land holding on behalf of a foreigner (section 113 Land Code Act.

 

https://www.thaicontracts.com/ask/28-other-questions/37-property-ownership-by-foreigners-via-thai-limited-companies-allowed.html

In 2006 new regulations for the land offices were established preventing land ownership registration by such nominee structured limited companies (the business registration departments received similar instructions). The reason for these new regulations were the widespread misuse of Thai companies and illegal use of Thai nominee shareholder structures by foreigners for property and business acquisitions that were normally restricted for foreign ownership.

Currently the Thai government is actively investigating the Thai shareholders in partly foreign owned limited companies owning property in Thailand.

Nominee shareholding structures

The use of Thai nominee shareholders by foreigners is illegal, not only under the land code act but also under the foreign business act. When a nominee shareholding structure exist, the shares held by the Thai nominee shareholders will be deemed held by the foreigner (as with bearer shares) and the Thai limited company therefore considered foreign. Pursuant to section 97 under 1 the company will be considered foreign and therefore as a foreign company illegally and without permission holding land.

 

Oh brother.  Take a look at what you post and where you getting it from.  Your source is some website called "samuiforsale", a real estate brokerage.  You are not quoting the law.

 

Two quick points.

 

First, Section 113 of the Land Code says "anyone who acquires land as an agent of alien..." is violating the law.  Its pretty easy to identify an agent.  This does not make it illegal for a foreigner to own shares with voting control or economic advantages in a company that owns land.

 

Second, the other material you cite refers to nominee shareholding.  I have already explained why the definition of a  "nominee" is hopelessly muddled.  There have already been cites to other sources referring about the problems with the definition of a nominee under Thai law.  The Thai government admits the definition is a problem.  In other words, simply citing some article that says nominee shareholding is illegal begs the question.

 

The real question here is this: what is a nominee?  Thai law does not say that a Thai is a nominee shareholder if his shares do not have control over the company or have diminished economic rights.  No one has yet provided a cite to any law that says this.  Why?  Because there isn't one.

 

As matters stand now, an illegal nominee shareholding relationship is not established simply because a foreign has voting control or superior voting rights.  If the definition is changed so that an illegal nominee relationship is established simply because the shares held by a foreigner have management control or superior economic rights, this change is an expropriation of property rights.

 

And this is why the government has been unable to make this change.  

 

Remember, simply referring to "nominee shareholding" is meaningless unless we know that term means.  No one has yet provided a clear definition.  And, as matters stand now, the definition is a hopeless muddle of nothing.

[Horace]

30 minutes ago, mogandave said:

And when a farmer has a going concern and the state diverts their water?

Or when zoning changes are made running businesses out a a particular area?

 

Thanks.  I am probably not in agreement with you, but at least you understand the issue and citing reasonable examples.  Let's taking a zoning change.  A zoning change can be an expropriation.  If it is, compensation must be paid .  But since you are citing good examples, I suspect you already know there is a whole body of international law about what does and does not constitute an expropriation of property rights, and that this is the fodder of investment state disputes.

 

But changing the law so that foreigners no longer have voting rights or economic rights they have under existing law is an easy call.  Its an expropriation.  You are taking property away from the foreigner without any compensation.  And there is no generally recognized and acceptable policy reason (e.g., environmental concerns, safety, keeping porn shops away from schools, etc.) for doing so.   Hence it is an illegal taking of property rights.

 

Let me put it this way.  There is obviously strong sentiment in many quarters (mostly the elite) against what is perceived as foreign ownership of property.  If the government could legitimately change the definition of a nominee so that foreign control or economic benefit made the structure illegal, don't you think they would do that by now?  Wouldn't that be easier than keeping the hopelessly ambiguous definition of a "nominee" they have now? 

 

They haven't done that, and there is a very good reason.  Doing so would be an obvious expropriation without any legitimate rationale, and this would de-legitimize the FBA and Thai property law.  There are good reasons - involving investment and self-interest - they haven't taken this step.  

[JLCrab]

Correction (maybe) to come from News1Live: DSI and BOI did not raid the premises of the law firm in question regarding financial fraud related to circumvention of Thai laws on foreign ownership of land and restricted businesses using nominees but for unpaid parking tickets.

 

Never mind.

[OldSiamHand]

2 hours ago, janclaes47 said:

I'm not your lackey, but it took me 0.54 seconds with google to proof that you are spouting drivel

 

 

As a casual observer with more than a passing familiarity with these issues, I would say that Horace as been spot on.

 

Your point is a valid one though, even though it is not illegal to set up a foreign controlled company whose sole purpose is to own property.   It is valid in the sense that we are talking about a company, which is intended to generate revenues and eventually a profit.  If the company simply sits on its assets (building and land) and fails to generate income but merely expenses (annual audits and other operating expenses), then the Revenue Department will raise an eyebrow and may conduct an audit after the company has submitted a couple of years of audited financials showing no revenues.  Where things go after that I'm not sure, but it is generally advised to avoid this situation by having the company generate revenues and a small profit.  For example, the company could lease the underlying land to the foreigner and earn rental income, with the foreigner owning the home in his own name (not prohibited under Thai law).

[xylophone]

3 hours ago, Horace said:

If the definition of a nominee is clear, why does your quote say that the government has plans to change ("amend" means "change", but simply sounds nicer) the Foreign Business Act.  If I amend a contract, I have changed the contract, and I need the other side's consent to do so.

But surely you have been selective in just focussing on this because my and others points are covered in this from a Law Company (not a Real Estate agent). Also it states that under current laws and policy it is relatively simple (but illegal) for foreigners to operate restricted businesses by using Thai nominee shareholders and controlling the company through preference shares and majority voting rights in the company, AND definitions and samples are given as to what constitutes a nominee.

 

So whilst you are arguing your point on a very narrow premise, the Govt can follow its own edict as stated above and in the following from a law company. 

 

And you seem to be quite concerned with what the "international" reaction would be if the Thai government did enforce its "rules" about nominee companies and you quote Germany and a jet as an example.

 

Has it ever occurred to you that Thailand can do whatever it wants within its own borders with regards to its own property laws/rules/regulations and wave away protests just like that.

 

Evidence the Koh Tao trial where no fingerprints were found, no evidence that the Burmese boys were anywhere near the murders, no concrete evidence that there was a trail of custody or indeed anything to do with blood tests etc, and the world cried out – – but what did Thailand do, it found them guilty and death may well follow. Thailand does what it wants, when it wants.

 

Yet there you are arguing your point on a technicality to all intents and purposes. Things don't work like that here I'm afraid and the following should be read carefully...…..

 

Thailandlawonline

 

A Thai company cannot be a front for foreign land ownership. A company formed with this purpose is 100% illegal under the land code act and void under the civil code.

 

The company would be considered the juristic person who acquired ownership on your behalf (illegal under section 96 Land Code Act). You will be considered the principal and actual owner under the chapter agency of the civil and commercial code. The land will be considered your property through the company, and therefore you acquired land in Thailand without permission (section 94 of the Land Code Act). You may be able to circumvent the law, Thai lawyers may even assist you, but if you get caught there are serious penalties involved which could include fines, imprisonment (penal code) and deportation out of Thailand (immigration act). A Thai company is not an alternative for foreign ownership of land.

Foreign investors are prohibited from using nominee shareholders in a Thai company under the foreign business act. Also bearer shares (shares owned by whoever holds the physical share certificate) are prohibited.

 

Nominee shareholding structures

 Nominee shareholding structures in a Thai company (as a juristic person) are commonly used by foreigners to circumvent the licensing procedure and general restrictions under the Foreign Business Act or other laws prohibiting specific business categories for foreigners. Nominee structured companies with foreign participation and control are set up as majority Thai owned to be classified as Thai companies and as such not to be restricted by foreign ownership or foreign business laws. The foreigner is usually given absolute control through the limited company's preferred shares structure. The drawback is that the Thai shareholders could be deemed 'nominees' acting on behalf of the foreign investor (meaning that the company is Thai on paper only, legally the company is foreign by majority foreign ownership as the actual owner of the shares is the foreigner). The use of Thais as nominee shareholders by foreigners is strictly prohibited under the Foreign Business Act.

 

Section 36 (foreign business act) 'A Thai national or juristic person that assists a foreigner in avoiding the Foreign Business Act by means of holding shares as a nominee or being a nominal owner of the company, shall (including the foreigner allowing Thai nationals or juristic persons to do so) be liable for a fine of 100,000 to 1,000,000 Baht and/ or imprisonment of up to three years'.

 

Any suspected use of nominee shareholders by foreigners should be forwarded to the police and ultimately to a court to determine if in a specific case nominees are used by the foreigner.

 

Definition of a nominee shareholder

The Thai partners or shareholders must comply with the Business Registration Rules (applied by the DBD) when forming a company with foreign shareholders involved, and in such case must submit evidence of financing used to hold shares, including bank statements and other documents. Business registration rules for Thai companies with foreigners involved could be circumvented by setting up a 100% Thai owned company and only in a later stage involve the foreign investor in the company.

 

There have been plans in the government to amend the foreigner definition in the Foreign Business Act, and by this way solving the nominee problem in Thailand. Under current laws and policy it is relatively simple (but illegal) for foreigners to operate restricted businesses by using Thai nominee shareholders and controlling the company through preference shares and majority voting rights in the company

 Sample definition of nominee

 

a) A nominee shareholder, being either a natural person or juristic person, who is registered as the holder of shares in the partly foreign owned company but who does not actually invest in the company, nor has the financial means to pay up his shares, nor has a beneficial interest in the company, nor has any form of control in the company.

b) Is there an intention to evade the law? Indicators would be:

- how is management control in the company structured,

- is there a loan investment supplied or guaranteed by the foreigner (did the Thai shareholder actually invest in the company),

- unbalanced voting rights attached to shares held by the foreigner giving him absolute control,

- and the flow of funds from dividends paid by the company to the shareholders.

 

[mogandave]

 
Thanks.  I am probably not in agreement with you, but at least you understand the issue and citing reasonable examples.  Let's taking a zoning change.  A zoning change can be an expropriation.  If it is, compensation must be paid .  But since you are citing good examples, I suspect you already know there is a whole body of international law about what does and does not constitute an expropriation of property rights, and that this is the fodder of investment state disputes.
 
But changing the law so that foreigners no longer have voting rights or economic rights they have under existing law is an easy call.  Its an expropriation.  You are taking property away from the foreigner without any compensation.  And there is no generally recognized and acceptable policy reason (e.g., environmental concerns, safety, keeping porn shops away from schools, etc.) for doing so.   Hence it is an illegal taking of property rights.
 
Let me put it this way.  There is obviously strong sentiment in many quarters (mostly the elite) against what is perceived as foreign ownership of property.  If the government could legitimately change the definition of a nominee so that foreign control or economic benefit made the structure illegal, don't you think they would do that by now?  Wouldn't that be easier than keeping the hopelessly ambiguous definition of a "nominee" they have now? 
 
They haven't done that, and there is a very good reason.  Doing so would be an obvious expropriation without any legitimate rationale, and this would de-legitimize the FBA and Thai property law.  There are good reasons - involving investment and self-interest - they haven't taken this step.  

If the law is changed and or enforced such that these companies are no longer legal, the state could easily step in and force the properties to be sold with the business owners being the beneficiaries. They give you a year to sell it, then they take it, auction it and give the company owners the proceeds, minus process fees.

Given the companies are absolutely circumventing the spirit of the law, I do not see how this would cause a big stir.

Of the total number of expats, what percentage do you think are involved in this type of thing?