Subscribe in a reader

Monday 13 November 2006

Thailand, and Koh Samui in particular, has been rocked by controversial events over the last few months. It started with the political feud between the Prime Minister at the time Taksin Shinawat and the Democrat Party and claims of corruption and nepotism. This led to claims of land encroachment by certain Thai Rak Thai politicians or their supporters on land in Koh Samui and that led to allegations of money laundering, extortion, illegal assembly and other crimes against certain individuals - the vast majority of whom were later totally exonerated - and a group known as the Bandidos - a motor cycle gang of international repute similar to, but rivalling the Hell's Angels.

The troubles for PM Taksin were exacerbated by the sale by his family of the Telecommunication giant ShinCorp to Singapore investor for several billion Baht and the sale was declared to be free of tax. This angered many people who started to look at the structure by which the Singaporeans had acquired Shin Corp as foreign control of companies in Thailand is not allowed and in particular with regard to a telecommunication company and the potential threat to national security. It was found that the shareholding through Nominee companies was 96% when at most it should have been 49%.

This then brought into the open the whole structure of foreign ownership in Thailand as the concept of using Nominees has been well established for over thirty years and whilst perhaps against the letter of the law, was the accepted practice for pretty well all international companies investing in Thailand. Why invest billions of Baht without having control of your investment? This applied to huge companies such as Lotus-Tesco and many more.

This had its inevitable knock on effect to the real estate market in that foreigners have been buying real estate in Thailand through companies with Nominees for years. Strictly under Thai Law, foreigners cannot own land (as opposed to buildings which they can own)in Thailand in their own name. So, a Thai company was formed with the standard structure and a 51% majority Thai Shareholding, although the 51% was designated as Class B shares with reduced voting rights. Suddenly the implication was that everyone who has used this route to ownership was in danger of losing their property. Of course the panic merchants had a field day. The reality is that even if the company is shown to be owning land illegally due to the share structure, Thai Law has a specific remedy for this and gave 180 days to regularise the situation. I have heard of no one anywhere in Thailand who has been required to do this.

Then of course we had the Coup. Welcomed by many, peacefully carried out and they have kept their promise to install an interim government with new elections in twelve months.

The interim government has been announced although it is clear that the Military are still holding the reigns. Edicts seem to come out everyday some of which make you wonder what is happening. We will soon be seeing a complete ban on advertising alcohol in all media – supposedly to protect the younger Thai population. The fact that most of the drink problems emanate from the illegally distilled local liquor Lao Khao which is never advertised seems to been ignored. Then there was the proposal to ban anyone under 25 from drinking – that received very short shrift when it reached the Cabinet and was immediately sent back to be redrafted but it has re-appeared with a new age limit of 20.

Discussions continue re foreign investment in Thailand and the government seems to have last taken on board that the present laws if enforced rigidly will not work and will only deter any foreign investment here. We have to wait and see what solutions they come up with.

Our current advice to anyone wishing to purchase property here is that you can still go down the Thai Company route, but the Thai shareholders must be real, or take a 30 year lease with options to convert to Freehold should that possibility occur in the future and with options to renew. 30 years is the maximum term for which a lease can be registered in Thailand and options are purely contractual. I will go into that in a later post.

No comments: