Property Owned Through Company: Transmission Issue

[fleming]

Hi,

I am planning to buy a house throught company set up of which I will own 49% and 3 Thais will have 51%.

And would like to know what could happen in case one of the 4 people including myself die...

- where do the rights go?

- can my children inherit of that house?

- can the local's descendant claim something?

I guess there is a specific procedure to prevent this, can somebody enlighten me?

Thanks for your help

Edited January 23, 2006 by fleming

[Nadia 2]

Something else, I think you need a minimum of 4 Thais under the Land Code not to be deemed as a foreign entity (this contrary to the foreign business Act where there is no longer a requirement that the majority of the 7 shareholders must be Thai to be a Thai entity.

Also not how a company is deemed foreign! and thus should the law be enforced in Thailand not allowed to own land.

Under the FBA Section 4

Section 4. In this Act:(www.dbd.go.th) special note under 4

"Foreigner" means

(1) Natural person not of Thai nationality.

(2) Juristic person not registered in Thailand.

(3) Juristic person registered in Thailand having the following characteristics.

(a) Having half or more of the juristic person's capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic parson.

( Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.

(4) Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2) or (3), or a juristic person having the persons under (1), (2) or (3) investing with the value of half or more of its total capital..

!!!Thus, even though a company may have its capital shares held by a majority of Thai nationals, if the majority of the value of the capital was invested by a foreigner, the company would be deemed to be foreign and therefore not allowed to own or develop land.

Under the Land Code (though any company considered foreign under the Foreign Business Act is likewise to be considered foreign under the Land Code).

Section 97 Land Code

The following juristic persons may have the same rights in land as aliens:

• 1) Limited companies with more than forty-nine per cent of their capital owned by aliens or more than half of whose shareholders are aliens, as the case may be;

For the purposes of this Chapter, if any limited company issues bearer shares, the shares shall be deemed held by aliens.

• 2) All limited partnerships or registered ordinary partnerships with more than forty-nine per cent of their capital owned by aliens or more than half of whose partners are aliens, as the case may be;

• 3) Societies including cooperatives more than half of whose members are aliens or which operate especially or for the most part in the interest of aliens;

• 4) Foundations whose object is especially or for the most part in the interest of aliens;

* 5) Any juristic person in this Section which has manager or member of the board of directors who is an alien.

Section 98 In case a juristic person named in Section 97 becomes the owner of the capital, a shareholder, or partner, as the case may be, in any other juristic person under the provisions of the preceding Section, such other juristic person shall be deemed an alien.

*Repealed by Proclamation of the Revolutionary Party No. 49 dated 13/1/59

[johnnyk]

One way I'm gonna deal with this is by making my daughter the managing director of my company with full authority when she's 20 years old.

[fleming]

Thanks Nadia2 for your answer, althought it's not really providing a solution to my problem but rather more worries... I was just wondering if anybody as encounter such experiences induiced by a change in the people...

[Web_Director]

As a lawyer, I would suggest you that the property will be owned by the company that you are going to set up. Therefore, even the shareholders die the property shall belongs to the Company. Your child cannot inherit such property.

The issue is what will happen if you die, of course your child can interit your ownership of the shares in the company. The thing is that you must do the legal process asap coz if a company has shareholders less than 7 people, the Court has the power to order the dissolution of the Company.

[Nadia 2]

I know my previous answer was not too much of a help, but I think you should not get in a situation where you own property through a thai incorporated company.

The Thai law;

If you have not made a will the Thai Civil and Commercial Code will determine what happens to your assets in Thailand when you die. This shall mean that the assets will be distributed amongst the statutory heirs and they are entitled to inherit in the following order: descendants/ parents/ brothers and sisters of full blood/ brothers and sisters of half blood/ grandparents/ uncles and aunts.

Are there heirs surviving in one of the classes, the heirs of the lower class have no entitlement to share in the assets. The one exception is where there is a descendant and a parent in which case they take an equal share.

If you are a director in a Thai limited company the control or the shares of the company will not automatically transfer to your heirs. In general a general meeting of shareholders must be called and a shareholder decision is needed to appoint or remove a director. The shares in the company must be transferred at the Ministry of Commerce, though, without the director able to sigh there is a whole procedure to go through.

The law

Section 1152; 'At the first ordinary meeting after the registration of the company and the first ordinary meeting in every subsequent year one-third of the directors, or, if their number is not multiple of three, the number nearest to one-third must retire from office'.

A retiring director is eligible for re-election, unless restricted by law. There are (currently) no general restrictions on the nationality of directors. However, there are certain requirements for specific businesses to have a specific number of Thai and/ or resident directors.

Section 1155; ‘Any vacancy occurring in the board of directors otherwise than by rotation may be filled up by the directors, but any person appointed so appointed shall retain his office during such time only as the vacating director was entitled to retain the same’.

!!!! Have someone you trust in the board of directors to fill up your place should anything happen to you.

Section 1132; In the event of death or bankruptcy of any shareholder another person becomes entitled to a share, the company shall, on surrender of the share certificate when possible, and on proper evidence produced, register such other person as a shareholder.

Inheritance is non-taxable income.

Response to webmaster

Yes (1237) a limited company MAY be dissolved by the Court (instead of 1236 speaks about ‘IS dissolved) if the number of shareholders is reduced to less than seven.

1 - A limited company may also be dissolved by the Court if default is made in filling the statutory report or holding the statutory meeting

Note; strictly spoken this means every landholding company?)

2 – if the company does not commence its business within a year from the date of registration or suspends its business for a whole year. (I always wonder what the business of a landholding company is)

3) If the business of the company can only be carried on at a loss and there is no prospect of its fortunes being retrieved ((with the minimum income requirement of a foreign director?)

Cheers N.

[fleming]

Thanks very much Nadia2 for your light...

so what would you suggest as the best way to be buy land (and build house) in Thailand if not through company in order to obtain the maximum security concerning the transmission of ownership?