Guest Posted March 7, 2002 Report Share Posted March 7, 2002 I plan to set up a trading company in Bangkok for exporting goods. I am informed that the company has to be 51% owned by a Thai National. I understand also that a seperate legal document could be signed to get the other 49% under my name. Any advise on a reliable lawyer who can help me process the registration and prepare the neccessary legal documents I require? Link to comment Share on other sites More sharing options...
Guest Posted March 7, 2002 Report Share Posted March 7, 2002 You did not state what nationality you are.. if you are an American, you have an advantage as you can legally own 100% of your business in Thailand, while other foreign enttities can do so only under more limited circumstances. The other foreign entities sometimes use nominees as shareholders which is a not -uncomon, although illegal method practiced by foreigners who value independent control. According to the Alien Business Law, it is illegal to have nominee shareholders in a company. Clause 29 states that.. Any person of Thai nationality holding shares in a partnership which is a juristic person or in a limited company as an agent for an alien so that the juristic person can engage in a business in violation of the National Executive Council, or an alien, who causes a Thai to act in such a way, shal be liable to a fine up to 500 thousand baht: and the Court shall order the close of the business. That person would probably also be charged under the Foreign Business Act section 35 Penalty here is punished with an imprisonment of not exceeding three years or an fine from 100,000 baht to 1,000,000 baht or both and the Court shall order the dissolution of such joint business or business operation. The Thai persons penalty for doing the nominee is also up to three years prison and a million baht fine under section 36 of the Foreign Business Act. The fact of the matter is there are probably more than a few foreigners who have started up small to medium-sized Thai limited companies using nominee Thai shareholders.The Thai friends( shareholders) simply sign a blank share transfer sheet. In this matter, the foreign shareholders maintain illegal control over the Thai shareholders. More than the threat of prosecution, lawyers say that the problem with the nominee shareholder route is that the Thai shareholders can turn the tables on you. Their have been cases where the Thai nominee have used the threat of three years in prison to gain control of the company, and have kicked the foreigner out.Starting up with nominee shares is a very very bad business practice. It's much better to do it in either two different ways.. Share Voting Structure...Thais legally own 51% of the shares in a private limited company, while foreigners own the remaining 49%. However the articles of Association, the by-laws which dictate how the company operates, can be drafted in a way that gives the minority shareholders, the foreigners, the ability to elect a majority of the board of directors and so block board of director resolutions that any Thai director may wish to pass. This is possible because the Alien Business Law does not dictate that members of the board of directors have to be Thai. In fact, all of the directors may be foreign. Preference Share Structure: Two sets of shares are made. The foreigners own 49% and The Thais own 51%, but the type of shares they possess would differ. The Articles of Association would then be drafted so that the voting rights of the shareholder would differ depending on what type of shares he owns. Ordinary shares would have one vote per share, whereas preference shares would have one vote per 10 shares. The foreign shareholders have 49 votes and the Thais have 5.1 votes. This gives the foreign businessman over 90% of the votes, enough to pass any majior resolution unilaterally. Both ways are legal and IMHO are much better than the nominee route. Link to comment Share on other sites More sharing options...
Guest Posted March 7, 2002 Report Share Posted March 7, 2002 I'm about 60% through the process of registering a Thai private company limited. I am using a farang-owned firm on Sukhumvit Soi 38 for the process. See: www.visathai.com for the web site of that firm. I'm an American, but I did not pursue the 100% American ownership route. It appeared to me to be a longer and more costly process, with few real advantages. If you are in BKK and want to hear about some lessons learned, I will be playing DJ at The Living Room tonight (Thursday March 7th) from about 5:00 pm until maybe 8:30 pm. Or contact me at steve@indo-siam.com . "Let the good times roll!" B-Fly BKK Link to comment Share on other sites More sharing options...
Guest Posted March 8, 2002 Report Share Posted March 8, 2002 Thanks guys for your the info. BTW I'm Malaysian. Showtime your alternatives sounds better that the nominee route. If it was just me and the Thai partner and no other shareholders will both the alternative work the same way? Sorry peesooahbkk I won't in BKK until April. Maybe I could email u to arrange to met for drink and a chat then. Cheers Link to comment Share on other sites More sharing options...
Pom Michael Posted March 8, 2002 Report Share Posted March 8, 2002 Another issue that you need to get legal advice on quickly is taxation. As a trading company, you will be subject to VAT along with company taxes. This can be a major tax burden on your business, especially if you are sourcing items on the local market and don't get a tax invoice from them. Then, when you export them - you will be liable for the complete VAT on the items along with your tax liability for the "profit" to be the full selling price. The tax people will come very quickly to your place after you register and start trading. I would recommend that you get professional advice before you go any further. Sorry to be so negative, but I'm speaking from experience. Link to comment Share on other sites More sharing options...
Guest Posted March 8, 2002 Report Share Posted March 8, 2002 Pom Michael really important point you raised there on taxes. I am definitely buying to export so I will certainly need seek professional advise to get around this problem. Cheers! Link to comment Share on other sites More sharing options...
Guest Posted March 8, 2002 Report Share Posted March 8, 2002 In order to have a private Limited Liability Corporation, you must have 7 shareholders. You could however have five shareholders have the minimum of 1 share each. Your Thai partner and you could have the other 99,995 shares. Tax... be aware for Americans, that President Clinton and Thailand in 1998 did passed the double taxation treaty between the USA and Thailand. At least now, you won't be charged double tax on your profits. You just have to pay Thailand. Not sure on the double tax for Malaysia... In ref to the Living room DJ...Amity Treaty process does cost around 60,000 baht to 240,000 baht through an attorney. However its pretty easy to do yourself at The Commercial Service, American Embassy, Dietham Tower A, Suite 304, 93/1 Wireless Road. If you are clearly American then it's actually no problem. The Commercial Service will be happy to help you. By the way, at this location( US Commercial Service) they have an excellent import export library that can be used free of charge. The best source by far in Thailand along with the BOI office. Link to comment Share on other sites More sharing options...
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