Set up a Ltd Co.

August 2006. Old, existing rules were actually implemented and and Thai shareholders in Thai/Foreign companies were required to be able to provide financial proof that they can afford their share of the company when the company is registered. As most nominees were office staff from the law firm, there's no way the majority of these individuals can show hundreds of thousands of baht in their bank accounts. The end result is that whilst it is still possible to set up companies this way, it requires that you know some Thai individuals with large bank balances in order to do it.

Therefore, many law firms are now telling clients that the limited company route isn't the way to go unless the Thai partners/shareholders are 'real people' i.e. not nominees. The problem the majority of people have is that they don't know any trustworthy, wealthy Thais who are willing to assist them. But there have always been other options, but lawyers have tended to ignore them as the profit margins aren't as high as those on setting up companies and providing accounting services etc for the lifetime of the company. Now, all reputable lawyers will advise leasing unless you happen to have close Thai friends or business partners you can trust.

So, you want to own your own piece of Koh Chang. However, you don't want to own a depreciating asset - so a short term lease is out and either you don't have a Thai spouse / significant other, or you'd prefer not to put all your eggs into one basket and have the land in their name. Therefore, you decide to go the company route.

Firstly, regardless of what you're told - setting up a company in order for a foreigner specifically to own land isn't legal according to the letter of the law. But you are in Thailand and so there are a great number of laws which have never been enforced for whatever reason. The laws concerning foreigners forming companies which are then just used to buy land fall into this category. (Note: This doesn't mean that in some point in the future these laws wont be applied. But as so many people now own property through a Thai company any serious measures are highly unlikely.)

Apparently, the two main areas of concern, other than the main 'foreigners simply setting up companies to circumvent land ownership laws' worry, are firstly the use of nominee shareholders and secondly the fact that the company could be declared 'alien' despite having a majority Thai shareholding.

The Foreign Business Act mentions the use of nominee shareholders in any company, if they have been used to circumvent the FBA (for example in allowing a foreigner to set up a company in order to acquire land) all shareholders could face a fine of 100,000 - 1 million baht and imprisonment of up to 3 years. In addition the 'business' (company) shall be ordered to close down the business or be ordered to terminate the illegal shareholding.

The other problem that is often skipped over is the fact that the company set up by the foreigner to purchase land can be deemed 'alien' (and therefore not allowed to own land), even though the capital shares are held by a majority of Thai nationals. There are a several regulations related to how a juristic person is deemed to be 'alien' in Thailand, but what it comes down to is if the majority of the value of the capital (meaning share capital and assets of the company) was invested by the foreigner the company could be deemed to be foreign and therefore, under present law, not allowed to own land.

It's these regulations, which have been gathered from postings on expat discussion forums - as I'm not a legal eagle, that the Land Office are now enforcing. However, as I mention on the Buying Land page, there is a simple, legal workaround which appears to be the preferred option by developers & lawyers. As I mentioned before, so many people have bought property in this manner and there isn't a law firm, Thai or foreign-run, in the country that won't help you set up a company in order to buy land - so either they totally lack ethics or feel that the element of risk is negligible and there are legal loopholes that can be exploited without danger.

So how to go about setting up your company . . . the three things that you need are:

1) A name for your company. This can be anything you like - English or Thai - , think of three possible names just in case your first choice is already taken. Feel free to be creative as there's no law about having a laugh with your company name - just remember you may have to use it on letter headed paper one day.

2) Money. Basic company formation costs around 25,000 baht for a company with 1 million baht registered capital. A good lawyer will advise you that the registered capital of the company should be similar to the cost of the property being purchased. The simple reason is to avoid anyone in the Tax Dept asking . . . "How can a new company with only 1 milion baht in registered capital be able to buy land worth 10 million baht?" Add on around 10,000 baht per million baht capital required. An inexperienced lawyer won't tell you this, meaning that you will save money initially when setting up the company but may have problems later on.

3) A good lawyer. I'd always go for a well known, experienced Bangkok or Pattaya-based lawyer for two obvious reasons:

And that's it, you don't even have to be in Thailand in order to set the company up if you use the right law firm. It can all be done whilst you are sitting at home, simply by having the lawyer courier important documents that need to be signed to you. You'll find that there are about 30 pieces of paper that need to be signed. Total set-up time will be 3-4 weeks.

Then, when you come to Thailand in order to buy your property, you are in a position to act immediately. Being prepared will show any sellers that you are serious about buying as there's nothing worse that someone who views a plot of land says then want to buy it and then say they can't actually do so for a couple of months as they aren't yet in a position to act. (The additional discount you could expect from most sellers for being able to complete a sale quickly would more than pay for the set up costs for the company.)