New company ownership rules might affect you

[STEVE G]

Sonmic, grandfather rights are a clause in a statute which permits the operator of a business or a land owner to be exempt from restrictions on use if the business or property continues to be used as it was when the law was adopted.

[sonmic]

Thanks Steve,

So it basically means that if this clause was included, everything carries on normally without sanctions?

[johnnyk]

perhaps a stupid question, but what is "grandfathered" exactly?

generally means that if it was existing under previous rules/regs it will be left alone, new rules/regs to apply to new start-ups. This being Thailand it can mean all, some or none of the above

[Beguine]

Granfathering in this context means that when laws are changed companies that were in compliance with the old law are allowed to continue. In this case Annex 3 companies that have genuine Thai shareholders owning, say 51%, but with less than 50% of the votes will be allowed to continue with the same structure indefinitely but Annex 1 and 2 companies will only grandfathered temporarily. There are precedents like companies that were in existence before the first Alien Business Act in 1972 or branches of foreign companies that were allowed to operate here until that loophole was filled. Although these were all grandfathered the Ministry of Commerce made it very difficult for them to expand by preventing capital increases or even minute changes in the original business. Therefore most were forced to become Thai.

[Burger]

Some of the following is cut and pasted:

Yesterday the Bangkok Post (pinch of salt) stated that the National Legislative Assembly have proposed a new draft Foreign Business Act potentially more friendly to foreign-owned joint ventures operating in Thailand than the government's version of the bill.

A business would not be automatically defined as foreign even if voting rights held by foreigners were more than 50%, a controversial clause currently present in the government's own proposed FBA amendment.

If this goes through, does it mean that foreign owned companies (by the voting rights thingy) do not now have to report within a year and obtain a licence to continue ??

Burger

PS: I won't start a war by saying this is a foreigner friendly move

[Beguine]

The concession seems designed to exempt affiliates of multinationals controlled through preferential voting rights but with genuine Thai investors owning 51%. They want the Commerce Ministry to inspect companies to see if they have a good reason for such a structure and check that there are no nominees. On the other hand I believe they want to increase the jail sentence for nominees and foreigners using them from 3 to 5 years and eliminate the grace periods for companies to comply with the law. The only positive is that they acknowledge that multinationals need to have management control of their businesses. The rest is pure BS. Detailed inspections to see if there is a good reason for management control - what stupid nonsense. What kind of procedures will this involve and for what benefit? If there is a good reason to have management control there is also a good reason to own a majority stake and they should strike Annex 3 off the FBA or cancel the whole thing and cover foreign ownership in specific laws for each industry that has a good reason to be protected. The Commerce Minister says he will stick to his guns over the amendments which he never came up with any justifications for but it is now a matter of face for the arrogant stuffed shirt who should have been kicked out in the cabinet reshuffle. The new finance minister is against the amendments but the PM doesn't understand anything about economics and keeps on demonstrating this fact by drivelling on about the sufficiency economy. So it is not clear which way the governement will jump on the FBA. We can only hope that disagreements between the NLA and the government and within the government will make it impossible for the amendments to be past by this whacky government. I note that the draft has not come back from the Council of State yet and it may have to go back to the Council of State if it gets substantially revised.

[buksida]

So essentially its a case of same sh1t different day ... hohum, still nowt good for us aliens then.

[Jockey]

The concession seems designed to exempt affiliates of multinationals controlled through preferential voting rights but with genuine Thai investors owning 51%. They want the Commerce Ministry to inspect companies to see if they have a good reason for such a structure and check that there are no nominees. On the other hand I believe they want to increase the jail sentence for nominees and foreigners using them from 3 to 5 years and eliminate the grace periods for companies to comply with the law. The only positive is that they acknowledge that multinationals need to have management control of their businesses. The rest is pure BS. Detailed inspections to see if there is a good reason for management control - what stupid nonsense. What kind of procedures will this involve and for what benefit? If there is a good reason to have management control there is also a good reason to own a majority stake and they should strike Annex 3 off the FBA or cancel the whole thing and cover foreign ownership in specific laws for each industry that has a good reason to be protected. The Commerce Minister says he will stick to his guns over the amendments which he never came up with any justifications for but it is now a matter of face for the arrogant stuffed shirt who should have been kicked out in the cabinet reshuffle. The new finance minister is against the amendments but the PM doesn't understand anything about economics and keeps on demonstrating this fact by drivelling on about the sufficiency economy. So it is not clear which way the governement will jump on the FBA. We can only hope that disagreements between the NLA and the government and within the government will make it impossible for the amendments to be past by this whacky government. I note that the draft has not come back from the Council of State yet and it may have to go back to the Council of State if it gets substantially revised.

Nice post. Thank you.

[Burger]

Beguine,

But if the NLA ammendments get passed, then will our companies not be classed as 'foriegn' and therefore not have to report within one year ?

Burger

[Beguine]

The one year grace period and the grandfathering would be eliminated under the NLA draft. So there would be question of any one reporting within a year. Companies controlled by foreigners through preference share structures would not automatically be deemed as foreign. They would be inspected by a Commerce Ministry committee which would determine whether they thought they were foreign or not. The process would include inspection of the sources of the Thai shareholders' investment to determine whether they were genuine investors. Ultimately it would be up to the committee to decide based on criteria that have not been specified whether a company is foreign or not. The NLA draft acknowledges that some foreign companies may have a need to have voting control to protect technology, brands etc.

It should be obvious that for small farang companies whether owning land or not this would be even stricter than the government's amendments. There is not a snowball's chance in hell of any of them passing this opaque procedure. This is also worse for multinationals because they won't be grandfathered or have any grace period to restructure, if they fail the committee's test. It may only help multinationals that are not here already and are willing to go through this process. But it would make more sense for them to apply for an alien business licence to own up to 100%, since the process and criteria sound the same. I think the Joint Foreign Chambers and Embassies have not yet reacted because they are punch drunk with all the bullsh*t and flip flops from these idiots. When they do I doubt that it will be very favorable.

[Burger]

But the government have already stated that they do not have the resources to 'check' all of the 500,000 registered companies and will only 'check' when a complaint is made.
They also stated to date they have only investigated one company in Samui due to major irregularities.

So to me it's seems like it's a way of letting the 'property companies' continue.

Just my reading of it.

Burger

[Wanderlust]

Could be interesting if a grumpy/xenophobic neighbour reports the farang next door just to get rid of him....

[Burger]

The only case they've looked into property wise was a report of over 100 limited companies being registered at the same address.
Think it has to be a serious complaint, not too sure they'd take action over a dog that barks too loudly!!

My reading of it is it's another way they can continue letting the kind of foreigners they want, to come and invest.
While discouraging the foreigners they don't want, ala the visa run thing.
Bit unfair but it's their country and we know full well they'll do as they please.

The last 4 or 5 law changes also allowed the foreign house buyer to continue investing.

We'll see, all speculation for now.

Burger

[STEVE G]

Your right Pete, this property stuff is as boring as hell, lets get back to English vulgarities and Finnish disco dancing!

[sargeant]

I agree steve leave them to blow wind up their own bums

or is that an english vulgarity