Treaty Of Amity, Still In Effect?

[BigA]

Whats UP!! I have read the section in this forum describing the application and benefits to Americans under the Treaty of Amity. In my research I have encountered conflicting information about this treaty. Is it still in effect? Can an American apply for the benefits now? One person (an American business owner in Thailand) tried to claim protection under it and could not, told me it was revoked under the new law.

Are there any similar arrangements with other states?

Is this a situation where one person gets one answer and another person hears something different from the bureaucracy?

[Indo-Siam]

Hello "A" -

The Treaty is still in effect. In my opinion, it is only useful in two circumstances:

1) You want to start a Thai Representative Office for an American parent firm that has registered capital well in excess of 4,000,000 Thai baht.

2) You want to pursue a business activity that is one "List 1" of the Foreign Business Act - see: http://www.thailawforum.com/database1/foreign5.html

In any other case, the Amity Treaty is a waste of time - you can simply reigster a company and apply for an Alien Business License - which acconplishes the same thing, except in the two instances cited above. Plus, the cost is about 3,000 baht less.

There are three categories of business in which both an Alien Business License and Amity Treaty certification are tough to obtain (because they are activities that are not prohibited by the Foreign Business Law) - one is small retail shops, the second is exporting businesses, and the third is small manufacturing operations that are not eligible for BOI promotion. In any of these three cases, you may - by Thai law - do what you want - including having majority foreign ownership. So says the Ministry of Commerce. The Labor Ministry will also issue you a work permit - no problem. But Immigration has a problem - which takes some "handling" to resolve.

My company can handle your application in any case, and I would welcome a chance for us to be considered.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

[email protected]

www.thaistartup.com

[BigA]

Thanks for this timely info Steve, I am not doing anything now. But would contact you later if I did!

[Sunbelt Asia]

Steve,

Sorry but I must respectfully disagree…

It’s cheaper for Amity for businesses on Catagory B and can also be on Catagory C in some cases.

On Catagory B of the Alien Business License, the official Government fee is 40,000-500,000

On Catagory C of the Alien Business License, the official Government fee 20,000-250,000

For Amity the government fees are around 24,000 Baht max.

Also on Amity it’s straight forward and you don't have the limitations as you do on an Alien Business License. In reference to conditions they are much tougher...These conditions include that the business bring into Thailand Baht 3,000,000 in capital during the first year versus Amity can be as low as 1,000,000.

Retail and wholesaling business are covered by Catagory C and have much higher capital requirements. Foreigner may operate businesses under Catagory B only if at least 40% of the capital is Thai owned. In the case of businesses under Catagory B, at least 2/5 of the directors must be Thai nationals and a minimum of 40 percent of the shares must be held by Thai persons, which minimum may be reduced to 25 percent by Cabinet approval. Businesses under Catagory B or C may be subject to conditions such as minimum debt/equity ratio, number of alien directors resident in Thailand, period of investment, technology and assets, etc

None of these requirements are needed under Amity. Amity is a clear winner in my opinion because you don’t need any Thai director, minimum of shares held by Thai, any minimum debt/equity ratios.

By the way, the Amity expires December 31st 2004. It is expected that any Amity company formed before that date will be grandfathered in. It is expected to be replaced by the FTA between the USA and Thailand.

We'll miss the Amity as our law firm has probably process more Amity Treaty applications than any other firm in the past year. It’s a big advantage versus where other nationalities who are forced to apply for the Alien Business License and Americans should take advantage of it. We are strong advocates of Amity.

www.sunbeltasia.com

[Indo-Siam]

Here are my thoughts:

1. It is exceedingly rare for a Thai Private Co. Ltd. to be started by seven or more sincere, active participants - whether it be 100% Thai owned, or partially (or fully) foreign-owned. My guess is that more than 99.9% of all TPCL start-ups in Thailand use one or more "passive" (= nominee, or proxy) shareholders (albeit this is technically illegal). If you are going to include "supportive passive shareholders" anyway, then these can be used as another approach toward structuring share ownership ina way that supports "active investor" interests.

2. There are five Thai government regulatory organziations that a TPCL with foreign employees must deal with: Commerce Ministry, Labor Ministry, Revenue Department, Social Fund Department, and Immigration. Any seven individuals can incorporate a company with 1,000,000 baht or more capitalization - including seven foreigners. Nothing prevents this. It happens frequently. The Revenue Department will issue tax registrations, and collect taxes - regardless of shareholder structure. The Labor Ministry will issue a work permit to any foreigner who works in a position, for a company that would otherwise be entitled to a work permit - without regards to percentage of foreign ownership of company. The Social Fund department cares less. Immigration is the one potential stumbling block - and might conceivably block an extended entry permit if they noticed a conflict between Foreign Business Act and shareholder structure - if you wrote up a work permit job description that blatently stated that job was to run a company that was pursuing a business prohibited to foreign-owned company. But this would be an exception, not a norm.

3. In a February 5, 2004 meeting with head of Foreign Business Section at Nonthaburi, I asked how often companies were prosecuted for violating the Foreign Bsuiness Act. After some confused fumbling, the answer came back - never. There had never been a prosecution - at least in the recent memory of the two officials I met with.

4. I have personally seen the shareholder sheets of three companies that had seven foreign shareholders - all three companies operating "happily" - one with a foreign work permit. None have Amity Treaty or Alien Business License.

5. I do not recommend willfully operating in violation of known Thai rules - just because there is no recent history of enforcement of the rules. But this approach work for a lot of people.

6. If you look at the list of businesses restricted by the Foreign Business Act (see: http://www.thailawforum.com/database1/foreign5.html) and then compare this list to what a given investor wants his company to do, it is often difficult to find a conflict. Neither an ABL nor AmityvTreaty protection will be approved unless a foreign-owned company can conclusively demonstrate that it proposes to directly pursue one of the restricted activities.

7. The final entry (Item 21) on List 3 is an amorphous category that can apply, or not apply, to most anything not specifically itemized elsewhere on the list. All five Thai government regulatory agencies with whom a TPCL must interface seem to me to generally ignore majority-foreign-ownership of businesses that are not specifically detailed as being restricted on the lists - and also to ignore many instances that are on the list.

So - anyway - my earlier entry was not about trying to exhaustively detail all applicable scenarios. I was basically saying that - in my opinion only - pursuing Amity Treaty protection is almost alwasy a waste of time, in which the applicant perhaps ends up with "peace of mind" - which may be very valuable to some people.

In my expereirence, Bussinesses on List 2, if started started by foreigners, are generally going to be better off pursuing BOI promotion, as opposed to Amity or ABL registration. So - that is the approach I would recommend.

List 1 activities are going to tend to draw a lot of attention - and there Americans would benefit by having access to otherwise prohibited activities.

I chuckle, because I know how easy it is to change shareholders in a company - it does not take the signtures of "outgoing/old"or "incoming/new" shareholders. All it takes is typing up a Bor Or Jor 5 form, listing new shareholders' identities and shares owned, gettinga company Director to endorse this document by signature and company seal, and then submitting it to commercial regsitration office. As long as no "investors" challenge this action, it can be accomplished without their knowledge or active participation. So - all the turmoil and agony about structuring company share ownership is usually much ado about nothing.

I have never heard of a case where "passive, supportive, otherwise uninvolved" Thai shareholders, participating as initial "promoter" shareholders for a newly launched company, ever caused any later problems for a company. In 100% of the cases I have heard of - of any problems related to share ownership - the problems have ALWAYS been caused by real partners, wives, girlfriends, business associates, family members, etc.

People need to remember that - at incorporation - a company cannot be in violation of the Foreign Business Act - because - at incorporation - a company is not involved in any activity - it is just a holding company, with a broad list of intended company objectives. It can still hire a foreign manager, to help plan businress strategy, and look after the investment of initial shareholders - still without carrying out any prohibited activities. With care taken in formally defining a company's activities, many businesses can avoid running afoul of Foreign Busines Act restrictions, and operate without interference.

My thoughts, anyway.

Steve

Indo-Siam

[email protected]