Leasehold properties still secure but nominee issue persists in Land Code
Foreigners can safely invest in leasehold properties and are unlikely to run afoul of the Foreign Business Act (FBA) in its current state or even if the changes planned by the current government are implemented, according to Marcus Collins, a partner with the Bangkok law firm McEvily & Collins.
The FBA does contain a number of business activities that have a direct impact on the property sector, chiefly property development and rental of property. Rental is going to be in Annex 3 which is a services provision and land development is in Annex 1.
An important change being considered is that the majority of directors need to be Thai but Mr Collins explained that the FBA in its current form does not have such a provision.
So you could argue that if it doesn't deal with that, why make it tougher than it is? Why make it tougher than the original intent of the purpose of this law, a law ... that was put in place by a military dictator in the 1970s?
Legal interpretations still hazy, says Mr Collins
The original law, which is the FBA as it stands today, says a company is Thai if the majority of the shares are held by Thai shareholders, which is minimum 50% plus 1 share, for the purpose of engaging in activities in Annexes 1, 2 and 3. This is not the same as what the Land Code says, in which the split has to be 49-51%.
It doesn't say they have to have the majority of the votes in a shareholders' meeting, nor does it say you have to have majority of Thai directors in a company.
However, Mr Collins explained that if the changes are implemented it would allow existing companies that have different shareholding ratios and fall under Annex 3, which includes rentals, to be grandfathered. So any company that now has a leasehold development with different rights for different types of shares would be okay because it wouldn't have to change that.
However, the nominee issue persists because a company would still have to have Thai shareholders who are not considered nominees.
That issue doesn't go away ... either in the Land Code or the FBA. That issue has not been addressed properly in any of the discussions that we have seen in the past year or so, [under] the military government that has been in place or even previous to that when the whole debate started about Thaksin Shinawatra and Shin Corporation.
So it's funny, it's been a year now and nobody has yet come out from the government with a statement. 'Okay, we believe the nominee is the following person, we consider the following structures to be nominee.'
Mr Collins added that this was an issue that must be resolved even if the authorities abandon FBA amendments.
If we focus on the rumour for a moment, some Democrat Party members have come out with statements ... that first they felt it was wholly inappropriate that a temporary military government would start messing around with laws that have such an enormous impact on the Thai economy. So their first statement was. 'Apart from all this discussion about amending the FBA, we feel that actually this current government shouldn't really start messing with this law.'
If the Democrat Party is part of the next government, it is possible that it could opt to deal with sensitive business issues by means of specific laws already on the books, for banking, insurance or other sectors. That is the way they should do it because it would be a much more targeted approach, says Mr Collins.
However the nominee issue lingers in the Land Code, which has not been amended for many years.
Mr Collins pointed out that over the years the Interior Ministry has instructed Land Department offices how to deal with land acquisitions by companies that are partially owned or run through a board of directors by foreigners.