US Amity Treaty

[Guest]

 

G,

 

You wrote:

 

"I think the agreement is a dead duck as the Gov't has already announced to the US that it will not be renewed and the US took the news with aplomb. It will also allow Thaksin to say he's not bowing tot he US, and if anything, is making Thailand more "independent"."

 

Could be, or it could be public posturing and the real outcome will be worked out behind the scenes. I have no idea of the financial effect of a non-renewal, either on Amity businesses here or on the businesses in the US owned by Thais under the corresponding E1 Visa program.

 

The crux of the matter is whether or not this is the best way, under current and future conditions, to set up, run, and protect a business in Thailand. A hard question to answer.

 

J22J

 

[StoneSoup]

I do not think it is difficult at all to basically dismiss the worth of having a US Amity Treaty company.

 

Take a look at Thai Private Co. Ltd. - all of them. Now look at just the ones launched by foreigners.

 

Divide that group into three categories:

 

1) Started by non-Americans

2) Started by Americans, but not registered under treaty

3) Started by Americans, registered under treaty

 

If registration under the treaty is a significant benefit, then companies in category three should be running better, or more profitably, or be having better resales value, or better outcomes - or better SOMETHING to justify the additional cost (about 50,000 bhat).

 

I have not seen a benefit.

 

For anyone who is interested, here is weblink listing all 137 companies (lines 5 and 6) who have ever registered under the treaty (Thai language only -'sorry):

 

http://www.thairegistration.com/thai/foreign/foreign_name.phtml

 

"Let the good times roll!"

SS

 

 

[gummigut]

http://bangkokpost.net/130603_Business/13Jun2003_biz67.html

 

It does state the possibility of it being revised, but if it's to conform to WTO it's basically going to be moot (having said that, I'm sure there's loopholes).

 

There are several other mentions of the Treaty's expiration, but it seems that the source is this article and/or nothing new is added to what this article says.

 

<<burp>>

[Guest]

One ?pro? is of course that an Amity registration is legal.

 

It is a legal vehicle for a (US) foreigner to own up to 100% and/or control an entity setting up and operating a business in Thailand.

 

Constructing a Thai company with pref shares etc. and convoluted voting rights created for the sole intent and purpose to circumvent the law and disenfranchise the Thai shareholders in order to give effective control to a foreigner has to be, at the very least, legally risky. You may wish to be satisfied that this construction has been tested in the courts, including the bankruptcy courts, and found to be sound.

 

Further if any local lawyer or if any of the many unregulated, unlicensed, and often unqualified, so called business consultants who seem to proliferate in Bangkok recommended such an approach I would certainly want them to stand behind such a recommendation and fully indemnify the risk, including damages and loss of future profits. Indeed I would require to be named as a coinsured on their professional indemnity insurance specifically for that risk and with a waiver of subrogation rights.

 

It must be the case that to create and start a new business in a foreign country requires substantial risk, time, effort and expense. Why start the venture by creating a legally questionable vehicle when a fully legal alternative is available. In another post the suggestion is made that this could save Baht 50,000. That seems a relatively small premium for an insurance that however else the business may hit problems or be shafted, or heaven forbid fail, it wont be because it started on day one by deliberately flouting and breaching Thai law.

 

I asked a friend why he had gone that route and he said that he ?needed a company quickly and a Thai company was much quicker to set up than an Amity company, the Thai shareholders all work in the lawyers office and will do what they are told and not cause any problems, and anyway that?s what everyone does?,

 

So it might all be part of that often charming ?Thai way?, that blend of tolerance, and corruption, where if you don?t make waves or embarrass anyone, and make the right covert payments, then what you do and how you do it is ?up to you?.

 

[StoneSoup]

I do not recommend to my clients that they register as an Amity Treaty company, nor that they create any convoluted structures. I will arrange eithere if the clients need this artifice to feel good about themselves.

 

What I do recommend is forming a company, and not letting any "block" of cohesive Thais own (collectively) more than 24% of shares. 75% of voting shares are needed to enact most significant decisions.

 

Anecdote: I formed my company with myself owning 43% of shares, two farang friends each owning 3%, my Thai gf owning 30%, two Thai acquaintances owning 10%, and one Thai business associate owning 1%.

 

Four months lter, my Thai gf went nuts (under influence of a new Thai lady friend), and skipped, out, taking all the money in my apartment as she left (too bad for me).

 

A few months later, she shows up with a Thai lady lawyer in tow, from an established law firm. At that point, my Thai company (with 2 million baht paid in capital) had about 750,000 baht in one Thai bank account that she knew about.

 

The Thai lawyer demanded that I buy back my ex-gf's shares for 200,000 baht. I stifled a chuckle, and then asked carefully if I understood correctly - did she mean that her law firm seriously believed that my ex-gf's shares were worth 200,000 baht? She answered that this was correct. I then turned to my ex-gf and suggested that she immediately sell her shares to the law firm for 200,000 baht. I then turned to the lawyer and said tht after the share purchase was complrete, I'd be happy to meet with her boss as a new shareholder of my company. There then followed about one minute of silence, then one minute of whispers in Thai between the two, then the lawyer told me that I must have misunderstood, and I was the one who needed to buy the shares. I then replied - Oh, you want to know what I will pay for the shares? I told her I'd pay 3,000 baht - if the sale took place today - 300 baht the next day, 30 baht the day after that, 3 baht the fourth day - and after that, don't even bother. More blank looks. Then ingave the lawyer a little lecture about liquidity of shares, and the difference between private and publicly traded companies, and then I told them both to get their sorry asses out of my office, and that if her law firm ever wanted to contact me again, her farang boss better do so himself, and he better have his act together or I'd hand him his head.

 

'Never heard from either of them again - ever (ninde months have now passed).

 

The only time control of shares is important is if you sell the company. Unless that is part of the long-term strategy, don't even worry about it. Jus make sure that you, as principal, have full signature authority at the outset, and make sure Thai shareholders do not have enough votes to change directors - and ideally, not enough to block critical actions.

 

The only role for an Amity treaty is if seven Americans really want to start a company, and don't want to have to have Thais stand-in for them. If you are a lone entrepreneur, it makes no sense to scrape up six other Americans. Easier to come up with a gaggle of Thais.

 

"Let the good times roll!"

SS

 

 

[Guest]

SS,

 

You wrote:

 

"What I do recommend is forming a company, and not letting any "block" of cohesive Thais own (collectively) more than 24% of shares . 75% of voting shares are needed to enact most significant decisions.

 

Anecdote: I formed my company with myself owning 43% of shares, two farang friends each owning 3%, my Thai gf owning 30% , two Thai acquaintances owning 10%, and one Thai business associate owning 1%. "

 

Did the anecdote you related have anything to do with your 24% recommendation, in hindsight??

 

I find your advice to be highly useful and accurate in most cases. However in this instance, coupled with Wowzer's logic, I feel more strongly than before that the Amity structure is the way to go.

 

J22J

 

 

[StoneSoup]

J22J -

 

You are correct. I should add that when I initially started my company, its line of business was doing something entirely different than what it is doing now. After some of the appalling mistakes that I made in pursuing my initial business direction, I realinged to address some of the services that I was myself unable to find.

 

Market/competitive research was one of the areas where I saw a vaccuum. This is still the most valuable service that my firm can perform, and it is almost impossible to sell to start-ups. No start-up players think that they need "more" insight into the Thai marketplace. They think they can't afford it. 95% of start-ups I've encountered never put together a formal business plan. This means that - among other critical failures - a start-up candidate has neglected two critical things - formal budget modeling and cash-flow analaysis, and formal assesment of total market size, competitive market share, and competitive strengths and weaknesses.

 

Guess what - these two things (along with LOCATION, for many types of businesses) are what make or break you.

 

I have never, EVER known anyone to benefit from having an Amity Treaty company - except for the possible exception of exploiting the "greater fool" theory in selling such a company to someone else who feels the need for such a company.

 

Basically, Amity Treaty companies are formed by people who can't scrape together a handful of Thais they can trust. If you can't assemble a quorum of Thais that you can trust, THEN DON'T START A COMPANY IN THAILAND. With extremely rare exceptions, going it alone in Thailand with minimal Thais perceiving that they are gaining some advantage by the existence of your business - means that you aren't going far.

 

Without exception, every person I have met who thinks an Amity Treaty company with seven farang shareholders is the way to go is - deep inside- of the opinion that all Thais are scheming, parasitic, n'er-do-wells, and that said farang is "the one" who is going to plop down in their midst, work hard (or shrewedly), and "show these Thai hicks how success is achieved" - without those same Thais feeling a part of the program.

 

Yeah, right. This is the business equivalent of "being the Romeo" who is so good that he alone does what no one else can do - convert a Thai bargirl into a faithful wife or companion.

 

IF YOU EVER NEED THE PROTECTION OF AN AMITY TREATY COMPANY, YOU ARE ALREADY DEAD MEAT.

 

All you are doing is fighting over a corpse.

 

If your form as a majority foreign-owned company, it will cost you an additional 42,000+ to obtain an Alien Business License - probably more like 50,000 (obtaining that license requires at least one trip to Nonthanuri). For a small start-up company, that's the equivalent of sevral months rent, or several months payroll.

 

Whatever. My firm makes more profit processing an Amity Treaty registration than not. I just think its a waste of money, and a false sense of security.

 

Why would anyone want to start a company inside a foreign country by purposefully assembling a team of people who weren't from that country? Is this the way to gain insight, assistance, acceptance, respect into that country?

 

My thoughts. Good luck!

 

The Fighting Fish

Stone Soup

 

 

[Sporty]

StoneSoup,

 

What you say, about the Treaty in todays world I can not disagree with you.

 

Regarding your statement:

 

"I have never, EVER known anyone to benefit from having an Amity Treaty company - except for the possible exception of exploiting the "greater fool" theory in selling such a company to someone else who feels the need for such a company."

 

Well, I can not mention the name, its a friends business, don't think he like it here, I can tell you there is now a 16 plus year old company, doin really well (20+ million baht a year PROFIT, about 50 Thai employees), started under the treaty, as a partnership, by 3 Americans, one is gone now (died), and the other bought out.

 

sporty

[StoneSoup]

Hi Sporty -

 

But - what is the contribution that being an Amity Treaty company made to this success? If he had started a conventional Thai Private Company Limited like every other farang-run business that is not American-owned, would he have done more poorly?

 

I guess no one sees my point- if an Amity Treaty is so good, then Americans who run Amity treaty companies should be significantly more successful, on balance, than all the companies in Thailand run by Americans who don't register for treaty coverage - or all the companies run by Japanese, Chinese, Singaporean, Korean, Swiss, German, French, British, Canadian, Australian, Swedish, etc. etc. businessmen.

 

None of this latter group has treaty "protection" - does that seem to hold them back, in relation to Amity Treaty companies? I have seen no evidence.

 

Registering as an Amity Treaty company does not hurt a company's chance of success (othe than draining 50,000 additional baht out of thestart-up capital), but I don't see how it is important in increasing a company's chances of success.

 

I see it mainly as a crutch for Americans who don't know enough trustworthy/helpful Thais to put together the required seven shareholders. In my mind, this means that (relatively speaking) a lot of people who SHOULD NOT be starting a company here (and who would not, were they not Americans with access to Treaty privileges), do in fact proceed.

 

I don't have time to reserach it for free, but I would guess that Thai Private Company Limited started up under Amity Treaty provisions over the past 10 years have a HIGHER failure rate than comparable businesses launched outside the treaty - because their owners were "naturally selected" by the process to have less supportive participation by Thais.

 

But - good ideas, strong financing, luck, and hard work can overcome adversity. If someone thinks that the Amity Treaty was the one thing that kept them from otherwise failing, then they should speak out and explain themselves.

 

I recounted that I have already been faced with probably the worst consequence (involving a renegade Thai shareholder) that can arise out of normal TPCL situations, and it was just a blip on the radar screen - no major catastrophe. If I had panicked, I might have been victimized. But - all it takes is a clear understanding of what share ownership in a non-liquid market means - it means that your shares are worth whatever someone will give you for them - to realize that Thai ownership of shares is almost meaningless.

 

Shareholders are only in position to receive reimbursement for their shares as dividend payouts, or as result of liquidation, or if shares are sold. They cannot walk in and seize"x" percentage of current assets, just because they own "x" percentage of shares. That is the illusory view (misperception) that most treaty defenders seem to be protecting themselves from.

 

Cheers!

StoneSoup

[Guest]

SS,

 

You wrote,

 

"Without exception, every person I have met who thinks an Amity Treaty company with seven farang shareholders is the way to go is - deep inside- of the opinion that all Thais are scheming, parasitic, n'er-do-wells, and that said farang is "the one" who is going to plop down in their midst, work hard (or shrewedly), and "show these Thai hicks how success is achieved" - without those same Thais feeling a part of the program."

 

Although your points are well made and I agree with your general premise, I certaintly wouldn't put myself in the "know-it-all and don't trust Thais" category. If and when I decide to do a Thai startup it will definitely be preceeded by a business plan, market analysis and comprehensive advice on corporate structure. I would certainly want to benefit from your company's services at that time.

 

J22J