25
May 2006 there was a tightening of
the rules that govern the laws on
ownership of Property. Here is an
explanation of those changes:
If
it appears that an alien holds
shares or is a director or it is
reasonable to believe that a Thai
holds shares as representative of an
alien the officers shall investigate
the income of Thais holding shares,
delving into the number of years in
the current profession and monthly
salary.
The provision of necessary evidence
is required. And if after due
investigation it can conceivably be
believed that the request for the
registration of rights and legal act
is to by-pass the law or to be
believed that anyone who buys land
for the benefit of an alien in
accordance with Section 74,
paragraph 2 of the Lands Act the
officers who undertook the
investigation in detail shall
forward the findings to the Land
Department to await the order of the
Minister.
Basically this means that if
land/property is registered to a
Company where a foreigner is an
officer, or suspected of using a
proxy as his officer, then that
Company will have to prove that the
land/property is in fact owned by
all shareholders (Thai & foreign)
for their personal benefit, and NOT
for the benefit of the foreigner.
Thai Law states that only Thais may
own Land in Thailand.
15
August 2006 this new explanation of
the rules will apply:
Company formations - new tighter
rules to go into effect Aug. 15,
2006
New Government regulations - Detail
sought on sources of foreign funds,
and rules tightened for joint
ventures.
The following is a partial text of
the new rule - the rule is Order of
the Central Registration Office
No.102/2549 (2006) regarding new
requirements for business
registration, which will take effect
on 15 August 2006.
The new requirement is aimed at
guarding against the problems of
nominee shareholders and increasing
transparency in the business
registration process.
According to the Order, the new
registration of a partnership or a
company with (i.) foreign
shareholders of 40% or more ( but
less than 50%) of the registered
capital; or (ii.) foreign
shareholders of less than 40% of the
registered capital, but those
foreign shareholders have power to
enter into juristic acts binding the
partnerships or the companies,
requires all Thai partners or
shareholders to submit evidence(s)
showing source(s) of fund used to
hold the shares, which is: Bank
statement or passbook of the past 6
months, or Other banking documents
showing financial status of the
partner(s) or shareholder(s) or,
Copy of other evidences showing
source(s) of fund used for holding
shares. This information is from an
email notice from the British
Embassy. New business registration
rules will require all new companies
with foreign shareholdings of more
than 40% to declare their sources of
funds, according to the Commerce
Ministry. The new policy, which will
take effect on Aug 15, is aimed at
guarding against the problems of
nominee shareholders and increasing
transparency in the corporate
registration process.
Orajit Singkalavanich, the
director-general of the ministry's
Business Development Department,
said the rule is intended to apply
to new companies that are controlled
by foreign entities, even if their
direct shareholdings are less than
40%. Shareholders must submit
evidence of financing used to hold
shares, including bank statements
and other documents.
Authorities have taken a stricter
line on the practice of nominee
shareholders following the takeover
of Shin Corporation by Singapore's
Temasek Holdings earlier this year.
Temasek effectively has full control
of Shin through the use of nominee
companies, such as Kularb Kaew,
despite the fact that Thai law
limits foreign ownership at 49%.
Sources at the Business Development
Department said a preliminary study
found that Kularb Kaew was a proxy
of Temasek, and did not qualify as a
Thai company. The investigation is
expected to be finalised this month.
A
recent land scandal on Koh Samui has
also raised public questions over
the use of nominee shareholders by
foreigners to bypass property
ownership limits. Ms Orajit said the
department hoped the new rules would
discourage the use of nominees by
requiring Thai shareholders to prove
that they are not acting as simple
nominees on behalf of foreign buyers
and have the financial means to
actually hold shares.
"The department will examine all of
those documents before giving
approval," she said. "We have
learned that Thais have acted as
nominees for foreign investors to
avoid compliance with the Foreign
Business Law, which limited foreign
stakes at 49%. Tighter requirements
[for proving] one's financial status
will help us sort out this problem."
Companies violating the rules would
face dissolution. Complicit
shareholders also could face fines
of up to one million baht and/or
jail terms of up to three years.
In
the future, the Business Development
Department plans to examine existing
registered companies with foreign
shareholders to determine whether
they breach the new rules or not. Ms
Orajit admitted that mistakes had
been made in the past, in part due
to department policies aimed at
facilitating the establishment of
new companies.
In
any case, she said the new
procedures, while requiring more
documentation for new registrations,
would not necessarily result in
longer waiting periods for
approvals.
The department also wants to amend
local laws to revise the definition
of foreign businesses in order to
cut down on existing
loopholes.-----------
These notes are part of the "Bangkok
Post, August 1, 2006 Business News
section - information from articles
by Phusadee Arunmas, and a notice
from the U.K. Embassy.
