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

[xylophone]

21 minutes ago, Horace said:

Can you now point to a specific Thai law that says the courts should look at voting control or economic benefit - or something else more than the nationality of the shareholders - when determining if a company is an Alien?  Criminal penalties apply for violations of these laws, so a reference to the "spirit" of the law does not work. Also, a policy enacted, say, in 2006, cannot affect a company formed in 1999. 

But this is not the main point that is being argued here and despite the original post being about a crackdown on illegal companies etc, most of this thread has morphed into a subject of foreigners/aliens owning land through setting up companies which aren't really companies, which produce nothing and which employ no Thais, whilst the Thai shareholders put absolutely no money into the company whatsoever. That's what is being argued.

 

This has been stated by many law companies here to be a "sham company" or a "nominee company", irrespective of what definition you want to put on these things. If those aspects above (in the first paragraph) are relevant and inherent within this "company" then it is illegal.

 

This is what is being stated by the majority of posters and it is quoted in the Land Code Act that such companies should be looked at to ensure that aliens are not circumventing the law of not owning land.

 

You appear to be arguing a different point, and ownership of land by companies set up in the manner dictated, with majority Thai shareholders who have invested their own funds, who run a bone fide company which produces something and employs Thais, has regular shareholder meetings and produces return on the investment by the Thai shareholders, is legal and there is no recourse whatsoever on those shares, even if a farang owns 49% of that company.

 

Thai Law companies statements......….

Can foreign individuals own land in Thailand? 
ANSWER: Foreign land ownership can only be allowed pursuant to a treaty (section 86 of the Land Code Act, no treaty exists) or following section 96 bis of the Land Code Act. Both require permission of the Minister of Interior.

 

Can a Thai national own land on my behalf? 

Answer No. It is illegal for foreigners to use a Thai person (juristic or natural) for this purpose and illegal for Thai nationals to act as an agent or owner on behalf of a foreigner, (section 96 of the Land Code Act). The Thailand Land Department even issued a warning in English on their website that this structure would be a criminal offence against the Criminal Code (section 267) and the Land Code Act (section 111).

 

Where can I find the law that prohibits foreign land ownership? 
Answer The Land Code Act contains provisions governing foreign land ownership. Read more: CHAPTER 8 / หมวด ๘ - Limitation of Foreigners Right in Land / การกําหนดสทธิ ิในทดี่ ินของคนตางด  าว..

 

Can foreigners have other rights to land in Thailand? 
Answer Foreigners can have possession of land or real estate under a with the land department registered lease agreement or obtain a right of usufruct. or have an interest in a Thai company that owns the land, however this last option is currently less popular because in general this structure as a vehicle to own real estate on behalf of a foreigner has some legal defects in its structure and purpose.

 

A company will be regarded as a “Thai” company and may own land in Thailand if no more than 49% of the total issued shares in the company are held by foreigners. However, even if foreigners own less than 49% of the total issued shares, by internal policy of the Land Office, officials may investigate the purchase transaction to make sure it is not an attempt to get around the prohibition against foreign land ownership.

 

PS. Please do not get into the debate again about what constitutes an "alien" or a "nominee" in Thailand because it can mean whatever the court wants it to mean at any particular time.

 

PPS. And IMO there have been no "ad hominem" attacks on you as regards your posts, however frustration may well be creeping into some replies.

[mogandave]

 
PPS. And IMO there have been no "ad hominem" attacks on you as regards your posts, however frustration may well be creeping into some replies.

I understood him to mean he was going to ignore all the attacks he was making on others.

[Horace]

13 hours ago, xylophone said:

Can a Thai national own land on my behalf? 

Answer No. It is illegal for foreigners to use a Thai person (juristic or natural) for this purpose and illegal for Thai nationals to act as an agent or owner on behalf of a foreigner, (section 96 of the Land Code Act). The Thailand Land Department even issued a warning in English on their website that this structure would be a criminal offence against the Criminal Code (section 267) and the Land Code Act (section 111).

 

This is coming to an end so I will keep this limited.  The words "an agent or owner on behalf of a foreigner" begs the question. 

 

Agency is obviously a problem and it is not used in a preference share structure since an agent is obliged to follow the instructions of his or her  principal.  A preference share holder can vote his or her shares as he pleases.  He can vote against the foreign shareholder.  A preference shareholder is therefore not an agent.

 

Is the "Thai person" owing land on behalf of a foreigner?  The meaning of this language is vague.  We obviously disagree about what this means, but I don't think it can be legitimately disputed that the Land Department's interpretation of this vague language has obviously changed over time.  And that's the problem. 

 

If it meant one thing in 1999 when the Land Department allowed foreign controlled companies to own land because the Thai economy was languishing, and it means something else today, the application of today's definition on a structure set up 20 years is an expropriation.  I know you will disagree, but I am confident the markets will not.

 

 

[mogandave]

Yes, the entire structure of the Thai government and the stability of the Thai economy subject to fail depending on the clarification of how one word is defined.

[overherebc]

For individuals setting up 'sham' companies to buy a house the worst treatment I've seen handed out was to a friend who was told 'just transfer the house ownership to your daughter's name, no rush, as long as you agree to do it.'

[xylophone]

46 minutes ago, overherebc said:

For individuals setting up 'sham' companies to buy a house the worst treatment I've seen handed out was to a friend who was told 'just transfer the house ownership to your daughter's name, no rush, as long as you agree to do it.'

Didn't work out that well for a friend whose lawyer had sold his villa (and land) out from under him, and when the case went to court the ruling was that my friend had "purchased" the villa through a sham company so had no right to it......unlawfully acquired, so he lost the case and villa (last I heard).

[Dogmatix]

1 hour ago, Horace said:

 

This is coming to an end so I will keep this limited.  The words "an agent or owner on behalf of a foreigner" begs the question. 

 

Agency is obviously a problem and it is not used in a preference share structure since an agent is obliged to follow the instructions of his or her  principal.  A preference share holder can vote his or her shares as he pleases.  He can vote against the foreign shareholder.  A preference shareholder is therefore not an agent.

 

 

You have explained several times that the CCC definitions of agent and principle mean that Thais who allow their names to be used as shareholders by foreigners to set up companies that qualify as Thai without investing any of their own money cannot be considered as agents and therefore cannot be held criminally liable in the context of Section 113 of the Land Code.  That being the case, I would like to know what your interpretation of "agent" as used in Section 113 is and exactly what would constitute criminal behaviour in facilitating foreign ownership of land.  It is hard to imagine that a Thai law proscribes prison sentences for a crime that doesn't exist.  So there must circumstances where Thais or others could be guilty of acting as agents.

 

If a preference shareholder is not an agent, what about about those who have no money but let the foreign register ordinary shares in their name.  Could they be deemed to be agents following the foreigner's instructions to sign various documents? 

[xylophone]

1 hour ago, Horace said:

 

This is coming to an end so I will keep this limited.  The words "an agent or owner on behalf of a foreigner" begs the question. 

 

Agency is obviously a problem and it is not used in a preference share structure since an agent is obliged to follow the instructions of his or her  principal.  A preference share holder can vote his or her shares as he pleases.  He can vote against the foreign shareholder.  A preference shareholder is therefore not an agent.

 

Is the "Thai person" owing land on behalf of a foreigner?  The meaning of this language is vague.  We obviously disagree about what this means, but I don't think it can be legitimately disputed that the Land Department's interpretation of this vague language has obviously changed over time.  And that's the problem. 

 

If it meant one thing in 1999 when the Land Department allowed foreign controlled companies to own land because the Thai economy was languishing, and it means something else today, the application of today's definition on a structure set up 20 years is an expropriation.  I know you will disagree, but I am confident the markets will not.

 

 

Thank you for your concise and reasoned response.

 

It appears that we will have to agree to disagree because as I see it, your whole "argument" revolves around YOUR understanding of the Thai use/definition of the word "agent" and with respect, it will most likely mean whatever the Thai government wants it to mean in order to fit the end it wants to achieve/its purpose.

 

As for the markets, if this is seen as a tightening up of laws that were already in place but not enforced, then it will not be a problem, mainly because it was always "suspected" that companies set up this way were sailing close to the wind.

 

Furthermore companies will always want to find a way to tap into a lucrative market so investment will continue, but by using different avenues and structures...…...the world of investing and company expansion in Thailand will go on irrespective of this outcome, especially if the crackdown mainly involves the companies set up by foreigners, which aren't actually companies at all.

[Dogmatix]

1 hour ago, Horace said:

If it meant one thing in 1999 when the Land Department allowed foreign controlled companies to own land because the Thai economy was languishing, and it means something else today, the application of today's definition on a structure set up 20 years is an expropriation.  I know you will disagree, but I am confident the markets will not.

 

 

Can you provide any evidence, other than hearsay, that the Land Department explicitly allowed or encouraged foreign controlled companies to own land in 1999.  The only thing in that area documented from that year to my knowledge is the amendment to the Land Code that allowed foreigners investing B40m in certain approved investments to buy up to one rai of land for residential purposes in certain zones.  Related to that was the directive also in 1999 to Land Departments to stop prohibiting Thai women married to or cohabiting with foreigners from buying land, subject to a proforma declaration signed by both spouses that the funds used for the purchase were the Thai woman's and would not form part of the conjugal property.  If you were to dig around in the archives I am sure you would be able to find evidence that the Land Department directive requiring applications to transfer land by companies 40% or more by foreigners to be referred to the director general for investigation was in place then. (My own first foray into the land market via a company took place only a year later in 2000 and this Land Department regulation was definitely in place then and had been in place for some time.)  In 1999 that probably meant that real businesses with operations effectively controlled by foreigners would have been approved but shell companies owned more than 40% by foreigners might not have been, unless the director general decided to relax his standards.  Those without real businesses were not advised to take their chances with the DG and were advised to reduce their foreign shareholding to less than 40% to avoid scrutiny and get around the Land Departments policy. 

 

My point is that, even if there was a temporary relaxation of standards, I doubt it would be possible to produce evidence of an explicit policy to permit companies with more than 40% foreign shareholdings suspected of being fronts for foreigners to buy land.  Without evidence it is impossible to accuse the Thai government of a change of policy.    

[Horace]

23 minutes ago, Dogmatix said:

You have explained several times that the CCC definitions of agent and principle mean that Thais who allow their names to be used as shareholders by foreigners to set up companies that qualify as Thai without investing any of their own money cannot be considered as agents and therefore cannot be held criminally liable in the context of Section 113 of the Land Code.  That being the case, I would like to know what your interpretation of "agent" as used in Section 113 is and exactly what would constitute criminal behaviour in facilitating foreign ownership of land.  It is hard to imagine that a Thai law proscribes prison sentences for a crime that doesn't exist.  So there must circumstances where Thais or others could be guilty of acting as agents.

 

If a preference shareholder is not an agent, what about about those who have no money but let the foreign register ordinary shares in their name.  Could they be deemed to be agents following the foreigner's instructions to sign various documents? 

 

I think you are confusing my (a) summary of what some claim constitutes a nominee with (b) an agent.  The two are as different as night and day.  An agency relationship is defined in Title XV of the Thai Civil and Commercial Code (CCC).  The CCC sections in this Title say that an "Agent must act according to the instructions of the principal".  CCC section 809 requires the agent to give an account to the principal.  CCC section 810 provides that an agent must hand over all monies received out of the agency.   Agents are liable to principals for their acts. This list goes on.

 

A shareholders with diminished voting and economic rights does not have to do any of these obligations.  A Thai shareholder in a preference share structure can vote as he chooses.  He doesn't have go to give an account to other shareholders or anyone else.  He can keep all the money (dividends) he receives.  The Thai shareholder has no liability or obligations to the foreign shareholder. The Thai shareholder is simply another shareholder in a company. None of the obligations of an agency relationship apply to a Thai shareholder in a preference shareholding arrangement.  The obligations of an agent are all set out in the CCC. 

 

I don't see any provisions barring preference shareholding arrangements, and no one has pointed to any provisions of the CCC, FBA or Land Act referring to preference shareholding arrangements.

 

That is the problem I keep pressing on.  There is a definition of an agent in the CCC, and its pretty clear.  It also pretty clear that a Thai shareholder with preference shares is not an agent.  But nothing about these other principles you and other have raised about "Thais acting on behalf of foreignors". and "sham companies" have ever been explained.  No one has ever pointed to any Thai law on this.  Instead, they claim the company is a sham, and then argue because the company is a sham, the shareholders must be sham shareholders.  But no one has yet pointed to any law about sham companies. 

 

That is why I see this whole line of argument is putting the cart before the horse.  

[Dogmatix]

3 minutes ago, Horace said:

 

I think you are confusing my (a) summary of what some claim constitutes a nominee with (b) an agent.  The two are as different as night and day.  An agency relationship is defined in Title XV of the Thai Civil and Commercial Code (CCC).  The CCC sections in this Title say that an "Agent must act according to the instructions of the principal".  CCC section 809 requires the agent to give an account to the principal.  CCC section 810 provides that an agent must hand over all monies received out of the agency.   Agents are liable to principals for their acts. This list goes on.

 

A shareholders with diminished voting and economic rights does not have to do any of these characteristics.  A Thai shareholder in a preference share structure can vote as chooses.  He doesn't have go to give an account to other shareholders or anyone else.  He can keep all the money (dividends) he receives.  The Thai shareholder has no liability to the foreign shareholder. None of the characteristics of an agency relationship apply to a Thai shareholder in a preference shareholder.  Its all set out in the CCC.

 

That is the problem I keep pressing on.  There is a definition of an agent in the CCC, and its pretty clear.  It also pretty clear that a Thai shareholder with preference shares is not an agent.  But nothing about these other principles you and other have raised about "Thais acting on behalf of foriengers".  There is simply no Thai law on this.  It seems to be whatever Thai officials think it is at any point in time.  That's the problem.

 

You haven't answered my question as to what is your interpretation of Section 113 of the Land Code that  criminalises agents who act to facilitate land ownership by foreigners.  How should "agent" be interpreted in this clause.  It seems rather important for TV members, since people can go to prison for whatever is considered as agency in this context, perhaps without even realising they were committing a crime. 

[Horace]

1 minute ago, Dogmatix said:

You haven't answered my question as to what is your interpretation of Section 113 of the Land Code that  criminalises agents who act to facilitate land ownership by foreigners.  How should "agent" be interpreted in this clause. 

  I just posted that an the term agent is defined in the Thai Civil and Commercial Code.  I don't see why a different definition would apply.  If one does, the Land Code should say.  It does not.  Hence, you look at how agency relationships are created in the Thai Civil and Commercial Code.

[overherebc]

42 minutes ago, xylophone said:

Didn't work out that well for a friend whose lawyer had sold his villa (and land) out from under him, and when the case went to court the ruling was that my friend had "purchased" the villa through a sham company so had no right to it......unlawfully acquired, so he lost the case and villa (last I heard).

Lawyers.

A dishonest man is a man you can always trust to be dishonest. ?

[blackcab]

On 8/28/2018 at 2:12 PM, Dogmatix said:

If the Revenue Department could be harnessed to send an alert to the DBD...

 

This would be very easy to achieve by adding a couple of compulsory questions to all corporate tax returns, and making accountants and auditors liable to provide accurate and truthful answers.

[Dogmatix]

2 hours ago, Horace said:

  I just posted that an the term agent is defined in the Thai Civil and Commercial Code.  I don't see why a different definition would apply.  If one does, the Land Code should say.  It does not.  Hence, you look at how agency relationships are created in the Thai Civil and Commercial Code.

You have been helpful in pointing us to the CCC for a definition of “agent” which may or may not be accepted by a criminal court in determining criminality under the Land Code. But so far you have only been explicit in what you believe does not constitute criminalty under the Land Code without enlarging on precisely what behavior would constitute a criminal offense under the Land Code.

 

I believe this is an important question for many foreigners involved in land deals and for their Thai associates. For those unfamiliar with it Section 113 of the Land Code says that anyone acting as an agent to buy land for a foreigner will be punished with a fine of B20,000 or two years in prison or both. What precisely does this mean. Does anyone else have the answer.

[Horace]

59 minutes ago, Dogmatix said:

But so far you have only been explicit in what you believe does not constitute criminalty under the Land Code

 

If the law does not expressly state something is criminal, it is not criminal.  In other words, we should not have to rely on the law to tell us what we can do.  We rely on the law to tell us what we cannot do.  This is particularly true when the law imposes criminal penalties.  That is how I look at things.

 

 

[mogandave]

I think the law is clear that anyone involved in attempting to break the or assisting in any effort to break the is breaking the law.

[Arkady]

22 minutes ago, Horace said:

 

If the law does not expressly state something is criminal, it is not criminal.  In other words, we should not have to rely on the law to tell us what we can do.  We rely on the law to tell us what we cannot do.  This is particularly true when the law imposes criminal penalties.  That is how I look at things.

 

 

 

This law expressly states that acting as an agent to buy land on behalf of a foreigner is a criminal offense. So what does that mean? What actions in relation to the purchase of land for a foreigner would constitute a criminal offense under this section?

[OldSiamHand]

22 hours ago, Horace said:

 

 I must have asked these questions a dozen times, and no one has yet provided a plausible answer.  Can you do so?

Nobody can provide a plausible answer because there simply isn't one.  At this point you're just pissing in the wind with many of the posters here - they have a feeling that something is wrong with the structures in common even though they are perfectly legal (and as you mention considered explicitly by the authorities at least twice in the past with respect to voting control vs mere percentage ownership).

[Horace]

50 minutes ago, Arkady said:

This law expressly states that acting as an agent to buy land on behalf of a foreigner is a criminal offense. So what does that mean? What actions in relation to the purchase of land for a foreigner would constitute a criminal offense under this section?

 

The agent would have to be appointed (CCC Section 797), and since this transaction concerns land, the appointment would need to be in writing (CCC Section 798).   In other words, applying the CCC, the Thai shareholder would need to sign a document saying that he or she has authority to act on behalf of the foreigner, and is buying shares on behalf of a foreigner.  I can't imagine any sensible Thai lawyer drafting or any sensible person signing such a document. 

 

This is one of the reason I think the prohibition on foreign acquisition of land under Thai law is unworkable.  If this is a criminal offense, the law has to be construed strictly in accordance with its terms.  I don't see how a Thai shareholder holding shares with diminished economic and voting rights is an "agent" of a foreigner.  If the Thai shareholder is an agent, he would, for example, need to be obligated to follow the instructions of the foreigner.  A Thai holding shares with reduced voting rights does not have to follow the instructions of the foreigner.  He can what he wants.  He can vote against the foreigner.  In other words, the Thai is not an agent.

[Horace]

4 minutes ago, OldSiamHand said:

Nobody can provide a plausible answer because there simply isn't one.  At this point you're just pissing in the wind with many of the posters here - they have a feeling that something is wrong with the structures in common even though they are perfectly legal (and as you mention considered explicitly by the authorities at least twice in the past with respect to voting control vs mere percentage ownership).

 

Agree.  The question was rhetorical.  The posters have a "feeling" that something is wrong, but can't articulate what is wrong.  You can't force someone to divest their holdings in land or impose criminal penalties based on a feeling that there is something is wrong. 

[OldSiamHand]

21 hours ago, Dogmatix said:

 

The Land Dept was not giving carte blanche to these companies to buy land before 2006.   The directive before that for many years was that whenever a company with shares held more than 40% by foreigners applied to transfer land the case should be referred to the Director General personally for investigation to see whether this was a front for a foreigner to own land, in which case the transfer was blocked, or if it was a genuine company with a real business and real Thai shareholders investing their own money.  Thus the official policy of the Land Dept has actually been to try to prevent sham companies with nominee Thai shareholders from registering land for 30 years or more.  However, the enforcement before and after 2006 has not been applied once the land has been registered and foreigners have been free to increase their shareholdings to 49% and put in preference shares after the event. Nevertheless, hearsay evidence land officials acquiescence to the concept of shell companies aside, there is documentary evidence that the Land Dept has had mechanisms in place to prevent them from buying land for decades. Anyone who bought land through before 2006 is likely to have reduced the foreign shareholding to less than 40% before the transaction and increased back to 49% aftewards (don't ask me how I know this), which would be prima facie evidence that they knew exactly that they were circumnavigating the Land Dept's policy to prevent purchases by sham companies.  

 

We should not be surprised or hurt, if the government looks for a way to enforce the policy on companies that change their shareholding structures after buying land in the same as they do beforehand. Most governments would take exception to foreigners taking the p*ss out of their laws and regulations in this way.     

 

These discussions seem to be mixing two different concepts.  A company with nominee Thai shareholders created to show compliance with the FBA or Land Act are no doubt illegal (putting aside the problem with the definition of nominee).  A company with bona fide Thai investors (not nominees by any reasonable stretch despite problems with the definition of nominee) holding a majority of the shares of a company is not illegal, even if such Thai shareholder has diluted voting rights.

[Horace]

11 minutes ago, OldSiamHand said:

These discussions seem to be mixing two different concepts.  A company with nominee Thai shareholders created to show compliance with the FBA or Land Act are no doubt illegal (putting aside the problem with the definition of nominee).  A company with bona fide Thai investors (not nominees by any reasonable stretch despite problems with the definition of nominee) holding a majority of the shares of a company is not illegal, even if such Thai shareholder has diluted voting rights.

 

Agree, except I would substitute the word "are" for the words "seem to be".

[OldSiamHand]

15 minutes ago, Horace said:

 

The agent would have to be appointed (CCC Section 797), and since this transaction concerns land, the appointment would need to be in writing (CCC Section 798).   In other words, applying the CCC, the Thai shareholder would need to sign a document saying that he or she has authority to act on behalf of the foreigner, and is buying shares on behalf of a foreigner.  I can't imagine any sensible Thai lawyer drafting or any sensible person signing such a document. 

 

I wonder if this is reading too much into the reference to "transaction" in Section 798. 

 

While it is true that the "transaction" ultimately concerns the purchase of land by a Thai company with a Thai nominee, the agency being created is  whereby a Thai agrees to provide its services as a nominee shareholder of the Thai company.  The Thai shareholder isn't involved in the actual purchase of land, but is behind the scenes acting as agent for a foreigner to make the Thai company appear Thai.  Agreeing to act as a nominee shareholder is not a transaction that "is by law required to be made in writing."  Never considered this issue before so just throwing it out there.

[Horace]

8 minutes ago, OldSiamHand said:

 

I wonder if this is reading too much into the reference to "transaction" in Section 798. 

 

While it is true that the "transaction" ultimately concerns the purchase of land by a Thai company with a Thai nominee, the agency being created is  whereby a Thai agrees to provide its services as a nominee shareholder of the Thai company.  The Thai shareholder isn't involved in the actual purchase of land, but is behind the scenes acting as agent for a foreigner to make the Thai company appear Thai.  Agreeing to act as a nominee shareholder is not a transaction that "is by law required to be made in writing."  Never considered this issue before so just throwing it out there.

 

This could be correct.  But if the Thai shareholder is an agent of a foreign shareholder in agreeing to act as a shareholder, that Thai shareholder, as an agent, must follow the express or implicit instructions of the foreign shareholder while acting as a shareholder (CCC Sec. 807), provide information to the foreign shareholder on the shares the Thai shareholder is holding (CCC Sec. 809), hand over monies received by the Thai shareholder connection with the agency, the holding of shares of in the company (CCC Sec. 810), etc. 

 

A Thai shareholder in a preference share structure has none of these obligations.  The Thai shareholder does not have to follow the instructions of the foreign shareholder (implicit or express), a Thai shareholder does not have to give information to the foreign shareholder on his shares and a Thai shareholder does not have to hand over dividends he gets from his shares in the company.

 

Round hole / square peg.  And not the only one in Thai law.

[Arkady]

7 minutes ago, Horace said:

 

The agent would have to be appointed (CCC Section 797), and since this transaction concerns land, the appointment would need to be in writing (CCC Section 798).   In other words, applying the CCC, the Thai shareholder would need to sign a document saying that he or she has authority to act on behalf of the foreigner, and is buying shares on behalf of a foreigner.  I can't imagine any sensible Thai lawyer drafting or any sensible person signing such a document. 

 

This is one of the reason I think the prohibition on foreign acquisition of land under Thai law is unworkable.  If this is a criminal offense, the law has to be construed strictly in accordance with its terms.  I don't see how a Thai shareholder holding shares with diminished economic and voting rights is an "agent" of a foreigner.  If the Thai shareholder is an agent, he would, for example, need to be obligated to follow the instructions of the foreigner.  A Thai holding shares with reduced voting rights does not have to follow the instructions of the foreigner.  He can what he wants.  He can vote against the foreigner.  In other words, the Thai is not an agent.

 

Thank you for that. You may be right but here we have a very important law, in fact a "code" which puts it on a par with the Criminal Code and the Civil and Commercial Code, that has been on the books since 1954.  You are saying in essence that Section 113 of the Land Code is effectively unenforceable because the CCC definition of "agent" must take precedence in the absence of any specific definition of the word in the Land Code. That means that those who facilitate the establishment of a shell company with Thai shareholders who are shareholders in name only purely to facilitate the purchase of land by the foreigner cannot be held criminally responsible, unless they have signed a specific agency agreement which binds them to do the foreigner's bidding in all related matters, which, as you point out, no one would ever do.  The Land Code has been amended many times since 1954.  It seems odd that none of the Interior Ministry's legal eagles ever thought of amending this section to make it enforceable.  Did several generations of bureaucrats and politicians deliberately leave it like that intentionally, while allowing the Thai public to take the law at face value and believe that foreign ownership of land was illegal with criminal penalties.

 

Or could it be the Interior Ministry, perhaps wrongly, believes the law is enforceable and that there has never been any need to amend it?  It would interesting to ask them that question, as well as to to confirm through extensive research that there has never been a conviction under this law since 1954.

[Horace]

On 8/31/2018 at 4:24 PM, Arkady said:

Thank you for that. You may be right but here we have a very important law, in fact a "code" which puts it on a par with the Criminal Code and the Civil and Commercial Code, that has been on the books since 1954.  You are saying in essence that Section 113 of the Land Code is effectively unenforceable because the CCC definition of "agent" must take precedence in the absence of any specific definition of the word in the Land Code. That means that those who facilitate the establishment of a shell company with Thai shareholders who are shareholders in name only purely to facilitate the purchase of land by the foreigner cannot be held criminally responsible, unless they have signed a specific agency agreement which binds them to do the foreigner's bidding in all related matters, which, as you point out, no one would ever do.  The Land Code has been amended many times since 1954.  It seems odd that none of the Interior Ministry's legal eagles ever thought of amending this section to make it enforceable.  Did several generations of bureaucrats and politicians deliberately leave it like that intentionally, while allowing the Thai public to take the law at face value and believe that foreign ownership of land was illegal with criminal penalties.

 

Or could it be the Interior Ministry, perhaps wrongly, believes the law is enforceable and that there has never been any need to amend it?  It would interesting to ask them that question, as well as to to confirm through extensive research that there has never been a conviction under this law since 1954.

 

Sort of.  But OldSiamHand points out that there does  not have to be a writing, and I think he is right.  The "transaction" would be holding the shares not the actual acquisition of property.  Hence, an oral agency agreement would suffice.  But how to prove it?

 

Unless someone is incredibility foolish and essentially sets up an agency relationship in writing, I don't see how there could be a conviction (although never underestimate the level of stupidity and venality in the real estate industry). I am not aware of any convictions under this law.   Anyone aware of any convictions?

 

Regulations could be enacted to prevent the use of dodgy structures from buying land.  But that means stopping the land registration before it occurs.  No expropriation if that occurs.

 

The "legal eagles" the Interior Ministry may very well be aware of this, but raising it could lead to a tremendous lose of face.  Face often trumps good sense here.   Just read that there is still a debate about whether the GT200 bomb detectors (an obvious fraud) work and should be used.

[xylophone]

1 hour ago, OldSiamHand said:

These discussions seem to be mixing two different concepts.  A company with nominee Thai shareholders created to show compliance with the FBA or Land Act are no doubt illegal

That is what I and others have been saying all along.

 

2 hours ago, OldSiamHand said:

Nobody can provide a plausible answer because there simply isn't one.  At this point you're just pissing in the wind with many of the posters here - they have a feeling that something is wrong with the structures in common even though they are perfectly legal

Surely this covers it...as do many Thai legal websites.

 

Section 74 In recording rights and legal acts by the competent authority under Section 71, the competent authority shall have the power to interrogate the parties and summon persons concerned to give oral testimony or send relevant written evidence as may be necessary and then proceed as may be appropriate under the circumstances.

 

If there is reason to believe the recording of such rights and legal acts is in evasion of the law or there is reason to believe the purchaser is purchasing on behalf of an alien, instructions shall be asked of the Minister whose word shall be final.

[Gulfsailor]

1 hour ago, Horace said:

 

This could be correct.  But if the Thai shareholder is an agent of a foreign shareholder in agreeing to act as a shareholder, that Thai shareholder, as an agent, must follow the express or implicit instructions of the foreign shareholder while acting as a shareholder (CCC Sec. 807), provide information to the foreign shareholder on the shares the Thai shareholder is holding (CCC Sec. 809), hand over monies received by the Thai shareholder connection with the agency, the holding of shares of in the company (CCC Sec. 810), etc. 

 

A Thai shareholder in a preference share structure has none of these obligations.  The Thai shareholder does not have to follow the instructions of the foreign shareholder (implicit or express), a Thai shareholder does not have to give information to the foreign shareholder on his shares and a Thai shareholder does not have to hand over dividends he gets from his shares in the company.

 

Round hole / square peg.  And not the only one in Thai law.

True. Except of course when there is an undated but signed agreement between said Thai shareholder and a yet to be filled in party/person, by which his shares are transferred to this new person/party. That's how Thai shareholders in 'sham' companies are exactly told how to vote and this act as agents. In return they get a monthly stipend. 

Hard to proof such agreement is in place, unless one raids the law firm who set it all up and where the contracts are likely being kept.........

[blackcab]

On 8/28/2018 at 2:04 PM, Horace said:

Its an expropriation ...

 

I'm currently as far as page 31, so I apologise in advance if this has been covered on the next few pages.

 

The Land Code has the provision to force the sale of land held by nominees. If this happens the actions of the Land Office are not tantamount to an expropriation, as the government will not keep the proceeds of the sale.

 

Forced sale, yes. Expropriation, no.