Define Thai Land Holding Companies

A Thai land holding company is defined as a majority Thai owned limited company that controls real estate property on behalf of foreigners who will own up to 49% of the shares in such company. Normally the foreigner will hold control and management in such company. Thai law generally permits the purchase of land through a legitimate partly foreign owned Thai company as long as the maximum foreign shareholding does not exceed 49% of the shares in the company.

Foreigners are allowed to control a majority Thai owned (Thai) land company. The foreigners rights as a minority shareholder are protected through the issue of preference shares and weighted voting rights. The voting rights are written into the articles of association of the company. Juristic persons (e.g. limited companies) incorporated under Thai law which are deemed 'foreign' entities are not allowed to own land.

Thai law: Foreigner definition of a Thai limited company:

1. Section 96 of the Land Code Act: Limited companies with more than forty-nine per cent of their capital owned by foreigners or more than half of whose shareholders are foreigners
2. Section 4 Foreign Business Act: Having half or more of the juristic person's capital shares held by foreigners or a juristic person having foreigners investing with a value of half or more of the total capital of the juristic parson
3. Business Registration Rules and Land Office Guidelines

Foreigners are restricted from using nominee or Thai proxy shareholders (under 1, 2 and 3 above). The company can also not be incorporated as a land holding or special purpose company merely to hold property on behalf of the foreigner (under the Land Code Act and Civil and Commercial Code of Thailand). 

The company must have a business purpose, money should pass through the company so the company will be actively trading and will not be liable for a Registrar’s application to strike off the register for being inactive. The foreigner will be a director of a Thai Limited company and obliged to fulfill its duty as a director. 

Companies controlled by foreigners in terms of voting rights and/or majority foreign management (directors) could under possible! future law be classified as foreign, even if direct foreign shareholdings are in a minority (e.g. foreigner definition under FBA amendments).

A property purchase through a Thai limited company is a legally weak investment structure because it is insecure how the government will deal with these companies and form of foreign land ownership in the long term, but it's the only vehicle available for foreigners under current laws to control land in Thailand. This structures would be less risky if the foreigner has viable Thai shareholders who he can trust and who can comply with the Business Registration Rules and Land Office Guidelines (i.e. rules aimed at preventing the use of Thai nominee shareholders).

• real estate start