Detail sought on sources of foreign funds

[dr dave soul monsta]

Rules tightened for joint ventures

[BKK Post]

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 would also 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.

[PeteC]

I think the 4th paragraph from the bottom deserves special note. Those with existing companies should assure all their T's are crossed and i's dotted. Pete

[Wanderlust]

I think the 4th paragraph from the bottom deserves special note. Those with existing companies should assure all their T's are crossed and i's dotted. Pete

Maybe that should be 'fingers crossed and eyes opened'?

[malcolminthemiddle]

Pasted from another unnamed web site.

Admin hope that is okay, delete if not. Thanks.


Order of the Business Registration Office
Department of Business Development
Order No. 102/2549
Specification of supplementary document required for the partnership and company limited registration.

--------------------------------

Pursuant to the Order of the Business Registration Office No. 1/2538 Regulations for the Partnership and Company Registration B.E.2538, dated on March 13, 1995 (BE 2538), stipulates that the person, who desires to register a partnership and company limited, is subjected to submit the application form and the supplementary document complying to the appendix of the aforementioned Order;
Now, under the Condition 3, Clause 3, of the Ministerial Regulation regarding to the establishment of the Business Registration Office, the appointment of the registrar and the determination of the rules and regulations for the partnership and company limited registration B.E.2549 which is issued under the Civil and Commercial Code (in the section regarding to the Partnership and Company), the Registrar General hereby stipulates the rules and regulations for the registration of the partnership and company limited which has the foreigner(s) holds the shares of the partnership or company at the proportion begins from 40% but less than 50% of the registered investment capital, or the foreigner holds the shares less than 40% of the registered capital and the foreigner is authorized to act on behalf of the said partnership or the company limited. For the aforementioned case, all Thai national shareholders are subjected to submit the evidences showing the source of the investment together with the application form of the business registration. The said evidence shall contain the detail of the amount of money which matches to the amount of the investment that each Thai shareholder has invested in the Company or the partnership. The required evidence shall be one of the following documents:

1. Copy of the bank statement of the most recent record of the last 6 months or;
2. any document which issued by the Bank to certify the financial status of the shareholder or;
3. Copy of the evidence that shows the source of the investment that the Thai shareholder invested in the partnership or company limited.

This regulation shall be commencing in full force from this August 15, 2006.

Order dated on July 20, 2006

Ms. Orrajit Singkhalawanitch
Director-general of Department of Business Development
The Registrar General
___________________________________________________________________________

If a foreigner wants to use nominees, this will be a issue.

This supplementary document will not be a issue if you JV with Thai shareholding companies who are interested in doing joint venture and provide a service. If you do a JV, your company can be registered and you as a foreigner can be in control of the company.

We utilize other sophisticated legal strategies as well that will allow the company to be registered and legal. The old days of a number of foreigners just having nominees are over.

For Americans, its a no brainer, use the Amity treaty NOW!

www.sunbeltasiagroup.com

[caller]

With reference to the 4th paragrapgh from the bottom:

"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".

First, we've been told its not a new rule, just a different interpretation?

Second, if it is a new rule, isn't this a catch-22? If the rules were different when the companies were set up, it shouldn't be hard to finf Co's set up that complied with the "old" rules, but not the "new"?

Or am I missing something?

The 64,000 dollar questions have to be:

a) whats the likely impact on home owners who went down the Co. route?
b) whats the future of this route, if any?
c) how will it affect current home owners who went down this route?
d) how will it impact on the many half built developments all over the place?
e) what will be the affect on property prices - new and re-sale?

Bad news.

[Wanderlust]

With reference to the 4th paragrapgh from the bottom:

"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".

First, we've been told its not a new rule, just a different interpretation?

As far as I can see it is a new rule as this is applying to companies with 40% or more foreign involvement; before I believe it was 50% or more (hence the 49% companies).

Second, if it is a new rule, isn't this a catch-22? If the rules were different when the companies were set up, it shouldn't be hard to finf Co's set up that complied with the "old" rules, but not the "new"?

Or am I missing something?

Very likely existing companies formed under the old rules won't be investigated, but any government can make legislation retrospective if they want, particularly when it comes to suspicions of money laundering or circumventing the law. The best advice is to make sure an existing company fully complies with the law as it stands.

The 64,000 dollar questions have to be:

a) whats the likely impact on home owners who went down the Co. route?
b) whats the future of this route, if any?
c) how will it affect current home owners who went down this route?
d) how will it impact on the many half built developments all over the place?
e) what will be the affect on property prices - new and re-sale?

Bad news.

My guesses are:
a) Not very much as regards dealings with officialdom but they should contact their legal advisors PDQ.
b) As far as I am aware many people had already switched to a 61/39% company set up, and I would imagine many others will change their companies to match; however I would imagine new buyers will be put off this method and will more likely go for the lease option, or buy elsewhere.
c) is the same question as (a) but in addition they are likely to find it harder to sell their property.
d) Some will be completed, some won't, but that was always likely anyway. The better companies are more likely to complete.
e) Prices will drop almost inevitably because of a simple economic fact - the demand will drop.

It is bad news for those who have gone down this route or have been planning to, but good news for areas which were becoming, or were already over developed. It is also good news for the Thais who were being priced out of the market in some places. It may also rid the property sector of the charlatans and crooks trying to make a quick baht as bogus lawyers and shady real estate agents, which can only be a good thing. Finally there is likely to be a wider choice of rental properties available, at more reasonable prices and conditions, which will become the preferred way of living here for foreigners (if it isn't already). I feel sorry for those who are caught out by this, particularly those who may have been duped by unscrupulous agents/lawyers, but buying property anywhere is a risky venture, particularly if you speculate on the price rising. As I have said before though, the application of these new rules may well vary depending on the area, and in a few months time everything could have changed anyway when a new government has been formed. For those affected by this, the most important thing you can do is get advice from a good lawyer and make sure you are complying with the law.

[tuktukmike]

My understanding is that they will investigate already formed companys,

RE,
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.

They will also investigate the under40% farang owned companys.

RE,
Orajit Singkalavanich, the director-general of the ministry's Business Development Department, said the rule would also apply to new companies that are controlled by foreign entities, even if their direct shareholdings are less than 40%.

What i now wonder is how people who bought under this scheme and only live here for 6 months of the year are going to firstly find real Thai investors and secondly show real Thai investment in their property.

Clearly this situation cannot continue and it would be hoped that the developers and real estate agents could put their heads together and come up with a good lease option, of course a little late for those who have already bought through the company scheme.

Mike.

[buksida]

Ok, more clampdowns, no surprise there, TRT.

Everyone seems to be taking the property angle with regards to these company regulations, this doesnt affect me so I have a few other questions.

What would be the effect on a regular part foreign owned business that wanted to start a company to run an operation, earn income and pay taxes? Would it still come under the microscope? Would you still need geniune shareholders? Would you have to limit the farang part to 39%?

More importantly is every part foreign owned business/company on death row so to speak or are they still just targeting those that have been setup to purchase property?

[hogus]

I called a little bit around by phone, to my lawyer office in Hua Hin and in Bangkok.
The answers were similar.
So long your company is working as a real company has to do, there shouldn't be any problems.
Means, you know about your shareholders, have annual meetings incl. a report, your shareholders can proof that they paid for their shares etc. ....

...and, yes, it seems that all companies with foreigner shareholders will be investigated.
Of course, this takes time, because the "big fishes" has this "honorâ€

[buksida]

So if you went into partnership with one or two Thais and didn't have the 6 or 7 bogus shareholders wouldn't it be the Thais responsibility to prove their investments?

What if your spouse held the remaining 51% and your investments were shared?

I guess if the responsibility falls on the company, they can close it down, so within the company the responsibility to give them what they want must fall onto the largest shareholder which more often than not is the farang.

We thought the property aspect was bad enough but once they start clamping down on every part foreign trading company then it really will be time to move to Burma!

You'd think considering that this legislation is directly targeting foreigners they would make some kind of effort to let us know what we need to do ... but no, we get the big finger as usual, welcome to Thailand!

[Burger]

Please see link

http://www.huahinafterdark.com/forum/vi ... 7823#27823

[Wanderlust]

I'll eat my hat if they ever investigate Mr & Mrs Smith to see the legality of their 3M bungalow funds and how much of it was laundered.
Burger

Careful Burger - Randy Cornhole knows how foolhardy it is to make statements like that!