With regards to the control of the foreigner in the Thai limited company, Thai law allows the foreign shareholder (holding not more than 49% of the shares) to be issued with a different class of shares, as issued to the Thai shareholders. Effective control over the Thai majority shareholders is secured through Thai corporate law including granting the foreign shareholder with “super majority” votes, usually 10:1 per share, any meeting of the shareholders to pass resolution in the company, requires the presence of the foreign shareholders so as to constitute a quorum, and only the foreign shareholders can appoint directors of the company.
Under both the Foreign Business Act and the Land Code, there is no specific prohibition on foreign control (voting and management) of a Thai majority owned company as mentioned above.
Improper company structures such as those that use trust, agency, nominee, agreements etc. may be open to challenge under the anti-nominee provisions of the law, as they would represent clear attempts to circumnavigate the law. It must be pointed out that anti-nominee provisions are found in the Foreign Business Act, 1999 and not in any of the land legislation, the principal one being the Land Code, 1954. Under the FBA, foreigners are prohibited from holding 50 per cent or more of the shares of a Thai company operating a restricted business.
Please note that since May 2006, there have been some changes in the practice of registering the freehold ownership in land into Thai limited companies. These changes are not changes in the Thai law. Proper legal advice should be sought from professionals. Upon request, we are able to provide more information.
An interesting point to note is that, in the worst scenario where an alien is found to have acquired freehold land in his/her own name, the Land Code provides that the alien must dispose of the said land within a period of time not less than 180 days. There are no provisions for seizure of the said land. Supreme Court decisions have even held that in such cases, the proceeds of the disposal belong to the alien. For more information about sale and purchase of property through shares in a Thai limited company, please contact us.