How legal Amendments to be enforced in july affect foreign land investors

A popular solution has been to find a Thai partner to jointly invest, by being a majority shareholder in a limited company, and to subsequently acquire the desired land through such company.

The criteria for establishing a limited company in Thailand are set forth mainly in the Civil and Commercial Code of Thailand (commonly known as the CCC). On March 3 this year, a new Act on the Amendment to the CCC (the "Act") was published in the Royal Gazette implementing new changes in the law relating to corporate structures, which will become effective on July 1.

One of the major amendments is the change in the numbers of promoters and shareholders required. The minimum number of promoters required for establishing a company and the number of shareholders required to maintain the status of a company has been reduced from seven persons to three. Consequently, a company eligible to acquire land shall now have a minimum number of three shareholders in which only one may be a foreigner; provided that the foreigner holds less than 49 per cent of the share capital. This change is beneficial to foreign investors as it reduces their burden in finding genuine Thai partners to meet the minimum shareholder requirements.

However, it is important to note that according to the current practice of the Land Department, if there is a foreign shareholder or a foreign director in the company, the land officer has authority to conduct an investigation to determine the source of the funds of the Thai shareholders to ensure it is not a nominee structure involved.

In addition, one of the new provisions makes it possible to complete the incorporation of a company in one day, whilst before this Act the process was seen as laboursome and time consuming as the statutory meeting could only be held seven days after the registration of the memorandum of association. As a result of the Act, directors of a new company may apply to register the memorandum of association and incorporate a company on the same day by holding the statutory meeting and subscribing and paying the par value of the shares at the same time. This new criterion is seen as very advantageous in the competitive business of land acquisition.