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Wednesday, 24 January 2007

Koh Samui and Thailand - What now?

From a Real Estate point of view we have seen increasing interest since Christmas with more enquiries of a serious nature and sales being agreed. I am a little surprised that many lawyers seem to be still promoting the acquisition of real estate through the Thai company route and it does appear to be correct that the Land Office are continuing to register land of less than 1 Rai to companies with foreign shareholders. I can only assume that they are looking at the new FBA which it is stated will give companies two years to rectify any irregularities in the belief that a newly elected government will correct the present unsatisfactory situation. The nominee structure with its combination or Ordinary and Preference Shares was for many years the accepted way for foreigners to own land and it was a typical Thai pragmatic compromise which allowed this despite the strict conflict with Thai Law. The present government, interim as it may be, have made it very clear that businesses in Thailand must be majority Thai owned and the Thai shareholders must have majority voting rights. Foreigners may not own or control businesses in Thailand. I think it is widely accepted that this whole situation was brought about as a consequence of the deal between the ousted Prime Minister Taksin Shinawatra and the Singapore government for the sale of his family business Shin Corp. Apart from the tax free nature of the sale which created a lot of bad feeling the issue it brought to the fore was the control of a major Thai company (and a sensitive one being in telecommunications) by a foreign entity. Further investigations into his business affairs and those of his family really opened a huge bag of worms which extended to land deals and which the opposition seized upon with glee and culminated in the Coup last September.

Where does this leave us with regard to real estate? The first thing is not to panic. Nothing stays the same for long here and much fear of what might happen is built on ill founded rumour. We have had meetings with certain people recently and even within the present system there are fairly highly connected people who recognise the dilemma and who are trying to come up with a solution. For the time being my own recommendation is that land should be acquired on a Registered Lease for 30 years with two well drafted options, firstly to acquire the land should the law change and secondly to extend the lease for a further 30 years. The house on the land can be owned separately in your own name. There is also talk about extending the period for which a lease can be registered and some rumours state 90 years and some 60 years. As usual we must wait for the facts and assume nothing. I consider it highly unlikely that Thailand will relax its policy on foreign ownership of land but I do think they will come up with a solution that makes investment here acceptable again.

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