Buying existing Thai ltd company which owns land/house freehold

[camckz]

Hello everyone.

I'm currently in the process of buying a property through a existing Thai ltd company.

The Thai ltd has been set up for the past 12 years and I will be going down as the new director with a 49% share with the other 51% being split between three Thai nationals with shares of 20-20-11%. Any advice on things that I need to be aware of or things to check out before purchase would be highly appreciated.

 

 

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[ThomasThBKK]

yeah never buy a company without tons of due diligence, it might be in debt, there might be loans taken out on it, people might sue the company etc....

 

Also that setup is usually deamed a nominee structure and doesn't give you much security.

 

Start with a usufruct in your name and get a good good lawyer... no reason to not transfer the chanote to a new setup except a bunch of transfer taxes.

 

 

just my 2 satang...

[camckz]

Thanks for your reply Thomas.

Im not currently in Thailand and this is very new to me but I have been doing what I can before I travel over.
The guy who is dealing with the sale is a friend of a friend of mine who himself has property over there. I've spoken to him and he has said I can have a copy of the land deeds, the building licence and a copy of the the company details to get it all checked over by a solicitor. So I'm thinking about taking them to a company called Siam legal international to have them go over them before I go.
In regards to the share holders he's told me that as I'm the majority shareholder and director I make all the decisions, also that when I am director I can change the other directors if I like and that the minority shareholders ( directors ) have signed a contract to say they have no rights. Does this sound like common practice in these kind of set ups ? From what I've read I've heard of this being a way that a foreigner can own a house in Thailand and be in full control , so when he has said these things to me it's kinda adds up?
When you say about transferring the chanote to a new set up is that in regards to putting new shareholders/directors in place ?
Also if possible could you explain what the usufruct is in simple terms as I've looked it up and it sounds quite complicated.
I really appreciate your replies, it's a great help to me as this is the first time of attempting to do anything of this sort and there seems to be some grey areas and I don't want to get burnt along the way.
Thanks again.



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[baansgr]

Lawyers can check at DBD

[NCC1701A]

4 hours ago, camckz said:

Thanks for your reply Thomas.

Im not currently in Thailand and this is very new to me but I have been doing what I can before I travel over.
The guy who is dealing with the sale is a friend of a friend of mine who himself has property over there. I've spoken to him and he has said I can have a copy of the land deeds, the building licence and a copy of the the company details to get it all checked over by a solicitor. So I'm thinking about taking them to a company called Siam legal international to have them go over them before I go.
In regards to the share holders he's told me that as I'm the majority shareholder and director I make all the decisions, also that when I am director I can change the other directors if I like and that the minority shareholders ( directors ) have signed a contract to say they have no rights. Does this sound like common practice in these kind of set ups ? From what I've read I've heard of this being a way that a foreigner can own a house in Thailand and be in full control , so when he has said these things to me it's kinda adds up?
When you say about transferring the chanote to a new set up is that in regards to putting new shareholders/directors in place ?
Also if possible could you explain what the usufruct is in simple terms as I've looked it up and it sounds quite complicated.
I really appreciate your replies, it's a great help to me as this is the first time of attempting to do anything of this sort and there seems to be some grey areas and I don't want to get burnt along the way.
Thanks again.



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setting up a sham company to "own" a house is illegal. good luck and welcome to the twilight zone of Thai real estate. 

 

[ThomasThBKK]

What u did might be common practice, but it's not ok. No. That is not a correct setup to have some land rights here at all. 

 

I guess you are american? 

There are tons of american law firms in bangkok like baker Mckenzie, freshfield etc. 

 

If you are german, there's also big german law firms like lorenz and partners and i am sure also many qualified british and australians. 

 

Good overview: 

https://www.lorenz-partners.com/download/thailand/NL019E-Foreigners-as-Owners-of-Land-and-Houses-in-Thailand-and-Legal-Instruments-to-Secure-the-Possession-of-Land-Jan15.pdf

[Delight]

 What the current owner is actually selling is that which he legally owns i.e.

A His share allocation -in this  case 49% of total

B His voting rights-100% of total.

A is not too important

B is vitally important

 The process total   is quite bizarre by normal commercial standards

it goes like this:

Stage one -you will transfer money to a stranger.

There will be no invoice and you will not issue  receipt.

With this in place

Stage two. The stranger will sign documents. He will keep signing until the lawyer -who is over seeing the procedure-tells him to stop

Stage three -you will also sign -until you are told to stop

All will be written in Thai -unlikely that any farang will understand that which he is signing.

The lawyer will declare the process has ended.

Somebody has to pay the lawyer.

I think that you have to be in the same room as the stranger and the lawyer

Also you have to ensure that the house is vacated.

My guess is that  in 99% of cases the forementioned procedure works out successfully.It happens all the time.

There has been cases where this procedure is deemed illegal. However ,it seems to me, that the authorities want the farang for some un related offence. They cannot find any evidence that will stand up in court -so they get him on his house set up.

 

You asked about a Usufruct set up.

In your case it would be this way.

The house and land will be transferred to a Thai. there is some noticeable cost for this. Main cost is closing down the existing company. People quote 100000 Baht just for this.

At the same time a Usufruct will be issued giving you the right to live there until you die.

Transferring to  a Thai girlfrieed is better than transferring to a Thai wife . It gets complicated in the event of a divorce.

Diownside -You can never sell the house without the explicit agreement of the owner. You own zero!

Up side -all is neat and tidy when you die -your girlfriend gets the lot.

Ofcourse the owner could be your lawyer.

Given that there are no pockets in shrouds -maybe the lawyer -or law company -is better

 

 

 

 

[camckz]

Thanks guys. These comments are most appreciated.. if I read between the lines it's kinda what I have been led to believe through my own research. It can be done, possible risks involved but as long as the company's legit and has no hidden dept all should be ok...yes it's not the right way to do it but it is done this way.
What are the key points to establish then before I proceed to make sure all is in order would you guys say... also what or who is DBD?
Would anyone here know of a reputable lawyer in the hua Hin area that speaks fluent English that may be able to help me once over... thanks again for your input guys any advice on this matter will be most appreciated.


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[ThomasThBKK]

DBD is the department of business dev, where all companies are registered, share transfers noted etc.

 

Not sure about hua hin lawyers, but every bangkok lawyer can easily go there if needed and some prolly have an office there too.

[Pilotman]

4 minutes ago, camckz said:

Thanks guys. These comments are most appreciated.. if I read between the lines it's kinda what I have been led to believe through my own research. It can be done, possible risks involved but as long as the company's legit and has no hidden dept all should be ok...yes it's not the right way to do it but it is done this way.
What are the key points to establish then before I proceed to make sure all is in order would you guys say... also what or who is DBD?
Would anyone here know of a reputable lawyer in the hua Hin area that speaks fluent English that may be able to help me once over... thanks again for your input guys any advice on this matter will be most appreciated.


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You must , just must, know who the nominated directors are.  You must also understand that you are taking a risk, how much of a risk is debatable, but it is real.  My house is owned by our family owned company, but the directors are myself , my Thai/Brit daughter and my wife, so it's legal and accountable. It also trades in consultancy, pays taxes and submits accounts. My strong recommendation is that you use a very reputable law firm to check and carry out  your due diligence, and explain to you the legal situation and outline any risks you may be taking.  It's doable, so don't be put off, but you need to be wary. 

[camckz]

Thanks Thomas.

Pilotman, thanks for your advice.
I am super wary and am trying not to let this put me off as I know it can be done, just as long as it's done in the right way..hence I don't want to miss something. All comments and advice are being taken on board and to be considered before making my final decision. All are appreciated.

Referring to your first point, would I need to know them personally as they have already signed over their rights to the current owner ?
The property will be let out for 80% of the year with the other 20% being for me and my family's use.
So I'm presuming this would actually be a functioning business as I'd be paying and more than happy to be paying tax on the income which will be submitted once a year.
Can you recommend a reasonable company to deal with the matter for me and also what kind of prices should I expect to be paying for their services as once again don't want to get ripped off ? Thanks again for everyone's input.


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[taninthai]

3 hours ago, camckz said:

The property will be let out for 80% of the year

You will be very very very lucky if it’s let out 80% of the year.hope your not dropping your life savings on it and thinking a reliable income from it.

[jackdd]

4 hours ago, camckz said:

The property will be let out for 80% of the year with the other 20% being for me and my family's use. 

Are you aware that short term rentals (less than 30 days) are illegal unless you have a hotel license?

[Pilotman]

4 hours ago, camckz said:

Thanks Thomas.

Pilotman, thanks for your advice.
I am super wary and am trying not to let this put me off as I know it can be done, just as long as it's done in the right way..hence I don't want to miss something. All comments and advice are being taken on board and to be considered before making my final decision. All are appreciated.

Referring to your first point, would I need to know them personally as they have already signed over their rights to the current owner ?
The property will be let out for 80% of the year with the other 20% being for me and my family's use.
So I'm presuming this would actually be a functioning business as I'd be paying and more than happy to be paying tax on the income which will be submitted once a year.
Can you recommend a reasonable company to deal with the matter for me and also what kind of prices should I expect to be paying for their services as once again don't want to get ripped off ? Thanks again for everyone's input.


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That's a difficult question to answer, as a foreigner using  nominated directors to control 100% of the shares of a company specifically set up to circumvent Thai property law is illegal.  As we had last year, you could be subject to a Government audit of the company and an illegal set up like the one you are considering would be picked up immediately.  Get best legal advice you can and see what you think.

 

We used an International law firm in Bangkok, Freshfields Bruckhaus Deringer.  I forget the cost,  as they were dealing with other issues for us at the time and they were setting up our company, rather than buying an existing one.   

[DaRoadrunner]

Thai lawyers are known for taking your money and doing a lousy job. Use a well known reputable law firm. Ask them about the various ways this can be done as foreigners are not supposed to own property except a condo. Having said that, there are many foreigners who 'own' property here in a variety of ways.

 

The proposed company ownership with nominees is a loop hole in Thai law. Would you sleep at night if you knew the authorities might come knocking on your door? There have been cases where property was confiscated. Yet again, there are many who have done it this way.

 

Be very careful, many got their fingers burnt.

[ThomasThBKK]

24 minutes ago, jackdd said:

Are you aware that short term rentals (less than 30 days) are illegal unless you have a hotel license?

They aren't if you have not more than 4 rooms/20 sleeps. You just need to register it at the land office, no hotel license needed.

 

And yes as pilotman says, such structures can be a nominee structure which is not legal. 

It's however legal to team up with some thais and run that as a proper company that rents out the property, that should be fine than.

 

And well as he also said, get a good lawyer. cheap lawyers are the most expensive mistake you can make in life.

[Percy P]

16 hours ago, camckz said:

Thanks for your reply Thomas.

Im not currently in Thailand and this is very new to me but I have been doing what I can before I travel over.
The guy who is dealing with the sale is a friend of a friend of mine who himself has property over there. I've spoken to him and he has said I can have a copy of the land deeds, the building licence and a copy of the the company details to get it all checked over by a solicitor. So I'm thinking about taking them to a company called Siam legal international to have them go over them before I go.
In regards to the share holders he's told me that as I'm the majority shareholder and director I make all the decisions, also that when I am director I can change the other directors if I like and that the minority shareholders ( directors ) have signed a contract to say they have no rights. Does this sound like common practice in these kind of set ups ? From what I've read I've heard of this being a way that a foreigner can own a house in Thailand and be in full control , so when he has said these things to me it's kinda adds up?
When you say about transferring the chanote to a new set up is that in regards to putting new shareholders/directors in place ?
Also if possible could you explain what the usufruct is in simple terms as I've looked it up and it sounds quite complicated.
I really appreciate your replies, it's a great help to me as this is the first time of attempting to do anything of this sort and there seems to be some grey areas and I don't want to get burnt along the way.
Thanks again.



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Why do you want a company or business to buy a house. One can buy a house anytime but not the land it's built on. The land is leased, 30 year which can be ree- leased no problem

[Langsuan Man]

11 hours ago, DaRoadrunner said:

There have been cases where property was confiscated

Citation please

 

In 12 years of following this subject here at TV,  I have only found one documented case of confiscation of company owned property, and that was in Phuket, where the authorities seized company owned land from The Hell's Angels Motorcycle Club only because they were using it as a club house, which the authorities ruled was a business 

[NanLaew]

20 minutes ago, Langsuan Man said:

Citation please

 

In 12 years of following this subject here at TV,  I have only found one documented case of confiscation of company owned property, and that was in Phuket, where the authorities seized company owned land from The Hell's Angels Motorcycle Club only because they were using it as a club house, which the authorities ruled was a business 

I guess the few foreigners that have been burned through the Thai nominee company home ownership scenario are rather reticent on coming on TV and admitting their folly. Similarly, the hundreds of TV members that are currently living the dream within the fragile protections of that construct are understandably a bit defensive.

 

If the OP is planning talking with Siam Legal, I am pretty sure they will push for a usufruct rather than the increasingly questionable premise of the one-man minority Thai company ownership. The question then arises, does Hua Hin land office recognize and honor usufructs?

[taninthai]

45 minutes ago, Langsuan Man said:

Citation please

 

In 12 years of following this subject here at TV,  I have only found one documented case of confiscation of company owned property, and that was in Phuket, where the authorities seized company owned land from The Hell's Angels Motorcycle Club only because they were using it as a club house, which the authorities ruled was a business 

It was in the news last week ,that they have closed a big villa complex in Samui and are investigating it for illegal nominee structure.

here you go

 

[LukKrueng]

18 hours ago, camckz said:

Thanks guys. These comments are most appreciated.. if I read between the lines it's kinda what I have been led to believe through my own research. It can be done, possible risks involved but as long as the company's legit and has no hidden dept all should be ok...yes it's not the right way to do it but it is done this way.
What are the key points to establish then before I proceed to make sure all is in order would you guys say... also what or who is DBD?
Would anyone here know of a reputable lawyer in the hua Hin area that speaks fluent English that may be able to help me once over... thanks again for your input guys any advice on this matter will be most appreciated.


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The company is legal ONLY of all shareholders actually paid in full for their part of the company, which means they also own their part of the property and entitled for any profits the company makes according to their % of shares. Any other way they are considered proxies and that is NOT legal - as some have replied already, government audit companies and once such a company is found - you might lose all you have put into it.

 

 

17 hours ago, camckz said:

Thanks Thomas.

Pilotman, thanks for your advice.
I am super wary and am trying not to let this put me off as I know it can be done, just as long as it's done in the right way..hence I don't want to miss something. All comments and advice are being taken on board and to be considered before making my final decision. All are appreciated.

Referring to your first point, would I need to know them personally as they have already signed over their rights to the current owner ?
The property will be let out for 80% of the year with the other 20% being for me and my family's use.
So I'm presuming this would actually be a functioning business as I'd be paying and more than happy to be paying tax on the income which will be submitted once a year.
Can you recommend a reasonable company to deal with the matter for me and also what kind of prices should I expect to be paying for their services as once again don't want to get ripped off ? Thanks again for everyone's input.


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As @taninthai wrote - not much chance for you to be able to rent it out 80% of the time... and as @jackdd mentioned - renting out for a period of less than 30 days requires a hotel license (which is doable, costs about 6000 THB per year but the property will be inspected and must comply with hotels / guest house regulations. 

And again - your partners in the company are entitled for any profits gained from the rental...

 

Another point to consider is that even if you are the only director of the company with 100% voting rights - the Thai partners still own 51% of the shares and can out vote you...

 

As you are only planing to be in Thailand for about 2 months / year, I'd say your best option is to rent / stay at a hotel while you are here. It saves you the initial investment, it allows you to go to different places at no extra costs, and you risk losing nothing basically.

 

[Tony125]

As an American, I think you know what the expression "never buy a pig in a poke" means.  Also read this link: https://www.bbc.com/news/magazine-34346620

[natway09]

Over & above your 49% ensure at least 2% is in the name of someone you trust.

Do you know your 3 other Directors ?

I have done this twice in my time here with differing  outcomes.

Ensure watertight

[ThomasThBKK]

1 hour ago, LukKrueng said:

The company is legal ONLY of all shareholders actually paid in full for their part of the company, which means they also own their part of the property and entitled for any profits the company makes according to their % of shares. Any other way they are considered proxies and that is NOT legal - as some have replied already, government audit companies and once such a company is found - you might lose all you have put into it.

No, that would mean you couldn't invest in businesses in Thailand. It's totally normal for a business that investments come from outside investors 

 

1 hour ago, LukKrueng said:

And again - your partners in the company are entitled for any profits gained from the rental...

IF there are profits in the company book....structure it accordingly. but yes in general they will be entitled to XX percent when the land is sold again if not properly structured.

Don't put the House itself in the company balance sheet...

 

1 hour ago, LukKrueng said:

Another point to consider is that even if you are the only director of the company with 100% voting rights - the Thai partners still own 51% of the shares and can out vote you...

No, they can't vote you out without voting rights... that's why it's called voting rights.

 

 

 

 

The thing is, if you team up with a bunch of criminals...you will have a hard time anyway, even if you could own the land in your name.

Forged signatures are a real issue everywhere in the world and outright crime is hard to protect from, it can take many many years for such issues to be solved if at all.

 

I would definately stay away from any shady region here when doing this kind of deals. Phuket, Pattaya and Samui come to my mind...

Other areas like Bangkok are not as lawless as these family run mafia towns.

[NCC1701A]

On 4/5/2019 at 7:11 PM, camckz said:

Any advice on things that I need to be aware of or things to check out before purchase would be highly appreciated.

Your mission camckz, should you decide to accept it, is to buy property in Thailand.

As always, should you or any of your IM Force be caught or killed, the Secretary will disavow any knowledge of your actions. This comment will self-destruct in five seconds. Good luck camckz.

[NanLaew]

39 minutes ago, NCC1701A said:

Your mission camckz, should you decide to accept it, is to buy property in Thailand.

As always, should you or any of your IM Force be caught or killed, the Secretary will disavow any knowledge of your actions. This comment will self-destruct in five seconds. Good luck camckz.

I also understand that the Thai partners in such a company must also present evidence of having paid their taxes. That usually puts the kibosh on the brother-in-law, wife's auntie, the neighborhood motocycle-taxi guy and the mae bahn's youngest daughter.

 

Oh yes and "the friend of a friend" that is handling the OP's 'mission impossible'.

[NanLaew]

59 minutes ago, ThomasThBKK said:

I would definately stay away from any shady region here when doing this kind of deals. Phuket, Pattaya and Samui come to my mind...

Other areas like Bangkok are not as lawless as these family run mafia towns.

Hua Hin isn't so squeaky clean when it comes to dodgy real estate companies or ones with dodgy farang partners.

[cryo]

This is a standard way for a foreigner to own a house/condo/business in Thailand and is used from industrial conglomerates to homes and multiple thousands do it with no problems but there is always a but, you will be instructed not to run any business from this nominated company/home. The majority of property/company owners that fall foul of the law do not follow this advice and rent out all the rooms in a building they own or open a restaurant or some similar business without registering and paying tax as lot of foreigners think Thailand is a tax free society which it is until they catch up with you. Another requirement is that you will have to get the company audited every year to keep the company registered/active which some individuals do not comply with this also leads to problems down the line.

 

Ken.

   

[khunPer]

On 4/5/2019 at 2:11 PM, camckz said:

I'm currently in the process of buying a property through a existing Thai ltd company.

The Thai ltd has been set up for the past 12 years and I will be going down as the new director with a 49% share with the other 51% being split between three Thai nationals with shares of 20-20-11%. Any advice on things that I need to be aware of or things to check out before purchase would be highly appreciated.

The benefit from seller is that he don't need to pay taxes, when selling the property. Part of settlement can even be made off-shore.

 

The benefit for buyer is that he don't need to pay transfer fee, and he should have a partial discount in property trading price for less tax obligations by seller. Part of settlement can even be made off-shore.

 

The advantage for seller is that he don't have a Thai company limited to close.

 

The disadvantage for buyer is that he take over a Thai company limited, he might not know everything about (due diligence), and he only won 49% of the company, and thereby "his" property. Nominees are illegal, so who are the Thai people owing the majority of the company, and the property?

 

Me, I would rather play little more safe, pay the relative small transfer fee, and have a fresh set-up, where I know the details; which might include preferred shares in a company limited...????

[khunPer]

5 hours ago, taninthai said:

It was in the news last week ,that they have closed a big villa complex in Samui and are investigating it for illegal nominee structure.

here you go

 

Theis is a business set-up working without the proper registration, not a single private villa. A number of these structures have been scrutinized lately on Samui, renting villas out on shorter terms than allowed without a hotel registration.