Property Ownership Through Nominee Owner In Thailand
Thai Companies in Thailand with foreign participation and control are frequently set up just like majority of Thai owned companies for it to be recognized as Thai companies and furthermore not to be reprimanded by foreign ownership or foreign business restrictions.
Through using Thai nominee shareholders or proxies in the company, foreigners outwit foreign ownership and business restrictions and manage for prohibited and restricted foreign businesses in Thailand.
Thai Nominee Shareholders in a Foreign-Owned Company in Thailand
The employment of Thai nominee shareholders by foreigners to avoid Foreign Business Act (FBA) is under the law, illegal and could lead to criminal charges if proven. A minority foreign owned Thai company using Thai nominee shareholders is a foreign company.
However, there is still a vague definition of what exactly a Thai nominee shareholder is. For as long as the Thai government does not put into practice a stricter enforcement of existing anti-nominee laws or on other grounds examines a company structure, these foreign controlled Thai companies will continue operating for foreigners prohibited or restricted businesses in Thailand.
Nominee owner refers to a circumstance where in a Thai national buys a land on behalf of a foreigner or performs as the agent for the foreigner in the land purchase. It has been a common practice in Thailand that foreigners acquire land and register ownership in a Thai national’s name and in return is given a lease, superficies or usufruct.
Foreigners do the registration of ownership either through a loan agreement and sometimes a mortgage registration. Under the Thai law, this structure is legal and duly recognized by law as long as the Thai national is not restricted in employing his or her outright ownership rights in the land which in fundamental nature relates to manage the land such as the freedom to encumber, trade and transfer the land. If such rights are restricted and lies with the foreigner it could be assumed that the Thai national obtained the land under Section 96 of the Thailand Land Code Act “as the owner in place of a foreigner” or acquired land on behalf of a foreigner as his representative. Under this law, both the foreigner and the Thai national are liable for fines and may even be punished with imprisonment.
Section 96 states that “When it appears that any person (including a juristic person) has acquired land as the owner in place of an alien or juristic person under the provisions of Section 97 and 98, the Director-General shall have the authority to dispose of such land and the provisions of Section 94 shall apply mutatis mutandis.”
Section 113 of the same Code states that “Any person who acquires land as an agent of an alien or juristic person under the provisions of Section 97 or 98 shall be punished with a fine not exceeding twenty thousand baht or an imprisonment not exceeding two years, or both.”
Under present law and regulations, the suggestion for a nominee shareholder lies principally in the source of the capital investment and the financial credibility of the Thai national shareholders when forming the Thai company. This also applies when transferring the land to a company often at the prudence of the officials involved.
The government makes it more complicated to form a company for foreigners nowadays.
Property Holding Companies Legal Issues
On the other hand, property holding companies have a whole set of different legal problems under Thai law. An arrangement which is sometimes being practiced is that a foreigner advances money to Thai national to purchase land, and in consideration for the financial loan the Thai national leases the land back to the foreigner under thirty (30) year land lease agreement whereby rent is set-off against payment of interest on the loan.
If, by instance, there is reason to believe that a Thai national is buying land on behalf of an alien the Land Department Office must interrogate the parties (the foreigner and the Thai national) and could refuse transfer of land to the Thai national.
In connection to this, if a nominee structure is being set up, transferring land to the Thai national and registering rights for the benefit of a foreigner (a real estate lease or usufruct) is commonly not done on the same day.
Section 74 states that “.....if there is reason to believe the recording of such rights and legal acts is in evasion of the law or there is reason to believe the purchaser is purchasing on behalf of an alien, instructions shall be asked of the Minister whose word shall be final.”