Taking The Family Off Company Shares

[N47HAN]

At the point where the company is doing well and want to take off the family and make it more buisiness orientated.

By this I mean ,

When the company was set up it was 39% 61% split amongst my wife and immediate members with myself holding the 39%.

The family at this moment are happy to release the company ownership as they are not aware of its financial status and it is exactly the right time to change, but how ?

thx

[fletchsmile]

At the point where the company is doing well and want to take off the family and make it more buisiness orientated.

By this I mean ,

When the company was set up it was 39% 61% split amongst my wife and immediate members with myself holding the 39%.

The family at this moment are happy to release the company ownership as they are not aware of its financial status and it is exactly the right time to change, but how ?

thx

Not entirely clear what you mean to take off the family (i.e include wife or not). Why not have you with 49%, wife 50% and <1% (negligible) with the rest? or you 49%, wife 48% and 3% split between anyone with business sense not connected to your wife. You need 7 shareholders total, majority must be Thai and hold (majority) of shares 51%. But 5 could hold one share each, with you and your wfe the rest.

Ownership transfer is quite easy.

At this point in time preference shares (no voting rights, but pay say 1% coupon, is an option - though FBA may change). i.e you hold all the ordinary voting shares. maybe your wife a couple and everyone else non-voting preference shares with no control, that pay a fixed dividend

Edited November 2, 2007 by fletchthai68

[N47HAN]

what i wish to do is take the family ( including the wife ) out of ownership.

Some may say dont you love/trust your wife ?

Well frankly i do , BUT buisiness and family is not a good mix and want to avert any potential issues in the future.

But How and who to transfer the 51 % is the question , Legally ?

[fletchsmile]

what i wish to do is take the family ( including the wife ) out of ownership.

Some may say dont you love/trust your wife ?

Well frankly i do , BUT buisiness and family is not a good mix and want to avert any potential issues in the future.

But How and who to transfer the 51 % is the question , Legally ?

If not a poperty company I believe you can own 49%. Providing you believe the law won't change:

- Set the structure so there is say 2mio baht of shares in nominal value.

- You own 0.98mio of ordinary shares, with voting rights. The family owns 1.02mio of preference shares with no voting rights.

- The preference shares could pay a dividend of 2% per year, i.e approx THB 20,000 per annum. That's your cost to your family. They have no control or voting rights. Actually you coud give to any Thai you know and trust a little doesn't have to be family. Whoever has will have no control and get only 20k per annum

- your ordinary shares have all the voting rights, and all the entitlement to profits after the 20k is paid.

To achieve this there would be a few options, eg set up a new company and buy the shares from the old one. You buy all the shares from family and issue them preference shares, etc

Edited November 2, 2007 by fletchthai68

[N47HAN]

A thought, Maybe not such a good one but a thought non the less,

Can I transfer 50% to my son ( hes only 10mnth !) 1% person x and 49% me ???

[ThaidleHands]

- your ordinary shares have all the voting rights, and all the entitlement to profits after the 20k is paid.

You don't want business profits; the taxes are too high. Use the voting rights on behalf of the shareholders and vote yourself a performance bonus at year's end, or adjust you salary or put yourself on commission if possible. The personal income tax rate should be much less.

[fletchsmile]

- your ordinary shares have all the voting rights, and all the entitlement to profits after the 20k is paid.

You don't want business profits; the taxes are too high. Use the voting rights on behalf of the shareholders and vote yourself a performance bonus at year's end, or adjust you salary or put yourself on commission if possible. The personal income tax rate should be much less.

The "normal" corporate tax rate (for businesses) in Thailand is 30%. However, there are many variations to it. eg small businesses, have some lower bands, companies listed on stock exachanges etc. But 30% is usually the highest rate. You can check on the Thai Revenue website, which applies to your business.

On the other hand, personal income tax is 30% on taxable income above THB1mio p.a. and 37% above 4mio. i.e 30% kicks in very quickly on personal income tax, but 30% is the max for corporate tax.

[fletchsmile]

A thought, Maybe not such a good one but a thought non the less,

Can I transfer 50% to my son ( hes only 10mnth !) 1% person x and 49% me ???

You need at least 7 shareholders. Majority must be Thai. You can put the business in your son's name. However, this can pose problems on many levels. eg if you wanted to sell the business. Ability of a minor to enter contracts etc.

If you don't trust any of the other shareholders, giving them preference shares with a low coupon and no voting rights, is currently the safest option and legal. There is some talk of the foreign business act changing to take account of voting rights. However, even if that happened you could change to another structure.

Another option I saw recommended by a lawyer is effectively a circular structure. With 2 companies each holding shares ineach other. Believe it or not this is legal, but best handled / explained by a lawyer

[ytivarg]

First print out the share transfer agreement available at http://www.pacificlegaladvisory.com/legal_....php?legal_id=8 and get it all filled out. Then drive to the Ministry of Commence in Nontaburi and register it with them. Done.

[torrenova]

If I am right, the question in changing the law was to find out what consideration these people had paid for their 51% when the westerner owns the 49% and say if it was a 10m company, then have they paid tax on Bt5,100,000 ? Ill advised and stupid argument when preference shares are worth so much less and that is why they are or at least were looking at the share structures. If they vote that they are illegal (I believe they mooted 2 years for companies to get out of this structure) then goodbye foreign investment and watch the price of houses in western ghettos fall like a stone.