3 Partners, 1 Director's Certificate

[jombi]

I would like to put forth the following scenario to our resident experts for comments :

Three Americans want to form a LLC in Thailand for the long-term purpose of purchasing land in Thailand. They find a small business for sale and wish to transfer the company that owns the business into their names. They do their homework thoroughly and the company checks out free of hidden liabilities. Money is an issue so the idea of transferring the company into their names is ideal. No company formation costs and the company is already capitalized at 2M. This being Thailand, they realize that the LLC must have 6 Thais for each Farang unless they form a new company under the Amity Agreement. They prefer not to form a new company under Amity because they won’t be able to capitalize it at 2M. The Nominees from Company One are willing to go along with Company Two. The problem is this: since only one Farang in this arrangement can have his name on the Director’s Certificate what can we do to cover the investment of the other two? Will a notarized contract stating each partner’s investment be legally binding both here in Thailand and back home in the States? Any other suggestions?

[Indo-Siam]

Preamble: My firm does not handle Thai sole proprietorships or Thai Limited Partnerships, because I long ago made the determination that > 90% of such proposed entities were being formed by cheapskates who had no legitimate reason for doing so, and were only interested in circumventing compliance with Thai rules that were set up for Thai Private Co. Ltd. This preamble is generic, and not meant to denigrate current poster.

Jombi - As I understand Thai law, what you propose is not possible. Without Amity Treaty status, foreigners cannot hold majority interest in a Thai Limited Partnership (and that is the correct term - the term LLC does not exist here). Furthermore, if foreign partners desire to have limited liability, the Thai majority partner(s) must have unlimited liability - and the minority foreign partners MUST NOT INTERFERE WITH DAY TO DAY OPERATIONS managed by the Thai parner.

Furthermore, work permit and entry-permit rules are not influenced by form of incorporation - you still need four (not six) Thais, and 2 million baht registered capital per work permit.

I have reasonably strong belief that the above provisions are correct, although I may not be current on any changes to rules that have occurred since late 2002.

In my book, any proposed Thai Ltd. Partneship involving more than two active individuals is a disaster waiting to happen.

Good luck!

Steve

Indo-Siam

[capital]

Indo-Siam,

God, you seem to know more than most farangs here in los when it comes to legal issues, and the info you're giving is 99.9% accurate if not 100%, me thinks. Pure curiousity, are you a lawyer?

No offence, just curious... you have answered a question I had in the past and I really appreciate it.

[Indo-Siam]

No - I am not a lawer. I am a researcher (www.thaitradedata.com). Once upon a time, in a land, far, far away, a college professor that I respected told me to take an elective course the following year. The course was entitled "Public Policy, Decison-Making and Debate". It turned out that it was a course taught by the college debate team coach, and all the other students were members of the intercollegiate debate team. I knew nothing whatsoever about formal, academic debate.

That course was far and away the most valuable educational activity of my life. I learned how to build an argument - both sides (because in academic debate, you are given a controversial topic, involving overturn of a current policy or practice, and told to prepare to either defend or attack the status quo - and then, at the last minute, you are told whether your team is attcking or defending).

That course taught me to analyze both sides of an argument, develop arguments for and against each key premise, and plan out what evidence would be key to support each premise. And then go and find the evidence. And then go investigate the credentials of the source of the evidence.

That one course 25+ years ago has applied again and again in my life. To this day, I still have the textbook "Argumentation - Inquiry and Advocacy" on my bookshelf here in Bangkok.

All the practice of law is - ultimately - is the conduct of a highly stylized debate, with very specific local rules.

To an extent, the scientific method is also a form of debate - propose a hypothesis, then go out and prove or disprove it.

Medicine, and religion also have aspects of debate - particularly in the realm of public policy.

Skepticism is a valuable tool in the toolbox - particularly around Bangkok. I have had a devil of a time getting my Thai staff to question what they are told by bureaucrats, overcome obstacles, or look for non-obvious pieces of evidence that we need to complete an argument.

Long answer!

Short answer - nope, not a lawyer!

Steve

Indo-Siam

www.indo-siam.com