Makiing A Company/lawyer?$?.....etc

[desertwind]

My friend has this question, perhaps you guys can help

-dw

Hello, please, here is my situatioN, I bought a peice of land , put under a thais name only, but now want to make a company to ensure that this is also my land and they can not sell it on me. they agreee to make the company now, but are dragging their heals... and say to me now that we need the villiage leader to sign the paper and then get a house number, and then and that only then we can take these papers to get a company, and i want this land only to hang on to for a while, and make a nice house sometime, or sell later?? and have heard that depending on the business you choose will be how much one is charged to make the company, I want minimum, and I want to just take he land papers to chaing mai to a lawyer instead, but do not know if i need to take with me the land papers, and the thai man?? that has the land on his name. and how much minimum should I expect to pay. as they told me 60,000- bht. I doubt this. as I have heard of twenty thous ...so please ONE: do I need a house number for a company? TWO; DOES THE THAI MAN HAVE TO BE WITH ME TO MAKE THIS COMPANY? THANK YOU SO MUCH IN ADVANCE FOR ANY ADVISE, AS THINGS HAVE GOTTEN QUITE WEIRD

[Sunbelt Asia]

You don't need any land paper to form a company now. This would come much later.

If you are forming a company to acquire land and do not have a business. Anything more than 39% ownership of the company shares owned by a foreigner will raise a red flag. The Thai government can and have in the past confiscated the land if they investigate and find the company was formed simply to own land.

Even if you own 39% of the shares, you can be the Managing Director and bind the company. Our legal fees to form a company are 3,900 Baht plus VAT.

Although there are no minimum capital requirements, the amount of the capital should be respectable enough and adequate for the intended business operation.

In order to set up a limited company in Thailand, the following procedures should be followed:

A. Corporate Name Reservation

The name to be reserved must not be the same or close to that of other companies. Certain names are not allowed and therefore the name reservation guidelines of the Commercial Registration Department in the Ministry of Commerce should be observed. The approved corporate name is valid for 30 days. No extension is allowed

B. File a Memorandum of Association

A Memorandum of Association to be filed with the Commercial Registration Department must include the name of the company that has been successfully reserved, the province where the company will be located, its business objectives, the capital to be registered, and the names of the seven promoters. The capital information must include the number of shares and the par value. At the formation step, the authorized capital, although partly paid, must all be issued.

The Memorandum registration fee is 50 baht per 100,000 baht of registered capital. The minimum fee is 500 baht, the maximum 25,000 baht.

C. Convene a Statutory Meeting

Once the share structure has been defined, a statutory meeting is called during which the articles of incorporation and bylaws are approved, the Board of Directors is elected and an auditor appointed. A minimum of 25 percent of the par value of each subscribed share must be paid.

D. Registration

Within three months of the date of the Statutory Meeting, the directors must submit the application to establish the company. Company registration fees are 500 baht per 100,000 baht of registered capital. The minimum fee is 5,000 baht; the maximum is 250,000 baht.

E. Tax Registration

Businesses liable for income tax must obtain a tax I.D. card and number for the company from the Revenue Department within 60 days of incorporation or the start of operations. Business operators earning more than 600,000 baht per annum must register for VAT within 30 days of the date they reach 600,000 baht in sales.

Be aware you have Auditing Requirements and Standards. Audited financial statements of juristic entities must be certified by an authorized auditor and submitted to the Revenue Department and to the Commercial Registrar for each accounting year.

Auditing standards conforming to international auditing standards are, to the greater extent, recognized and practiced by authorized auditors in Thailand.

[Sumitr Man]

If you are forming a company to acquire land and do not have a business. Anything more than 39% ownership of the company shares owned by a foreigner will raise a red flag. The Thai government can and have in the past confiscated the land if they investigate and find the company was formed simply to own land.

Even if you own 39% of the shares, you can be the Managing Director and bind the company.

Sunbelt:

I read with interest your comment quoted above. Can I ask: does this red flag issue, over the 39%+ share ownership, still apply should you have set your company up using a preference share structure? IOW, are you looking at 39%+ ownership in "issued" shares of the company, or in capital contribution (i.e. par plus premium)?

I ask because it has always been my understanding that you could get around this issue by using the preference share ownership structure, but your post would seem to suggest otherwise.

[Sunbelt Asia]

Preferred shares and ordinary shares issued must have the same par value. If the Thai owns less than 60% of the shares no matter if they are preferred or ordinary shares and the company was set up to own land, this would raise the red flag.

[piet pompies]

Dear Dessertwind,

you did not buy land, you got diddled....d. ! Try to get a cop or cops, or a lawyer to be on your side to get the seller to agree on a company sale, then follow the advice posted. Alternatively and realistically, get a lease for some years and let the Thais feel they still own the land sell the lease. Good luck.

[Sumitr Man]

Preferred shares and ordinary shares issued must have the same par value.

Granted. So you are looking to the "share issue", not capital contribution. Thus, you could in fact set up the company using a preference share structure, thereby basically retaining all control over the company.

I also heard that you can set up a company that is a 65/35 split. Pay the par value for the Thai shareholders as a "loan" and then make them pledge the shares to you as security against the loan. All "rent' paid on the property is deemed interest on the loan to the Thai shareholders.

Assuming this is the case, why am I always hearing that setting up a company to avoid land ownership rules is bad - beyond the issue of S. 150 of the Land Code [Thai nominee rule]?

[Sunbelt Asia]

[

Granted. So you are looking to the "share issue", not capital contribution

Its not "me" looking. Its the Thai government. Capital contribution is connected to shares issues. However, as for voting rights or profit distribution or liquidation proceeds, that can or cannot be tied to share holdings.

I also heard that you can set up a company that is a 65/35 split.

You could do it as 90/10 as well and have the same outcome.

why am I always hearing that setting up a company to avoid land ownership rules is bad

Some people don't want to have to file tax reports every 6 months and the audit

The main reason, several lawyers don't understand preferred or ordinary shares, including one esteemed member of this forum. He told our client that their was no such law allowing two classes of shares. So much misinformation out there, no wonder it will drive most men to drink!