PCT Thailand’s Free Expatriates Blog

More Protection For Buyers Of Condos in Thailand

Condominium buyers are to get better legal protection thanks to the amended Condominium Act, under which developers who do not deliver facilities as advertised will be penalised.

The amendment will become effective on July 4. Surasith Sahasthamrangsi of the real estate business promotion bureau of the Land Department said at a seminar yesterday that the new Act would punish de developers who used misleading advertising to boost sales.

“If they cant deliver what they advertise, the Land Department is empowered to charge them with giving false information,” Surasith said.

The amendment followed complaints by buyers whose purchases did not include what was advertised. Most of the angry buyers were people who bought units before they were completed. From July 4, developers will have to submit advertising plans with their construction proposals. On completion, the Land Department will check if all is as advertised.

Property Perfects chief operations officer, Teerachon Manomaiphibul, said this law would hurt only developers who are inclined to cheat buyers.

Meanwhile, experts said the amended law might hurt the resale market, as the provisional clause that allows foreigners or foreign entities to hold more than 49 per cent of condominium units in Bangkok, municipal areas and other specified areas will be scrapped.

The limit will now be 49 per cent, without exception.

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Thailand plans to ban alcohol sales during Buddhist religious holidays

Thailand‘s Ministry of Health is preparing legislation to ban the sale of alcoholic beverages during Buddhist religious holidays, a senior ministry official said Saturday.

Dr. Samarn Futrakul, who heads the ministry’s tobacco and alcohol consumption control group, said there is already a law prohibiting the sale of alcohol during elections, but not on Buddhist religious holidays.

Currently, restaurants, bars and entertainment venues are asked to “cooperate” with state officials by not selling intoxicating beverages on Buddhist religious holidays, he said.

Dr. Samarn said that in hos opinion it is necessary to issue such a regulation. His remarks were made after Interior Minister Chalerm Yoobamrung proposed that sales of alcohol should be prohibited during Songkran, Thailand’s traditional New Year, and during New Year’s celebrations according to the western calendar.

During the “seven dangerous days” of this year’s Songkran, which ended Thursday, 368 persons were killed in motor accidents throughout Thailand and nearly 5,000 were injured. Driving while under the influence of alcohol was identified as the major cause of accidents.

Meanwhile, about 80 persons, members of a “Don’t Drive when Drunk” group, as well as accident victims, met Mr. Chalerm Friday to offer support for his idea.

The group said it would launch publicity on the need to forbid the sale of alcohol during festivals and to also hold a public referendum to implement the idea.

Mr. Chalerm said he had asked the permanent secretary for the interior to present the proposal to Public Health Minister Chaiya Sasomsup’s committee, saying that he would further sales of beer, wine, and hard liquor as much as two days before and two days after the Songkran festival.

Alternatively, he said, the number of hours selling alcohol during the festival could also be shortened.

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REGULATIONS EASED
Government opens the door to more foreign investors
Rental, operations and financial leasing, factoring will be allowed to have majority foreign ownership

Four additional restricted businesses - rental, operations leasing, financial leasing and factoring - will be made more open to foreign ownership this week.

“For these four businesses, it will be easier to hold more than 50 per cent in the company,” Kanissorn Navanugraha, director-general of the Business Development Department, said last week.

The department has already provided clearer conditions for representative offices, regional representatives, government-related service agencies, and groups consulting for foreign investors.

The contract-manufacturing business will be next to be relaxed under the Foreign Business Act, followed by the brokerage, internal trade involving agricultural goods, advertising agency, hotel operating, beverage and food retailing, seed development, computer service, warehouse control service, pawnshop, school and entertainment businesses.

All of them will still be listed in Annex III of the Foreign Business Act, but will receive more flexible conditions to operate here.

The move is apparently the government’s efforts in demonstrating its commitment to opening up for foreign investment.

Commerce Minister Ming-kwan Sangsuwan on Friday assured Japanese investors that all obstacles would be cleared. During their meeting, the investors raised a number of issues, particularly the FBA.

Presently, foreigners who want to operate an Annex III business have to ask for approval from the Foreign Business Act committee. As the new conditions go into effect, foreign investors will no longer be required to ask for the committee’s permission. The application procedure and approval process will be predictable and more transparent.

Under the former procedure to allow foreign investors to operate protected businesses in Annex III, the Foreign Business Act committee last week approved requests received this month for foreigners to hold more than 50 per cent in 29 companies in several industries. The main ones are agency offices, government-related service agencies, subsidiaries of foreign firms and logistics management firms.

Deputy Commerce Minister Banyin Tangpakorn has instructed the department to set up a committee to come up with a concrete plan on whether to amend the act by next month.

The new amendment should be friendlier to foreign investors, while still ensuring the survival of local enterprises, as the last version was too strict in controlling foreign investors, he said.

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Partnership and corporate law upgrades

‘Why seven shareholders?” is a question businessmen have pestered corporate lawyers with for years, but it is about to become a thing of the past.

The Thai government, prodded by the Commerce Ministry, is adopting major amendments to several partnership and corporate law provisions with the aim to simplify or do away with unnecessary statutory procedures under the Civil and Commercial Code. The amendment was published in the Government Gazette on March 3, 2008 and will be effective on July 1, 2008.

Among other things, the mandatory seven minimum shareholders in a limited company shall be reduced to three. The new rule will benefit both new and old companies.

Having only three persons instead of seven sign the Memorandum of Association (MoA) will make the incorporation process easier and faster. A senior Commerce Ministry official claims that a fringe benefit to existing companies will be that nominee shareholders holding minority shares (typically one share each) will have a chance to make an exit. Many companies are getting ready to reduce the number of their shareholders.

Unlike the number seven, which has never been clarified, there is an explanation as to why at least three shareholders must be maintained, i.e. the requirement of majority number of shareholders still exists in certain statutes.

Another welcome change is that the process of incorporation which takes at least nine days under the present law can be done in one day under the new law. The new law provides for one-day registration of both the MoA and the company together if all requirements are met at the statutory meeting and all the papers are in order. This is a step forward that will put Thailand more in line with international practice.

The rules about shareholders’ resolutions are simplified. Currently, a special resolution is required for important matters such as change of company name, address from one province to another, capital, objectives, or Articles of Association, which must be adopted and then confirmed by two successive shareholders’ meetings. Said double approval takes at least 21 days and is the key reason why in practice it has been ignored and circumvented by backdating meetings.

The new amendment will allow the passing of a special resolution by only one shareholders’ meeting by at least three-quarters of the votes of the shareholders in attendance and entitled to vote. It is interesting to note that calling a shareholders’ meeting has always required prior notice either by publication twice in a local newspaper or delivery to all shareholders via registered post.

It came as a surprise to the Commerce Ministry that this provision was altered during the draft approval procedures such that it will take “both” newspaper publication and mail delivery to call a shareholders’ meeting once the law is enacted. Doing otherwise cannot be agreed under a company’s Articles of Association. Many have criticised that this is impractical and inconsistent with other relaxations. The drawback foreseeable at this point is the extra cost that will be incurred.

Another change is that a company can no longer opt to inform its shareholders of dividend declaration by means of publication in a newspaper instead of delivery by mail. The first will be removed under the new amendment, making it mandatory to individually notify shareholders about dividends by mail. It is hoped that this will fix the current loophole and uphold the right of shareholders under the law.

Although reduction of a company’s capital and merger of two companies are not common occurrences, the processing and timeframe are improved. Reduction of capital shall require only one-time publication in a local newspaper (instead of seven times) plus 30 days (instead of three months) objection period for creditors. To merge two companies, publication in a newspaper is reduced from seven times to one, and the objection period for creditors is reduced to 60 days instead of six months.

Finally, the new law makes it possible for an existing partnership to be converted to a limited company, subject to certain formalities. A partnership is nowadays not a popular form of business organisation, as liability has increasingly become a concern to business owners, both Thais and foreigners. A great number of medium-to-large partnerships are opting to become a limited company with the aim of going public in the future. Without a legal channel for such transformation, partners would have to transfer the business and assets of a partnership to a new company, hindered by many issues, especially tax implications on the transferring partnership and/or the recipient company.

Even though cutting down and shortening some procedural redundancies will not change the easy and common way of practice in Thailand, such as backdating and paper meetings, one cannot really argue that this is not a real upgrade we all have been waiting for.

Written by Kobkit Thienpreecha, Attorney, Commercial Department, Tilleke & Gibbins International Ltd.

Please send comments or suggestions to Marilyn Tinnakul at marilyn.t(at)tillekeandgibbins.com

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