Company Land Ownership

[LivinLOS]

I have a buddy who has a nice home on a land title owned by his (non trading) thai company.. This was all set up years and years back and was acceptable back then but obviously no longer so.

What are the Authorities currently doing about company owned land titles.. He has nil return accounts done for him and all has been fine so far.. At what point does he have a problem in the current climate.

Secondly, should he wish to sell to another farang.. What point in the company transfer does the land office stop the deal ?? I mean instead of selling the land to a person, he would sign over the shares and directorship to the buyer, and sign off on the company thereby passing the compmany and all its assets icluding the land and house over to the new company holder, the usual 7 Thai directors and usual low % shares but actual voting shares all held by the new buyer. At what point in the transaction (signing a new director, signing share ownership, signing off the company, or anything else ??) are the land office involved or where do the land office stop the process. Do they check into every shareholder transaction ?? Surely this is a massive volume of company law and outside land office oversight ??

All of this is just a curiosity exercise for now.

[Naam]

What point in the company transfer does the land office stop the deal ?? I mean instead of selling the land to a person, he would sign over the shares and directorship to the buyer, and sign off on the company thereby passing the compmany and all its assets icluding the land and house over to the new company holder

i am not a lawyer to render qualified advice but i have been told that the land office is not involved when a company changes ownership. having never filed a tax return is however a serious issue and should be addressed as soon as possible!

[LivinLOS]

I dont know his personal affairs, but I understood he had some annual accounts performed, as the company does nothing, makes nothing, I considered they were 'nil returns' but thats a pure assumption.

Even though its currently not possible to do what he did, he feels quite happy about his security in the current climate.

I know that company transfers were deemed 'not possible' but I am trying to understand at what point in a transfer of minority shareholders becomes a land office issue or where they block it, I am told they do but dont know when ??

[quiksilva]

I have never heard of the land department becoming involved in the sale of any company shares and don't see how they could block it even if they wanted to.

[LivinLOS]

OK so doesnt that mean that those 1000's of land plots and houses owned by farangs via a company route can still sell to another farang by simply doing a Change of minority shareholder and or director.. That doesnt seem right ??

[Mobi]

When all this hoo hah first started about illegal nominees, and farang ownership of land, and the land department's refusal to transfer land to farangs etc, the lawyers' immediate solution was to do what the OP is writing about : ie. transfer the shares in the land owning company from one farang to another, and avoid going to the land office, and also, incidentally, avoid land transfer tax.

A few months ago I spent the day with the senior lawyer from the Pattaya branch of a high profile law firm, who told me that they were still handling large numbers of house sales to farangs, and the way it was done was to set up a company with 100% Thai shareholders to buy the house, and after the land transfer was effected, the shares in the company would be transferred from some of the Thai shareholders to farangs, but still leaving Thais with a 'nominal' shareholding majority, as was done before. It is also common knowledge that other law firms are doing the same thing.

I have no idea if this firm is still doing this, or whether such transactions would stand up to scrutiny. It certainly seems highly dubious to me, especially as these manoeuvres are avoiding land transfer tax, and do not seem to satisfy the nominee rules, and are giving farangs effective ownership of land which is against the law.

However, anything is possible in this country, and it may well be a loophole that won't be closed any time soon, and for those who have little option, it may be the only way forward.

I would suggest getting a good lawyer to advise, and get the company's accounts and annual filings sorted as soon as possible.

[johnnyk]

If the authorities decide to take any action in regard to company ownership of property my sense is that dormant companies are where they will start looking. My rule #1 is always keep the tax man happy by doing some biz and paying a bit of tax.

[Guest madcow]

This is an extract of a letter sent to me a couple of days ago by one of the more honest Real Estate agents in Pattaya .

It seems many of the cowboys still recommending the Company route , simply to get sales

Attention Company Owners

Many expats choose to own Thai property or businesses using a registered Thai company. It’s one way to deal with the limitations on foreign ownership of land, and some people also prefer it as a vehicle for doing other business.

However, you may not be aware of a requirement that the company needs to report to the Thai government every year, including most particularly submitting a balance sheet for the company. Thai companies are also required to have an audited financial statement prepared every year by a licensed accountant.

Failure to file the annual report can have serious consequences. If the company is still active the Commerce Department might decide to “de-register” if for failing to comply with the reporting requirements. If the Revenue Department finds taxes owed they could add substantial fines, and in some circumstances could auction off the company to pay the back taxes. And you could find it very difficult to do business in the future with an “un-registered” or “de-registered” company attached to your records.

I

[quiksilva]

OK so doesnt that mean that those 1000's of land plots and houses owned by farangs via a company route can still sell to another farang by simply doing a Change of minority shareholder and or director.. That doesnt seem right ??

Well in theory it could happen, taxes would be paid on the transfer of shares, so the tax man is fine with it. The land department probably wouldn't be but there's not much they can do

The problem lies in the implication of it at a transactional level.

Put it this way, would you pay full value of a house for a minority shareholding interest in the company that only owns a house, when you don't even know the majority Thai shareholder? Think of the risks.

So for a minority shareholding alone, its probably not worth it although there may be some exceptions.

So why not just do a full transfer of shares? Many large properties (i.e. valued in Billions) in Thailand are held by Special Purpose Vehicles assigned just to the single asset, and when the owner wishes to sell out, he will sell the holding company.

It means much lower taxes, but of course there are many more risks associated with buying a company and your due diligence investigations should be carried out with much more care.

PLUS: there is still the risk that in the future the MoC will look at this firm and consider it to be a foreign firm based on management control. How likely that is is anyone's guess, but it is a risk that one must still consider, which is why the company ownership route is still not advised.

Edited December 17, 2007 by quiksilva