To Be Or Not To Be “nominee Shareholder”, That Is The Question

[Mobi]

The following is reproduced from the current edition of "Pattaya Today":

To be or not to be “nominee shareholder”, that is the question

in the latest order of the Land Department dated 21st July,2008

THE property market in Pattaya can panic again by the rumor that the Land Department will enforce a draconian policy to inspect all companies owning land. The darkness of ignorance must be pieced by the light of knowledge. In order to enlighten you, we decide to provide the readers with the first hand information as our report not opinion. We translated word-by-word the circular letter of the Land Department dated 21st July, 2008 and hope that it will be light that you will see at the end of the tunnel.

The term “nominee” is business lingo in Thailand for “proxy”. You should not conflate or confuse yourself with the other type of “nominee” if you are a farang in good faith who set up a Thai company to buy land for residential purpose. You are totally different from the spouse of our former prime minister who was found guilty of having her servant to hold her shares in the telecommunication company for tax evasion.

Please read this translation before you decide to sell your castle for a horse. In every civilized country, no law will be retroactive. We can say that this inspection will not be for all existing companies. You may seek the proper advice from a real licensed lawyer who may guide you in the labyrinth of laws.

Very Urgent

No. Mor.Thor.0515/2227

Ministry of Interior

Asdang Road, Bangkok 10200

21st July 2008

Subject: Acquisition of land by juristic persons (legal entities) having foreign shareholders

Attention: All provincial governors

Reference: The very urgent letter no. Mor.Thor. 0515/Vor 2530, dated 21st July 2006

Attachment: Three sets of specimen note of statement Whereas the Ministry of Interior has set forth the practical guidance for the acquisition of land by limited companies, limited partnerships or registered ordinary partnerships (except public limited companies or juristic persons permitted by other laws to acquire land) having the objectives to carry on the business of real estate with foreign shareholders or directors, or there is a reasonable ground to believe that Thai nationals hold shares on behalf of foreigners, whereby all land offices were instructed to investigate the source of money all Thai shareholders paid for the purchase of shares, and also money the companies paid for the purchase of land.

In order that the investigation of all registrars will be standardized to prevent the evasion of law or purchase of land for foreigners, the Ministry of Interior deems it appropriate to enhance the comprehension and set forth the additional measure as the practical guidance for all registrars.

“The Master of Nominees”

1. In the case of limited companies, limited partnerships or registered ordinary partnerships applying for the ownership of land and having the business objectives of real estate have foreign shareholders, the source of money paid for the shares by the Thai shareholders will be investigated.

2. In the case of limited companies, limited partnerships or registered ordinary partnerships which apply for the ownership of land and do not have the registered business objectives of real estate, but there is a reason to believe that Thai nationals hold shares on behalf of foreigners, for instance, a foreigner is the authorized director, promoter, holder of preferential shares having more voting rights than the majority Thai share holders who do not directly have the occupation of investment, for instance, lawyer or broker, the source of money of Thai shareholders paid for the shares will be investigated.

3. In cases where juristic persons purchase the land with the price higher than the registered capital without mortgage, the source of money paid by the juristic persons for the land will be investigated.

The investigation of the source of money in accordance with 1), 2) and 3), will be strictly complied in accordance with the referred letter.

4. The acquisition of land by public limited companies or juristic persons permitted by other laws to acquire land, for instance, Investment Promotion Act 1977, Industrial Estate Authority of Thailand Act 1979 is not required to comply with 1), 2) and 3).

5. In cases where foreign juristic persons take the lease or hold other rights for the long period of time, the investigation will be made about the business objective of the lease if it is the holding of land on behalf of a foreigner or in violation of the Foreign Business Act 1999.

6. All provinces are instructed to announce to public that anyone who holds land on behalf of a foreigner will be punishable under Section 113 of the Land Code for providing a false statement to the authorities having the duties to record the false statement in the official documents under Section 137 and 267 of the Penal Code. The foreigner or juristic person will be punishable under Section 111 and 112(1) of the Land Code whereby the land must be disposed of within the period of time prescribed by the Director General which is not less than 180 days but not more than one year. If the land is not disposed of within the prescribed period of time, the Director General will be empowered to dispose of that land. However, the specimen note of statement in accordance with the referred letter must be cancelled and replaced by the new specimen because it has the contents which do not cover the criminal liabilities.

In this connection, if the investigation was made and found that the application for registration of right or juristic act is to evade the law or purchase land on behalf of a foreigner in accordance with Section 74 paragraph two of the Land Code, the registrar will investigate for further details of the fact and refer the case to the Land Department for the order of the Minister.

Please be informed for your strict compliance.

Mr. Piraphol Taitasawith

Deputy Permanent Secretary of the Ministry of Interior

Head of Internal Security

Edited October 4, 2008 by Mobi

[harrry]

5. In cases where foreign juristic persons take the lease or hold other rights for the long period of time, the investigation will be made about the business objective of the lease if it is the holding of land on behalf of a foreigner or in violation of the Foreign Business Act 1999.

Does this mean a foreigner can not lease land?

[fidelio]

The noose is tightening....

[cclub75]

Same than in august 2006....

Check here :

http://www.thaivisa.com/forum/Supplementar...d-P-t77483.html

It's the yearly "little drop" from bored officials...

That's the big problem of Thailand : nobody believe the authorities anymore. Because they are such a bunch of clowns.

Edited October 4, 2008 by cclub75

[cclub75]

The term “nominee” is business lingo in Thailand for “proxy”. You should not conflate or confuse yourself with the other type of “nominee” if you are a farang in good faith who set up a Thai company to buy land for residential purpose. You are totally different from the spouse of our former prime minister who was found guilty of having her servant to hold her shares in the telecommunication company for tax evasion.

I would like to add a few comments :

-it's striking to have a report now, through a newspaper in Pattaya,... on such an important regulation (?) issued in july. Does someone else can confirm this ?

-to write "THE property market in Pattaya can panic again by the rumor that the Land Department will enforce a draconian policy" is a perfect summary of what's going on in Thailand : crap.

Any regulation should be enforced... Basic principle of rule of law. To say that there are "rumors" about enforcement or not... is laughable.

-to write (the lawyer or Pattaya Today), "You should not conflate or confuse yourself with the other type of “nominee" is also laughable.

There is only one type of nominee.

Thaksin using his maid or driver to conceal his assets, that's exactly the same than a farang using the cousin of his girlfriend, or some lawyers as dormant shareholders to buy land/house through a company scheme...

To say the contrary is basic and crass ignorance.

-and even worse : to write "In every civilized country, no law will be retroactive" is absolutely amazing ! We are not talking about a new law here ! But the strict application of laws that exist since long time (Land Code and Foreign Business Act from 1999) with 2 very simple basic principles : foreigners can't own land and nominees are a criminal offense. Period.

I mean who are those "lawyers" ! It's really scary.

To summarize : the article is total crap.

Only the regulation matters (if it really exists).

And if it does exist then some people are going to be in serious trouble. And it could be the end of the real estate market in farang areas.

Since basically the FBA in 1999, people have played with the law. Real estate boom. Paradise under the sun. Create your company, with dual shares systems, use nominees blablbla, easy, piece of cake, no control, legal, sabai.

It was an illusion (like many things in Thailand).

And now : game over. They can nail a lot of people.

"If the land is not disposed of within the prescribed period of time, the Director General will be empowered to dispose of that land."

What a powerful leverage they have now...

Edited October 4, 2008 by cclub75

[LennyW]

I guess this would be Kuhn Werachon's bi-weekly splurge in the Pattaya Today, in return for filling up half a page with re-cycled legal information he gets his name and company in there!!

If you ever meet him you would think he was some kind of comedian, i mean that nicely, funny guy and very helpful.

[Mobi]

I guess this would be Kuhn Werachon's bi-weekly splurge in the Pattaya Today, in return for filling up half a page with re-cycled legal information he gets his name and company in there!!

If you ever meet him you would think he was some kind of comedian, i mean that nicely, funny guy and very helpful.

Yes you are quite right Lenny, and yes cclub75, much of what is written is crap. However, you have to keep a sense of humour when reading his stuff, as there is no doubt he is writing with his tongue in his cheek and you have to keep a sense of proportion about these matters.

If you read between the lines, what comes over loud and clear from his humorous ramblings, is that "This is Thailand", and normal rules do not apply, and is a country where anything can happen, and every lawyer or government official can put their own interpretion, or spin on rules and regulations.

You can quote the law till you're blue in the face, but it doesn't change the decisions that are actually made on the ground. I believe that this is the main reason that companies like Sunbelt have given up trying to comment on these matters.

The reason I posted this thread was not so much because of the humorous diatribe, but because there seems to be a serious attempt to translate the Ministry of Interior's letter of 21st July, 2008, which is certainly of great interest.

It is no secret that I disposed of my company last year and went the "Thai owning route" with a usufruct, and many people have accused me of panicking. Well, maybe I did, maybe I didn't, but I sleep easy at night, and only time will tell who is right.

[Nadia 2]

I guess this would be Kuhn Werachon's bi-weekly splurge in the Pattaya Today, in return for filling up half a page with re-cycled legal information he gets his name and company in there!!

If you ever meet him you would think he was some kind of comedian, i mean that nicely, funny guy and very helpful.

Yes you are quite right Lenny, and yes cclub75, much of what is written is crap. However, you have to keep a sense of humour when reading his stuff, as there is no doubt he is writing with his tongue in his cheek and you have to keep a sense of proportion about these matters.

If you read between the lines, what comes over loud and clear from his humorous ramblings, is that "This is Thailand", and normal rules do not apply, and is a country where anything can happen, and every lawyer or government official can put their own interpretion, or spin on rules and regulations.

You can quote the law till you're blue in the face, but it doesn't change the decisions that are actually made on the ground. I believe that this is the main reason that companies like Sunbelt have given up trying to comment on these matters.

The reason I posted this thread was not so much because of the humorous diatribe, but because there seems to be a serious attempt to translate the Ministry of Interior's letter of 21st July, 2008, which is certainly of great interest.

It is no secret that I disposed of my company last year and went the "Thai owning route" with a usufruct, and many people have accused me of panicking. Well, maybe I did, maybe I didn't, but I sleep easy at night, and only time will tell who is right.

I believe this 'letter' is a further specification of the May 2006 land office guidelines when dealing with a partly foreign company, but it was issued 2006. Not 2008. No idea why the article in the Pattaya Today, as it is nothing new...

[Mobi]

I believe this 'letter' is a further specification of the May 2006 land office guidelines when dealing with a partly foreign company, but it was issued 2006. Not 2008. No idea why the article in the Pattaya Today, as it is nothing new...

If you look at the translation carefully, you will see it purports to be a letter dated 21st July, 2008, which refers to: "The very urgent letter no. Mor.Thor. 0515/Vor 2530, dated 21st July 2006".

Whether this is the case on not I cannot say, but I believe we have to give the Pattaya lawyer the benefit of the doubt and, would explain why he is writing about it now.

If correct, it seems to be a reminder of the original letter issued 2 years ago from the Ministry to those who are required to take appropriate action.

There again the whole thing may be a figment of this comedian's imagination

[jimmybkk]

A translation of this letter was also printed in the Sept 16-30 issue of Pattaya Expat magazine. This time translated by K. Kamnod of Thai Legal and & Associates.

Just filling up column inches and possibly selling legal services....

[kcallagmy]

Just got back from land office in sattahip. Have thai company with farang director and 39/61 common/preferred share structure. Multi voting common shares etc. Purchased property in company name with debt/equity of 4/1. Have Thai shareholders (2) both of which I have known for 5 years and have good jobs. No problems arrive 8:30 am and finished by 11:30 with everything done and in new company name. I have faith in system. If you follow law and are legitimate for business, it can work. No need to pay anybody pocket money and used my friend from Bangkok as lawyer.

[Johan78]

This, as well as everything else I've seen on this subject, talks about acquisition. Have they ever issued or said anything about going after companies that own land? And can we please leave the moral angle on this for another thread.

// Johan