Opening A Foreign Branch In Thailand.

[lamberts]

Hello,

I would appreciate if anyone can help me to find answers to these below questions. I understand this is a forum and it is better to get the services from a specialized party. At this stage, we have just started evaluating our options.

My Company is planning to setup an office in Thailand. We are an Australian Company.

The company is in the business of manufacturing Telecommunication Equipments for a leading brand.

In Thailand, the company plans to Distribute some of our products to Thai Market via Thai Distributors and may be by setting up offices in main Industrial Zone as showrooms. Further, our Thai office will purchase some products from Thailand to the Australian Market. Therefore, it is basically Import & Distribute plus an Export Company.

My questions are,

1. Will 51%-49% Thai-Foreign share ownership rule apply to setting up of Branches in Thailand?

If it is yes, do you think companies like Nestle, Siemans, Samsung have Thai partners holding 51% shares in those companies?

2. What other options available for us to start operations in Thailand, bypassing this 51% Thai Ownership? We are not interested in appointing agents or representatives at this stage. We are also not interested in any Ghost Directors etc as a solution to overcome this problem.

Thank you,

[Sumitr Man]

You are talking about setting up in an industrial zone, and of investing sums in Thailand equal to the likes of Nestle, Siemans and Samsung.

If this is the case, I suggest you start your reading here:

http://www.boi.go.th/english/

and move onto here afterwards:

www.ieat.go.th/

and if you still haven't found what you're looking for, re-phrase your questions to be more specific or seek the help of Sunbelt.

SM

[pedro01]

You are talking about setting up in an industrial zone, and of investing sums in Thailand equal to the likes of  Nestle, Siemans and Samsung.

If this is the case, I suggest you start your reading here:

http://www.boi.go.th/english/

and move onto here afterwards:

www.ieat.go.th/

and if you still haven't found what you're looking for, re-phrase your questions to be more specific or seek the help of Sunbelt.

SM 

<{POST_SNAPBACK}>

hmmm - if you are looking to import telecomms equipment into Thailand, a few things to consider.

- Thailand is friendly to people coming here to manufacture, not to sell imported goods

- you need to check out the import duties you'll pay & see if you'll still be competitive

- you need to also check out licensing - there are both import & export license requirements for telecomms equipment - for some equipment, you need to apply for a license every 30 days - it's a pain

- you need to check out if the goods are actually legal in Thailand. For instance IP telephony is still a grey area, legally speaking

I think first stop would be a lawyer - I'd recommend going to Chandler & Thong-Ek - international lawyers & not as pricey as PWC/KPMG etc

[lamberts]

Thank you for your time in replying to this.

I went through those websites.

I noted that it is possible to have 6 out of 7 directors to be foreigners while keeping 51% shares with a Thai Partner.

Since Thai Director gets 51%, which is the majority, I am wondering what benefit this would serve for any foreign company setup?

I am very reluctant to go with this 49%-51% share holding with ghost directors etc.

But still interested to know your views on above to see whether that would help in changing my views.

My main concerns are related to ownership of any Assets under the Company Name, Inventory and Invested money in bank accounts.

Thanks,

[lamberts]

hmmm - if you are looking to import telecomms equipment into Thailand, a few things to consider.

- Thailand is friendly to people coming here to manufacture, not to sell imported goods

- you need to check out the import duties you'll pay & see if you'll still be competitive

- you need to also check out licensing - there are both import & export license requirements for telecomms equipment - for some equipment, you need to apply for a license every 30 days - it's a pain

- you need to check out if the goods are actually legal in Thailand. For instance IP telephony is still a grey area, legally speaking

I think first stop would be a lawyer - I'd recommend going to Chandler & Thong-Ek - international lawyers & not as pricey as PWC/KPMG etc

<{POST_SNAPBACK}>

Hello pedro01,

Yes, you may be correct when it comes to general view of Thai People and Govt. officers. I went through the customs statistics from 2002-2004 under the HS code of the items that we are planning to import. According to those figures, it has given us enough confidence in setting up an import operation in Thailand.

I will check with some shipping agent about the licensing requirements and import duties etc.

I am not having any concerns about legality as these items already sell by reputed Companies in Thailand. I have purchased some as samples from these companies.

We will be hiring a lawyer very soon.

Thanks for your tips.

[sajal]

You are talking about setting up in an industrial zone, and of investing sums in Thailand equal to the likes of  Nestle, Siemans and Samsung.

If this is the case, I suggest you start your reading here:

http://www.boi.go.th/english/

and move onto here afterwards:

www.ieat.go.th/

and if you still haven't found what you're looking for, re-phrase your questions to be more specific or seek the help of Sunbelt.

SM 

<{POST_SNAPBACK}>

boi is not trader friendly.....they dont entertain trading companies...

if u do plan on 100% foreign ownership, you would have to set up a factory with ieat. they allow 100% foreign owners.

[Indo-Siam]

Foreigners are always worried about having Thai investors own majority of shares. In most cases, this worry is needless. There is a very simple approach that handles this concern.

Structureartocles of incorportaion such that 75% of voting sharesare necessary to do any of the following things:

Change director(s) or appoint new director(s)

Liquidate or sell the company

Increase registetred capital or issue new shares

Open a new bank account, or appoint new bank signatory individual

Declare or pay a dividend

Modify articles of incorporation and company bylaws

Now, structure shareholdings such that your foreign managing director owns at least 26% of shares - and your foreign investors are the only directors. Directors now have total control over the company - shareholders can do absolutely nothing without the concerrence of the director holding 26% of shares. If he signs an action, it flies. If he declines to sign, the action dies. Shareholders cannot replace the director.

For some reason, many people seem to think that shareholders can "cash in " their shares for a percentage of the company's assets. This is not the case. Shares in a Thai Private Co. Ltd. (TPCL) are not liquid. A shareholder can sell his shares - but only to someone who wants to buy them. The company is not under any obligation to repurchase shares from an individual shareholder.

If you set up as above (and my company can help you set up this way), then share ownership only becomes important under the following scenarios:

1. After the required three years as a TPCL, your company goes public on the SET, by making an IPO. (Unlikely outcome for most TPCL)

2. You sell company (well-informed people never buy the shares of another TPCL - because if you do, you acquire all the liabilities of that company. Much better to form your own company, and acquire the assets of the target company through an asset purchase agreement).

3. You declare and issue dividends (in most cases, making a profit, paying corporate tax on that profit, and then distriburting remaining balance as dividends, and then individuals paying tax on those dividends - is a bad idea. Better to pay higher salaries, or licensing fees - or anything except pay out dividends on profits).

4. You dissolve the company, distributing its assets to shareholders (simply drain or sell-off the assets before liquidation).

In short - for a TPCL, there is normally nothing for foreign investors to be worried about - if you structure the company properly.

In the scenario described by the initial poster, it sounded like the plan was to realize profits at the oversaes manufacturing location, not the Thai entity - which would be easy to control, via conytrol of transfer pricing. If TPCL is just being run to generate profits for an overseas parent company - who cares who owns the shares of the Thai company?

Last comment - if a company is not making profits, it is often possible to make a payment to less interested shareholders to purchase from them - for a fixed amount of cash now/today - their future rights to any possible dividends or distributions that the company might someday make. This is another way to mitigate fears about surrendering too much control over company fortunes.

My company would be pleased to help foreign investors structure things so as to protect their interests here in Thailand.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

[email protected]

www.thaistartup.com

Skype: sykesbkk