coolthaihouse.com blog

some thoughts from Dozer
builder image

Limited Company with 2 Classes of Shares

I did meet with the farang business consultant in Bangkok, in reference to this issue: setting up a company with ordinary and preference shares. The ordinary shares have more votes than the preference shares, so a minority shareholder can essentially ‘control’ a Thai limited company.

The normal way of setting up a company is by having the minority foreign shareholder receive signed proxies (or share transfer agreements). The theory is that whoever has the signed proxies essentially controls the company, since if there is any issue which arises the proxy can be executed and that shareholder is out. In theory it works pretty good, but can run into some hiccups. Since on paper anyway, the foreigner holds a minority position it essentially is not the sturdiest structure.

Normally small companies don’t have two classes of stock. This method is used by larger companies and also in the particular case of a minority shareholder wishing to achieve legal control over the entity. That is why, it seems, normally Thai lawyers don’t know about this setup.

I’ve known of this setup for a while (at least a few years), but up until now the setup expenses wasn’t justified. It definitely will cost a bit more to get it set up this way, but in the end it would be worth it.

The business consultant was familiar wit the set-up and explained many procedural ins and outs. He wasn’t terribly expensive either, about double the rate of a Thai lawyer (but not 5 times like some). If you want a recommendation let me know and I’ll forward his contact details to you.

Back in Pattaya I was making one last stab at finding a Thai lawyer who could do this set-up for me. I’ve got one looking into it but he needs to do some research. He did point out (as did the farang business consultant) that these methods of essentially allowing for foreign control of a majority Thai owned company are scrutinized very closely, but since they follow the letter of the law they can be put though with no problem.

The Thai lawyer also brought up a good point with reference to legal arrangements used by luxury developments that have mega bucks for legal setup like this [example legal setup used by large company](http://www.coolthaihouse.com/attachments/pref share company setup example.pdf “setup example”). The point: a large venture like this is employing several Thai staff, has offices, income and therefore would have some ‘pull’ with the government. So, hypothetically in the unfortunate circumstance that something wasn’t quite right with the setup, it could easily be smoothed over.

Another point the Thai lawyer made was that there were many thousand companies used for land holding in and around Pattaya. He thought at some point in the future the government would review the situation. Advice: have some portion of the company have an active trading (real business) income to avoid any future scrutiny.

Leave a Response

You must be logged in to post a comment.