Kentucky Real Estate Business

Posts Tagged ‘companies’

Can foreigners still own land or a condominium unit beyond the foreign ownership quota with a Thai limited company in Thailand? In new regulations issued by the Thai government (starting in May 2006) this circumvention of the law by foreigners is no longer ignored by the Thai government.

Thai law permits the purchase of land or condominium by a partly foreign owned Thai company so long as the maximum foreign shareholding does not exceed 49%. Foreigners are under Thai law as a minority shareholder allowed to control a Thai company that owns immovable property and therefore you could argue that foreigners can have a form of freehold ownership or control over property that would normally be restricted for foreign ownership (land or a condominium unit beyond the foreign ownership quota).

Even though property ownership by a partly foreign owned Thai company is a such not illegal under Thai law the Thai government is restricting and discouraging the misuse by foreigners of Thai companies to circumvent property ownership restrictions in Thailand. The Thai government has issued guidelines and regulation that must be applied by the local land offices when they are dealing with a partly foreign owned company.

Before the land office guidelines issued by the Land Department and Ministry of Interior starting in May 2006 it has been common practice for foreigners to own property through Thai limited companies. Currently this is much less common and foreigners who wish to form a company for property ownership will generally have to circumvent the land office regulations and have the shares in the company only registered in their name after the property is registered to the ‘holding’ company (this to prevent investigations into the Thai company and shareholders by the Land Department when registering the property). Under the current land office guidelines, when a partly foreign owned company is registering property (land), the Thai shareholders in the company must be investigated by the land office official before registration and transfer to the company is allowed (i.e. is it a real company or set up to circumvent the law and are the Thai shareholders in the company real shareholders or acting as nominees on behalf of a foreigner).

Existing partly foreign owned (up to 49%) Thai property holding companies are generally ignored by the Thai government but the main drawbacks the foreigner must be aware of are:

1. The purpose of a company may not be to circumvent foreign property ownership restrictions in Thailand. This would be an illegal purpose, making the whole legal set up and registration into the company’s name void under the Civil and Commercial Code and illegal under the Land Code Act. The company must have a business purpose and be in operation as a normal company and file yearly balance sheets and correct accounting (i.e. the company can under Thai law not be a ‘special purpose company’ or ‘land holding company’ for the foreigner)

2. Foreigners are not allowed to use Thai nominee shareholders in the company. According to the current guidelines ‘real shareholders’ are roughly defined as Thais with sufficient income and believable financial history and status, have an employment history and they must be able to proof this at the Land Department (investigation into the company and Thai shareholders only takes place at the land office when registering the property or transferring the property).

3. Whenever registering legal acts (e.g. selling the immovable property) at the Land Department the land office official must investigate the Thai shareholders when it appears to be a partly foreign owned company, even if the foreigner is removed from the updated shareholder list but appears on the Memorandum of association this investigation is under the latest regulations required.

Foreigners who decide to go the company route with additional property ownership in mind (land, land and house or condominium) should be advised by a Thai lawyer with experiences in business and property law. Too often foreigners who set up companies to own property are not properly advised and end up with problems at the Land Department when registering the property because of mistakes made by an inexperienced lawyer.

For more information visit our website www.thailandlawonline.com or email us for more information at info(at)thailandlawonline.com

UK Land Investment Group (UKLI) has issued a warning on its website amid growing concerns that there are a number of scam companies / businesses operating in the land investment market.

‘It has come to our attention that there are number of businesses that are advertising plots of land for less than £10,000 with promises or guarantees of obtaining planning permission within a couple of years – this offer sounds too good to be true because frankly, it is.’ Commented Brian Smith, Director of Strategic Land Buying at UK Land Investments Group.

‘The only way any company could deliver or guarantees you on such a promise would be if the land had already been re-zoned for residential development or had been granted outline planning permission already – if this was the case then a typical plot of land in the South East with planning consent would be worth more than £100,000.

The plots of land being offered for £10,000 or less with a promise of planning consent in a couple of years is clearly unrealistic – companies offer land at this price because typically it is cheap land without any real planning prospects.’

As a responsible business in land investment market we are very concerned at the behaviour of the so called businesses because they actually intent on misleading customers to part with their hard-earned cash and we would like to bring in the kind notice of anyone who is interested in land to carry out a comprehensive due diligence before he/she decide on whether to invest. Schemes such as this are highly speculative and should be viewed with caution. In general any financial promotion that claims extraordinary financial gains in the past or promises them in the future should also be viewed in the same light. Here are few checks which one must do before investing in land scheme:

Smith concluded, ‘we know from our own team of expert land buyers and planners that buying land can be an excellent, medium term investment with returns of up to 400% on land that is re-zoned for residential development – but we urge anyone looking at other businesses and considering land investment opportunities to be wary of any promises regarding planning permission.’