Doing Business in Thailand

In this post we will discuss the matter of Thai companies that purchase land and the disclosure requirement applicable to their Thai shareholders. Firstly we will review the legal criteria a Thai company must fulfill to own land.

Pursuant to the Land Act, a Thai company must fulfill the two following criteria to buy and own land freehold

Now, while a Thai company that fulfills those two criteria may in theory purchase and own land freehold without any restrictions the Ministry of Interior and the Land Department have issued a series of guidelines and circulars dated of 23 May 2006, 21 July 2006 and July 2008 which purpose is to impose a disclosure requirement upon the Thai shareholders of companies purchasing land when there are reasonable grounds to suspect the Thai Shareholders of the company are nominees shareholding acting on behalf of a foreign investor.

Pursuant to this disclosure requirement, the Thai shareholders of a Thai company that purchases land will have, if certain circumstances are met, prior to the execution of the land transfer at the Land Department to disclose the source of their investment.

What are the Criteria that Trigger the Application of the Disclosure Requirement?

In the two tables below we will review the criteria that the land department officer must consider to determine whether the Thai shareholders of a Thai company that purchase land need to disclose the source of their investment.

In the first table are listed the criteria that are applicable to a Thai company that purchase land for the purpose of real estate business.

In the second criteria are the criteria applicable, to a Thai company that purchases land for purpose other than real estate business.

What are the Evidence Requirements?

The evidence requirements vary depending whether the Thai shareholder is an individual or a company but in both cases the Thai shareholders must provide evidence to prove the monetary sources used to purchase the shares of the company purchasing the land

Individual shareholders shall be requested to provide the following evidence:

• Evidence of employment, such as salary and salary affirmation, certificate of employment, period of employment; and
• Other credible evidence of funds, such as savings accounts, money received from previous land sales, inheritance, and loans along with documentary evidence, such as bank saving books or land sale agreements, inheritance certificates, or loan agreements.

Corporate shareholders shall be requested to provide evidences as follows:

• The company balance sheet, or
• The loan agreement and minutes of meetings accepting the loan when the source of the fund used by the corporate shareholder is a loan.

In addition, the Thai individual shareholders, or the Director of the corporate shareholder will have to sign a form certifying the truth of the information provided to the Land Department about the source of their investment.

The form the Thai individual shareholders or the Director of the corporate shareholder must sign will include declarations that the shareholder:

1. is not holding the shares as a nominee for a foreigner or foreign juristic person,
2. is aware that holding land on behalf of a foreigner or foreign juristic person is an illegal practice in violation of Section 113 of the Land Code,
3. is aware that charges of providing any false information to any official according to Section 137 of the Penal Code may apply and
4. is aware that the General Director of the Land Department has the power to dispose the land in the event of violation of Section 113 of the Land Code. Note that the timeframe granted to companies that own land on behalf of foreign investors to dispose of the land is no less than 180 days and no more than one year.

Does the Disclosure Requirement also Applies to the Company that Purchase Land?

If a company purchases land at a price that is higher than its registered capital and do so without applying for a mortgage, the purchasing company will also be required to provide evidence about the source of money used to pay for the land.

For example, if the company that purchases land received a loan, then it needs to provide copy of the loan agreement and the minutes of meeting of the company approving the loan. If the company used a loan from a foreign person, then evidence such as transfer receipt(s) or withdrawal(s) from a savings account must be provided for the source of money. If the loan comes from a Thai person, or Thai Juristic Person, evidence such as the company balance sheet, withdrawal receipt(s) from savings accounts and minutes of the meeting of the debtor and creditor must be provided for the source of money.

Note: This post is an excerpt of Rene Philippe Dubout next book: “How to Safely Buy Real Estate In Thailand” to be published in January 2010

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact.

Originally posted 2009-10-22 04:04:21.

Related posts:

1. Business Registration:Thai Shareholders Disclosure Requirement
2. Corporate: Disclosure requirement of Thai shareholders
3. Buying Land: The Thai spouse right to own land freehold
4. Closing Accounts and Summon of the Ordinary Shareholders Meeting
5. Thai Private Limited Company: Shareholders Voting Rights
6. Buying Property: Two issues to consider before buying a land
7. Buying Land: The Witch Hunt (4) The Way Out
8. Working in Thailand: The four Thai employees requirement