Detail sought on sources of foreign funds
Source: Bangkokpost - 1 August 2006
Rules tightened
PHUSADEE ARUNMAS
New business registration rules will require all new companies with foreign shareholdings of more than 40% to declare their sources of funds, according to the Commerce Ministry. The new policy, which will take effect on Aug 15, is aimed at guarding against the problems of nominee shareholders and increasing transparency in the corporate registration process.
Orajit Singkalavanich, the director-general of the ministry's Business Development Department, said the rule would also apply to new companies that are controlled by foreign entities, even if their direct shareholdings are less than 40%.
Shareholders must submit evidence of financing used to hold shares, including bank statements and other documents.
Authorities have taken a stricter line on the practice of nominee shareholders following the takeover of Shin Corporation by Singapore 's Temasek Holdings earlier this year. Temasek effectively has full control of Shin through the use of nominee companies, such as Kularb Kaew, despite the fact that Thai law limits foreign ownership at 49%.
Sources at the Business Development Department said a preliminary study found that Kularb Kaew was a proxy of Temasek, and did not qualify as a Thai company. The investigation is expected to be finalised this month.
A recent land scandal on Koh Samui has also raised public questions over the use of nominee shareholders by foreigners to bypass property ownership limits.
Ms Orajit said the department hoped the new rules would discourage the use of nominees by requiring Thai shareholders to prove that they are not acting as simple nominees on behalf of foreign buyers and have the financial means to actually hold shares.
"The department will examine all of those documents before giving approval," she said. "We have learned that Thais have acted as nominees for foreign investors to avoid compliance with the Foreign Business Law, which limited foreign stakes at 49%. Tighter requirements [for proving] one's financial status will help us sort out this problem."
Companies violating the rules would face dissolution. Complicit shareholders also could face fines of up to one million baht and/or jail terms of up to three years.
In the future, the Business Development Department plans to examine existing registered companies with foreign shareholders to determine whether they breach the new rules or not.
Ms Orajit admitted that mistakes had been made in the past, in part due to department policies aimed at facilitating the establishment of new companies.
In any case, she said the new procedures, while requiring more documentation for new registrations, would not necessarily result in longer waiting periods for approvals.
The department also wants to amend local laws to revise the definition of foreign businesses in order to cut down on existing loopholes.
Initial company registration rules
Source: Department of business registration rules
Pursuant to the Order of the Business Registration Office No. 1/2538 Regulations for the Partnership and Company Registration B.E.2538, dated on March 13, 1995 (BE 2538), stipulates that the person, who desires to register a partnership and company limited, is subjected to submit the application form and the supplementary document complying to the appendix of the aforementioned Order;
Regulation of Commercial Registration Department
No. 102/2549
Re: Documents required for
Partnership and Limited Company Registration Application
------------------------------------------------
Now, under the Condition 3, Clause 3, of the Ministerial Regulation regarding to the establishment of the Business Registration Office, the appointment of the registrar and the determination of the rules and regulations for the partnership and company limited registration B.E.2549 which is issued under the Civil and Commercial Code (in the section regarding to the Partnership and Company), the Registrar General hereby stipulates the rules and regulations for the registration of the partnership and company limited which has the foreigner(s) holds the shares of the partnership or company at the proportion begins from 40% but less than 50% of the registered investment capital, or the foreigner holds the shares less than 40% of the registered capital and the foreigner is authorized to act on behalf of the said partnership or the company limited.
For the aforementioned case, all Thai national shareholders are subjected to submit the evidences showing the source of the investment together with the application form of the business registration. The said evidence shall contain the detail of the amount of money which matches to the amount of the investment that each Thai shareholder has invested in the Company or the partnership. The required evidence shall be one of the following documents:
1. Copy of the bank statement of the most recent record of the last 6 months or;
2. Any document which issued by the Bank to certify the financial status of the shareholder or;
3. Copy of the evidence that shows the source of the investment that the Thai shareholder invested in the partnership or company limited.
This regulation shall be commencing in full force from this August 15, 2006 .
Order dated on July 20, 2006
Ms. Orrajit Singkhalawanitch
Director-general of Department of Business Development
The Registrar General
Note: following the 2006 Business Registration Rules the government continued with the above policy. Related Foreign Business Act Amendments
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