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US businessmen buy Thai property through company
Our client John represents a group of five retired US businessmen who were interested in investing in real estate in Thailand. He was recommended to Healy Consultants by one of our clients, who had set up an offshore corporate structure through us to hold his Thai property assets. John therefore approached Healy Consultants in early 2006 with a view to exploring the most risk-free way to purchase Thai property and collect rental incomes.
At this early stage we explained the main legal aspects of buying a property in Thailand. Although the Thai government encourages property investment in designated areas of the country, foreigners are restricted in the way in which they can buy property. The group had not earmarked a specific property for purchase, but was particularly interested in the island of Koh Samui, which is one of the areas designated by the Thai government for foreign investment.
Preliminary research by John’s consortium had identified that incorporating a limited company, which would ultimately purchase the property, would be the most suitable way forward, despite the requirement for seven shareholders, the majority holding of which must be Thai. Since there were five US citizens already in the project, John asked if Healy Consultants could provide the additional two shareholders as nominees, including the Thai 51% shareholder. On this basis Healy Consultants provided a detailed e-mail quotation to John and his associates, for their review and consideration.
One month later John reverted to Healy Consultants with the go-ahead for the incorporation. He returned our Client Engagement Letter (signed by all five US shareholders), as well as providing the standard due diligence Healy Consultants requests from all clients. We explained to John that Thai company incorporation procedures were time consuming and uncertain, especially as at the time Thailand was experiencing political instability, but our Bangkok office is experienced in minimising inconvenience to our clients during the process, including not requiring our clients to visit Thailand at any stage of the incorporation.
That said, with five shareholders based in the US, a common challenge throughout the engagement was obtaining signatures on corporate documents, and arranging for due diligence (passport copies, bank reference letters etc) to be translated from English into Thai, as required. Thankfully, John and his business partners were in no hurry to complete incorporation, and had budgeted for a lengthy process.
The first task for our Bangkok staff was to register the company’s intended name with the Department of Business Development at the Ministry of Commerce in Bangkok. This involved filling out an application form online, including four proposed names for the company. Name approval was given in two days.
The next step was for our Incorporation Team to draft the company’s Memorandum of Association (in Thai), which would need to be sent to the shareholders in the US. The Memorandum contains details such as the company name; the head office location; company objectives; registered capital; and details of the seven shareholders.
The Memorandum was couriered to John in the US, and we advised him that we needed to submit it to the Commercial Registrar’s Office in Bangkok within 30 days of the company name reservation, or that would become invalid. This proved a challenge for John, primarily because two of the US partners were traveling, but thanks to their cooperation our Bangkok office received the signed Memorandum within three weeks and we were able to meet the submission deadline.
The Commercial Registrar’s Office approved the Memorandum registration within two working days, enabling our team to move to the next step of the incorporation process - registering the company at the Commercial Registrar’s Office. The application for registration involves submitting the following information: names, addresses, occupations, and nationality of the initial shareholders and directors of the company; the head office address (including a letter from the landlord granting permission to use the premises, in this case Healy Consultants’ agreed to provide the office address for John’s company); a company seal; company bylaws; the name of a Thai-certified auditor (supplied by Healy Consultants); the financial year. In addition, our Bangkok incorporation team paid the Thai government fees of 5,000 baht, based on the company’s minimum registered capital. The Commercial Registrar’s Office issued a Certificate of Registration within three weeks, confirming John’s company as a legal entity.
To enable the company to receive rental incomes and make payments, the next step was for Healy Consultants to assist in opening a corporate bank account in Thailand. Healy Consultants works closely with leading international banks, and is one of the few corporate consultants able to open a corporate bank account without the signatories needing to visit Thailand. Thus, our Bangkok-based Banking Team completed a Standard Chartered Thailand account application form. Our Singapore-based Marketing and Media Team also prepared a business plan for the company, outlining details of the company’s activities, shareholders’ and directors’ information, financial projections and a brief market analysis.
Both the application form and business plan were e-mailed to John, and he was asked to sign the business plan and also arrange for all signatories to sign the bank account application. Our Bangkok team received the signed documents within two weeks, and with this they were ready to approach the bank in Thailand. Our Banking Team submitted a complete package, including signed business plan and application form, as well as corporate documents, to the bank. Our staff also attended a brief bank interview, explaining why the company required a corporate bank account. The bank provided corporate bank account approval within 10 days by issuing a bank account number, which was forwarded to John. In the following three weeks, our Bangkok office received ATM cards and PIN numbers, including for Internet banking facilities.
Through the Thai company, John and his business partners have successfully purchased two apartments in Koh Samui, as well as a villa in Jomtien beach, close to Pattaya to date. The corporate structure is working as they had expected, although in the future John plans to live in Thailand with his wife, and will request Healy Consultants’ assistance to arrange residence visas.
Austrian entrepreneur launches high-end property magazine
Our Client Philip is an Austrian entrepreneur who wished to launch a property magazine catering to the upper end of Thailand’s property market.
Since mid-2006, Healy Consultants has worked closely with Philip to provide a wide range of business setup services in Thailand to help him fulfill his initial business objectives. It is likely going forward that Healy Consultants will continue to support the growth of Philip’s fledgling business.
Philip contacted Healy Consultants in mid-2006, while on a business trip to Singapore. He had become aware of our website during an Internet search, and called us to find out how we could assist with his strategic goals, and to arrange an appointment to see our team during his stay in the city.
Philip visited our office in late June, meeting with Aidan Healy, managing director of Healy Consultants. During the meeting, Philip highlighted his plans and priorities – to set up publishing house in Phuket, produce a glossy property and lifestyle magazine, highlighting to foreign investors the latest projects and developments in the country. Philip envisioned the need for one expatriate staff member, as well as himself as managing editor, plus a staff of two or three Thai nationals.
Aidan explained to Philip the many challenges he would face in setting up a business in Thailand, the principal one being that a Thai company requires seven shareholders, and the majority shareholding has to be Thai-held. Although Philip was aware of this requirement, we reinforced to him the potential (albeit small) risks, as well as the additional expense of seven nominee shareholders, of this corporate structure.
Aidan suggested to Philip that Singapore may be a more media-friendly environment for a magazine startup to flourish. However, Philip explained that since his magazine would be catering solely to the Thai market, he needed to be geographically close to advertisers and property developments, and that the operational costs would be lower in Thailand (compared to Singapore) in the medium to long-term.
Having been made aware of the legal, accounting and tax-related issues of setting up a business in Thailand, Philip returned to Austria to consider our proposal, and within a week he had signed and returned our Client Engagement Letter, and paid our engagement fees, to confirm the beginning of the project.
While Philip was obtaining the due diligence required by Healy Consultants, our Incorporation Team in our Bangkok office drew up a strategic engagement project plan which included:
Philip had outlined his preferred corporate structure to our Thailand Incorporation Team, to meet both his business as well as statutory requirements. Although Philip was in theory able to find Thai nationals who could act as shareholders, he felt more comfortable with the idea of using Healy Consultants’ professional nominee services, especially as our nominees do not act as bank signatories and have no active role in the daily running of the business. It was also decided that Healy Consultants would act as the Thailand resident director, until Philip officially obtained his work/residence permit.
With this structure in place, our Thai office approached the Commercial Registrar’s Office at the Ministry of Commerce in Bangkok to obtain approval for the company name, which was completed within one working day. At this point, our Incorporation Team then prepared the company’s Memorandum of Association containing details of company name (as reserved with the Commercial Registrar's Office); the head office location in Phuket; the company’s objectives; the initial registered capital of the company, and the names, addresses and occupations of the seven shareholders.
Since a Thai company is required by law to have a physical office, part of the incorporation process requires a copy of a lease agreement. Philip had already located a suitable office in Phuket Town, and already had this document ready for submission to the incorporation authorities.
The Memorandum of Association was also signed by Philip during a visit to Bangkok. He had also brought the personal due diligence required by Healy Consultants.
Meanwhile, Healy Consultants arranged for the nominee shareholders to sign a share subscription form. Under normal circumstances, this is a challenging task if a Client has handpicked shareholders through personal contacts or business associates. However, on this occasion our Incorporation Team was able to complete this step in one day.
The next step was for our Incorporation Team to submit the signed Memorandum of Association to the Commercial Registrar’s Office in Bangkok. The Memorandum was approved in writing within 10 working days.
Eight days after receiving Memorandum approval, the shareholders of a Thai company are required to deposit at least 25% of the company’s registered capital in an ESCROW bank in Thailand. In our Client’s case, since he required a work permit, a minimum registered capital of two million baht (US$61,400) was required (by law), so Philip deposited 25% of this total in the ESCROW account.
With this step complete, our Incorporation Team filed the following with the Commercial Registrar’s Office:
Seven working days after submitting these documents to the Commercial Registrar’s Office, our Bangkok team received a Certificate of Registration for Philip’s company, confirming that it had been fully incorporated.
The next step in the incorporation process was to register the newly-incorporated company at the Thailand Revenue Department in Bangkok. Three days after completing this, Healy Consultants obtained a Taxpayer identification card from the Revenue Department.
With the incorporation phase of the engagement complete, Healy Consultants approached Standard Chartered Bank in Bangkok to open a corporate bank account for the company. To achieve this, Healy Consultants Banking Team completed a Standard Chartered Bank Thailand corporate bank account application form, which was then couriered to Philip (as the sole bank signatory) in Austria for his signature and return to us.
Our Banking Team then prepared an application pack for the bank, comprising the bank account application form, the company’s Thai incorporation documents, and information on the bank signatories. Since Healy Consultants was acting as the resident director, our Bangkok officer represented the company at an interview at the bank, explaining the company’s activities and why it required a corporate bank account.
Our Banking Team receiving an account number in 12 working days. This information was then passed to Philip, who was delighted that we had been able to open an account without him needing to travel to Thailand again just for this purpose.
Publishing license
Obtaining a publishing license in Thailand is a complex task if not approached properly. A detailed application must be submitted to the Ministry of Interior in Bangkok, stating clearly many facets of the publication.
Healy Consultants’ Singapore-based Marketing and Media Team has wide-ranging experience of preparing information in the format and under the guidelines required by licensing authorities, and as such prepared a detailed Business Plan providing the following information:
The document was prepared in one day, and sent by e-mail to our Thailand office, who arranged for it to be translated into Thai (as required). This step was time consuming – although the translator was highly competent and experienced in business terminology, some of the property-related technical language used in the Business Plan presented her with a challenge.
Joy, one of our administration staff in Bangkok, then submitted the Business Plan, as well as a completed license application form, to the Ministry of Interior.
The approval process for the publishing license proved frustrating for Philip. His office was now fully functioning in Phuket, he had hired two Thai staff, he had sourced a printer and distributor and the licensing procedure was the only major remaining hurdle. In Healy Consultants’ experience, approval for a publishing license in Thailand takes up to two months, and this time had elapsed. Joy continued to follow up by phone with the Ministry of Interior, who confirmed that there was nothing wrong with the application. It appeared that the approval was caught up in the wheels of Thai government bureaucracy.
In early November, Healy Consultants received written approval from the Ministry of Interior confirming that a license had been granted for Philip’s magazine, must to his relief.
As part of our ongoing service, Philip has asked Healy Consultants to assist his company to prepare financial statements in preparation for his statutory return, which is required in late 2007. At this time, our Accounting Team will also prepare an annual tax return for the company.
Contact Us
For more information on our Thailand corporate services, email email@healyconsultants.com or telephone us at (+65) 6735 0120.
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