Thai Shareholder With Majority Of Co. Shares

[manao1]

We recently set up a Thai limited company for the purpose of buying land, starting a business and getting a work permit. Everything was done through an accountant who came highly recommended from several falangs. We had the accountant provide the shareholders to make it easy, but nothing in Thailand is ever simpel. When receiving the company registration papers I noticed that of the 5 Thai national shareholders, one is given 10,196 shares (equaling 50.98%) and the others 1 each. We own 49%

The accountant assured me that there is nothing to worry about, because only the 2 falang owners are Directors, so we are the only ones who legally have power over the company and the assets.

Is is common practice to give one Thai shareholder majority? I thought that dividing the 51% that needs to be in Thai hands equally among the shareholders makes more sense to be legally protected. What kind of power does this person have over the company? Should we be concerned? Any advise on what to do in this situation?

We are in the process of buying a piece of land, but we do not have a work permit yet. Have gotten conflicting answers on that subject. Will we be able to sign the papers at the land office without a work permit? If there are no other Directors in the co., who can sign if we can't? Our accountant is not a shareholder, and the 5 shareholders all live in different provinces.

I would appreciate any input on that subject.

[solo siam]

As Investors you should be able to sign cheques and the like without a work permit.

In regards to work permits, Unless you are running a proper company (and not just for land ownership) then I can't see you being issued with them.

Make sure that the Thai shareholders have non-voting shares and then dont sign anything without getting it translated beforehand.

[Sunbelt Asia]

Is is common practice to give one Thai shareholder majority? I thought that dividing the 51% that needs to be in Thai hands equally among the shareholders makes more sense to be legally protected. What kind of power does this person have over the company? Should we be concerned? Any advise on what to do in this situation?

Dividing the shares in either 1 Thai or 5 Thais equally is not much protection. It is almost as easy for 5 shareholders as it is 1 shareholder to collude to kick you both out as directors IF your company has common shares with equal voting rights.

The key is how much control you have. A number of means can be used to ensure that you as the foreign minority shareholders have effective management and financial control of the company. These include:

• creating different classes of shares with different voting and director appointment rights

• preference share structures

• shareholder agreements including share financing arrangements

The second issue is In addition to the Foreign Business Law, several other laws restrict foreign ownership in Thailand. Each of the laws restricting foreign ownership are mutually exclusive, so for example, a company with foreign shareholders owning or wishing to own land may be subject to both the Land Code and the Foreign Business Law. Most Land officers will not allow land to be registered in a Thai company if more than 39% of the shares are registered in foreigners names. With the proper setup than this is a mute point if its 49% or 39% as the foreigner can still have control.

We are in the process of buying a piece of land, but we do not have a work permit yet. Have gotten conflicting answers on that subject. Will we be able to sign the papers at the land office without a work permit?

No one will ask to see your work permit to sign at the Labor Dept but our lawyers reco to sign a power of attorney to a lawyer you trust. If you chose to use our services, our professional fee is 8,500 Baht.

If there are no other Directors in the co., who can sign if we can't? .

If you did not want to you can appoint a lawyer with a power of attorney to sign on your behalf.

Make sure that the Thai shareholders have non-voting shares

Under Thai law, all shares have to have voting rights but a certain class can have more or even less than the other class of shares.

In regards to work permits, Unless you are running a proper company (and not just for land ownership) then I can't see you being issued with them.

Under Thai law, it is illegal for the company not to be trading and to be set up to acquire land. The company can be a Landlord and rent out the land but it should not be a sleeping company with no income.

As a director you can easily get a work permit.

As Investors you should be able to sign cheques and the like without a work permit.

It would be almost impossible to write a corporate check without a work permit as no bank will allow you to open a current account. (I certainly have never heard of one) A savings account is possible with the right connections but not a current corporate account as under Thai law it is considered working when you sign a check. That is why the Thai government requires Thai banks to ask for a work permit on directors of Thai companies who are signatures on the current account, and who are not Thai nationals.

www.lawyer.th.com

[manao1]

I appreciate the information. This is the only place I have got a straight answer that makes sense.

We are planning to start a "real" business, not just a front for buying land, but we do not have the right visa yet for the work permit.

Does anyone know whether the Land Office in Phuket will give us a hard time registering the land in a company where falangs own 49%?

[johnnyk]

....It would be almost impossible to write a corporate check without a work permit as no bank will allow you to open a current account. (I certainly have never heard of one) A savings account is possible with the right connections but not a current corporate account as under Thai law it is considered working when you sign a check. That is why the Thai government requires Thai banks to ask for a work permit on directors of Thai companies who are signatures on the current account, and who are not Thai nationals.

www.lawyer.th.com

<{POST_SNAPBACK}>

Interesting.

I plan to set up a 39% foreign-owned company in order to buy my house and land.

I don't want to work in Thailand so I don't want a work permit.

Does this mean I cannot write checks on the company account to pay for the house in stages as it is built?

If I form a company with a work permit for myself to sign checks does this mean I then have to hire 4 Thai workers that I don't have jobs for?

Please clarify if you can, its confusing.

Thanks.

[~G~]

No Thai employees are required for work permit.

[Sunbelt Asia]

Does this mean I cannot write checks on the company account to pay for the house in stages as it is built?

Without a work permit...no you cannot. You could transfer money out of your corporate savings acct or have the bank issue cashiers check but a corporate check would be almost impossible for a signee who has no work permit and is not a Thai national.

If I form a company with a work permit for myself to sign checks does this mean I then have to hire 4 Thai workers that I don't have jobs for?

A work permit requirement is a non immigrant visa and 2 million Baht register capital unless you are married to a Thai, then its 1 million Baht.

Immigration has tougher rules. They require per work permit, 4 Thai employees that are paid at least 5,250 Baht per month. The other requirement is minimum salary for your nationality. You can do visa runs and extension of your work permit if you cannot meet this criteria.

www.lawyer.th.com

[NotaNutter]

Sunbelt, regarding your last 2 paragraphs above. Does this mean that if somebody has Permanant Residency status then they don't need the 4 Thai employees? (they don't need to contact immigration?)

[~G~]

Nobody needs the 4 Thai employees if they are willing to do visa run every 3 months (to have a multiple-entry non-Immigrant-B visa). If you want to have then "Extension of stay" you need the 4 employees. With "Extension of stay" you can stay in Thailand a full year without any visa runs.

Not very complicated really. No employees required for work permit; they are required only if you want to have a long entry permit.

[Sunbelt Asia]

Does this mean that if somebody has Permanant Residency status then they don't need the 4 Thai employees?

Correct they do not and neither is 4 Thai employees required for a work permit or long term visa if you have a extension of stay based on support of your Thai spouse, extension of stay based on education, extension of stay based on investment, extension of stay based on being an dependent, etc.

Only 4 Thai employees is required for the extension of stay based on business.

www.lawyer.th.com