Is Land Ownership Via The Company Route Ok For A Business?

[simon43]

I know that there is a lot of concern about the legality of using a Thai ltd company to own land on which the foreigner builds his/her residentail home.

But what about land ownership by a Thai company where that land is used for a commercial venture, such as building/operating a small hotel?

AFAIK, there hasn't been any concern aired over Thai Ltd companies with foreign shareholders which own land that is used for a 'real' business - or am I mistaken here?

I just want to establish the best solution to 'owning' some land on wich I intend to build/operate a guesthouse. (My last guesthouse was on rented land, so this issue didn't arise).

And (AFAIK), the only way to have control over said Thai company is via preferential voting rights, since I cannot have a majority shareholding. (Or am I also mistaken in this respect??)

Simon

[trogers]

Is okay only when the Co., Ltd. is genuinely 51% Thai-owned.

[Maestro]

An off-topic post has been deleted. This topic is not about a farang, ie a natural person, owning land, but about a company, ie a juristic person, with 51% of the shares owned by Thai nationals owning land.

--

Maestro

[InterestedObserver]

I just want to establish the best solution to 'owning' some land on wich I intend to build/operate a guesthouse. (My last guesthouse was on rented land, so this issue didn't arise).

Is okay only when the Co., Ltd. is genuinely 51% Thai-owned.

If the OP wants to invest his money in a business where the land is genuinely 51% Thai owned, then he needs to rethink his business model accordingly.

Edited September 1, 2009 by InterestedObserver

[simon43]

Indeed InterestedObserver, we are often advised to put our investment in our Thai wife's name, if you trust her. That's what I did last time and lost about 15 million baht

So this time round, I do not want to run the risk of losing out again. If there is no legal method in Thailand of 'owning' land for a commercial business, then I need to look at countries where that right is available.

What do other hotels with foreign investors do? I'm sure the land is not in the name of the manager's Thai wife, and if a company strucutre is being used, then I assume that it must be a watertight legal structure where the foreign investors have 100% control.

(This is hovering on a business question, as opposed to an owning land question, but I'm sure this post can remain in this forum for now)

Simon

[quiksilva]

Its fine so long as Thai nationals genuinely own 51% of the firm, and can prove that they have the independent financial capacity to hold that position.

[InterestedObserver]

If you are asking if you can legally own land for a business in Thailand, then the answer is no you cannot. There are certain exceptions involving lots of money and government approval. As already said, a legal Thai business involves at least 51% Thai shareholders and capital.

Edited September 1, 2009 by InterestedObserver

[loverboy44]

Just look how Thai's do it themselves. MBK in Bangkok leases the land from Chulalongkorn University. All the hotel chains like Marriott and so on do the same.

[InterestedObserver]

What do other hotels with foreign investors do? I'm sure the land is not in the name of the manager's Thai wife, and if a company strucutre is being used, then I assume that it must be a watertight legal structure where the foreign investors have 100% control.

For a guesthouse! Not in Thailand, best look elsewhere.

[InterestedObserver]

Just look how Thai's do it themselves. MBK in Bangkok leases the land from Chulalongkorn University. All the hotel chains like Marriott and so on do the same.

Marriott only manages the hotel on contract, they don't own the building, Thai's do.

[simon43]

Yes indeed, - that's why hotel management is one of the occupations that is fully open for foreigners.

So it sounds like the land-ownership should be via a Thai Ltd company (3 shareholders, with me owning a minority share). I guess that I can only control the business via preferential voting rights and pre-signed resignation forms from the other 2 Thai shareholders. If I get an usufruct on this land then I'm leaving myself open to a possible early death (the usufruct expires when I do!)

I know that business in LoS is far from watertight - I just want to try to avoid my previous mistakes

Simon

[SHYTALK]

What an incredibly complicated , illegal, and risky, mess up you are again contemplating in the land of scams.

Do yourself a big favour ,thailand is not worth it, go and go do your business in another country .

[CaptainNemo]

we are often advised to put our investment in our Thai wife's name, if you trust her. That's what I did last time and lost about 15 million baht

So this time round...

Tell, you what, can you just loan me the money, I've got a horse, and I know it's a winner... or how about B15Mil of lotto tickets?!

Seriously though, if you've got that sort of money to "invest in Thailand", you might want to consider giving it to deserving charity... at least perhaps take a holiday far away from Siam to reflect upon life...

[simon43]

CaptainNemo, note that I HAD that sort of money to invest some years ago. The situation is somewhat different this time around, (as far as my finances are concerned). So it is for the very reason that I lost it all last time, that I do not want to lose what little money I have this time

Simon

Also, investing in another country is definitely a possibility. I have been looking at land in Greece etc.

Edited September 1, 2009 by simon43

[johnnyk]

There is no perfect, 100% safe way for a falang to own land. I own through a company as I felt it better than land lease despite the imperfections.

That said, my opinion is that you will be left alone if the company actually does business, shows accounts, files tax returns, pays some tax if need be.

Even better if it can employ a Thai or three.

Preference shares and ordinary shares are perfectly legal share structures in Thailand (this structure exists in most western countries). If you have the ordinary shares ('preferred shares' in the west) with more voting power then you can have the final say over decisions, expenditures and so on.

Get a good accountant and play it by the book and I think you will be left alone.

[simon43]

Johnnyk - that's my feeling also. I think it is the authorities tend to be more interested in Thai companies whose sole purpose is to own the land upon which a foreigner's house is located. I think that for a 'real', trading Thai company that is benefiting the tourist sector then I should be ok, at least the risk will be minimised.

The Thai lawyer at my current employer has quoted me about 10,000 baht to get a ltd company fully registered. That's a lot cheaper than the 'farang' prices that I have been quoted before! But he is not charging any profit so I get everything set up nice and cheap.

Now, I just need to save a couple of million baht....

Simon

[Livinginexile]

What an incredibly complicated , illegal, and risky, mess up you are again contemplating in the land of scams.

Do yourself a big favour ,thailand is not worth it, go and go do your business in another country .

I concur...

Simon, why put yourself through all this again?

To make this deal completely legal you would need to find yourself a genuinly cashed up Thai partner that will invest 51% of the startup capital.

Do you intend to use your new girlfriend as your Thai partner in this venture?

Why not just rent the land as you did in Phuket?

[kcallagmy]

Simon43,

From somebody who has actually done it, it is absolutely legit way of doing business. I have company with 61% real thai shareholders but I have control via share structure. And yes it is a business and a small hotel to boot. With land, buildings etc. owned by company. This was done after all the big noise about nominee's etc. My lawyer was worried we could not do it and would need to try some other tricks. But, I insisted that what we were doing was legal and my two Thai shareholders are financially well off enough to pass the land department scrutiny and interviews etc..

[simon43]

LinvinginExile - Well, investing/moving overseas is also a possibility and my new GF (who was my old GF for 2 years before I met my ex), is quite happy to move away from Thailand if required.

I do not want to rent the land because that is a transient business. If the rental contract cannot be renewed at the end of the term then the business no longers belongs to us

The plan was to register a Thai company with myself as a minor shareholder but in control of the business via voting rights etc and being the sole signatory on the company bank account. Then the Thai company pays my GF a good salary for a period of time, paying tax etc on that salary, but the salary itself being returned back into the company bank account. The start-up capital would be reasonably low and quite possible to demonstrate that the Thai partners have invested 51% of the start-up costs.

We (the Thai company) would purchase the land and then we would build our bungalow resort in stages (just like i did last time). So build the 'shell' of the bungalows, fully equip a single bungalow and open for business, and then complete the internals of the other bungalows as you go.

You ask why put myself through this all again? The previous guesthouse project was absolutely fine. It was the wife that wasn't It was due to my mistakes/ignorance in the way that the business was legally constructed (in case of partner problems) that was my downfall

The airport guesthouse made 4 million baht profit over the past 12 months, (I know cos I do all the books etc). My ex has asked me to help her sell that guesthouse - and a 50/50 profit share has been offered by her, so not a complete downfall. (She wants to sell up because 'it is such hard work')

I cannot imagine not taking a risk with a new business. And it would be rather boring to put my funds in a bank and to do nothing with them....

Simon

[simon43]

Commenting on my own comments..

Why not purchase the land via the Thai majority-owned company that is registered for owning the land and operating the hotel venture, (where I have preferential voting rights), AND then lease the land for 30 years from that company. Then I would seem to have 'double-control' over the land.

Simon

[trogers]

Commenting on my own comments..

Why not purchase the land via the Thai majority-owned company that is registered for owning the land and operating the hotel venture, (where I have preferential voting rights), AND then lease the land for 30 years from that company. Then I would seem to have 'double-control' over the land.

Simon

The Thai government is looking into redefining control through nomination and measuring if voting rights are Thai majority controlled. Not just a check on capital contribution.

[simon43]

trogers - I understand the issue re nominees. That has been clearly made illegal. But I have never heard of an investigation into voting rights. Do you have a link to this news?

Simon

[trogers]

trogers - I understand the issue re nominees. That has been clearly made illegal. But I have never heard of an investigation into voting rights. Do you have a link to this news?

Simon

This issue was raised in Aug 2007. It is still in the pipeline and has not been discarded:

http://www.oknation.net/blog/Francesca/2007/08/21/entry-6

[simon43]

Interesting link.

I think that my proposed comapny structure would be ok because the 2 other Thai shareholders would be active partners in the guesthouse business, not acting as nominees.

But hey! TiT - you never know what will happen tomorow

Simon

[trogers]

Interesting link.

I think that my proposed comapny structure would be ok because the 2 other Thai shareholders would be active partners in the guesthouse business, not acting as nominees.

But hey! TiT - you never know what will happen tomorow

Simon

If you have some genuine Thai shareholders, one way to overcome any potential future change in FBA is to get your Thai wife to hold 2-3% while you hold the 49%.

[thaiwanderer]

As I understand it (please correct me if I am wrong) the OP is not asking if its legal as such, rather asking if its 'less illegal' or of less interest to the authorities than an effectively non-trading company structure used to merely own land. It is, but.....

Weighted voting rights and the like alone may well be legal on a letter of the law interpretation but issues of nominees (widely drafted and undefined prohibition) and the general prohibition on ownership of land in place of / on behalf of an alien can only be entirely avoided where your Thai partners are genuine (and not just greater or lesser appearance of being genuine), so the claimed 'legality' of weighted votes is paper thin. The real test for certainty is the extent that an alien is the beneficial owner and has effective control of the company and or land.

There is a myriad of ways to avoid raising too much suspiscion and or survive a non-thorough investigation and the OP is heading down the right track for that but (unless I am misunderstanding) lets not confuse that with having an entirely legal structure with genuine Thai partners.

The real test is not setting up the passable structure and succeeding in the business, its keeping hold of the business if and when its successful.

[InterestedObserver]

I think that my proposed comapny structure would be ok because the 2 other Thai shareholders would be active partners in the guesthouse business, not acting as nominees.

Are you saying that your Thai shareholders (active partners) are going to reach into their pockets and come up with at least 51% of the share / operating capital.

[kcallagmy]

I think that my proposed comapny structure would be ok because the 2 other Thai shareholders would be active partners in the guesthouse business, not acting as nominees.

Are you saying that your Thai shareholders (active partners) are going to reach into their pockets and come up with at least 51% of the share / operating capital.

Registered capital only has to be 2,000,000 baht so if they are legit, should not be an issue. Then foreigner can loan money to company to expand business. Again, totally legal.

[simon43]

Are you saying that your Thai shareholders (active partners) are going to reach into their pockets and come up with at least 51% of the share / operating capital.

[\quote]

Yes, because they will have received payment from overseas in respect of the invoice that they have raised for consultancy services etc So they will have the cash to inject into the business.....

This is not a multi-million baht venture (well not initially). The sums required are reasonable

Simon

[JimmyGreaves]

Commenting on my own comments..

Why not purchase the land via the Thai majority-owned company that is registered for owning the land and operating the hotel venture, (where I have preferential voting rights), AND then lease the land for 30 years from that company. Then I would seem to have 'double-control' over the land.

Simon

Hi Simon

I wanted to do this but could not find a lawyer who would handle it. Are you going to put the buildings in your name?