Boi Company : Act As A "thai Shareholder" ?

[cdub]

Regarding the rules to create a Limited Co in Thailand (minimum 7

shareholders, 51 % of the shares minimum for thai nationals) is it possible to

consider a BOI Company (100 % farang owned) as a "thai shareholder" ?

Can a BOI company take a stake in a LTD, and be considered as a "thai

shareholder", in order to "bypass" (smoothly) the standard rules ?

Chris

[Indo-Siam]

Hi Cdub -

At initial incorporation, it must be seven individuals who hold shares - a company cannot be an initial shareholder (i.e. one of the seven initial "promoters of the company" who sign the Memorandum of Association, and then hold the initial shares). Later, a company may acquire shares from initial shareholders, and be listed on the Bor Or Jor 5 form as shareholder.

The requirement is NOT 51% Thai shareholdings. It is 50% plus one share. But - essentially the same.

You can form a Thai Private Co company with any nationalities holding shares that you see fit - up to and including 100% foreign ownership (but still seven shareholders). Nothing prevents foreigners from registering a company here, without Thai shareholders.

What such a foreign-majority-share company CANNOT do is pursue activities restricted to "foreign" companies. Those activities are itemized within the Foreign Business Act of 1999 - English translation of restricted activity list is at at:

http://www.thailawforum.com/database1/foreign5.html

Note that you may pursue manufacturing as a majority-foreign-owned business - because manufacturing it is not an activity prohibited to "foreign" companies.

Now to your specific question. The Foreign Businss Act has a very specific definition of "foreign" - see under Section 4. sub-paras (3) and (4) at:

http://www.thailawforum.com/database1/foreign.html

So - the fact that a "foreign" company has BOI certification does not make that company less "foreign".

In fact, BOI certification is not of a "company" - it is for an "activity" to be pursued by a company. The same applies to Thai-US Amity Treaty - this is not an attribute of a company - it is an authorization for a qualifying company to pursue a specified activity.

I suspect that you are taking share structure more seriously than you need to - agonizing over how to protect you company from the dreaded clutches of required Thai shareholders. You may want to contact me to dicsuss this further, but:

Once a company is formed, it is unbelievably easy to change shareholders. Most people do not realize this, but to replace any (or all) of your seven shareholders, you do NOT require the signatures of those shareholders - neither the outgoing, nor the incoming shareholders. To file a change in the shareholders at the Commercial Registration office,all that is neeeded is a fresh Bor Or Jor 5 form, listing new shareholder identities and shareholdings, signed by just a company director (and accompnaied by a regsitration change application, also signed by a company director). You do not even need signed identity documents for new shareholders.

Literally - a company director can replace all seven shareholders with a new slate of seven shareholders, without any of the old or new shareholders even knowing that the change has occurred (although they could learn of the change by visiting a commecial registration office, and calling up the public records for that company).

Now - there do exist "shareholder transfer" forms, which require signatures of incoming and outgoing shareholders, plus two witnesses. But - these forms never leave company files - they are used only to support preparation of a new Bor Or Jor 5 form - and then just that form goes forward. The transfer forms are kept in company files in case a removed shareholder wants to challenge the fact that they were replaced.

So - it is a lot more important to designate trustworthy directors, than it is to agonize over what may be fairly disinterested "paper" shareholders. Nominally disinterested shareholders may be replaced in one afternoon.

Final comment - lots of people launching companies here have the situation 100% backwards - they are worried that Thai "strangers" might "steal their company" from them, so they want to ensure that shares are held by intimates who have the investor's best interests at heart. WRONG! In fact, I have yet to hear of even one case in which "disinterested" Thai "strangers" EVER caused trouble for a foreign-managed company in Bangkok. It is ALWAYS the initimates - the wives, girlfriends, brothers, friends, business associates who cause ALL of the problems. And that trouble is rarely about trying to actually take value out of the company - it is frequently about using company shareholdings as a weapon for leverage in addressing some unrelated dispute. Well - you don't GET in unrelated disputes with disinterested strangers.

Think about it.

Good luck!

Best regards,

Steve Sykes

Mananging Director

Indo-Siam Group

Bangkok

[email protected]

www.thaistartup.com