New law to loosen foreign control over Thai joint-ventures
The Business Development Department is hosing down fears about Thailand's move to restrict foreign control over joint-venture companies run by Thais, with director-general Pongpun Gearaviriyapun saying such businesses will get a temporary reprieve to comply with the changes. Currently, Thai nationals need to hold more than 50% of stock in a joint venture for it to qualify as a local company. However, the Foreign Business Act (FBA) does not prohibit foreigners from making up the majority of the board of directors. It also does not prohibit them having different classes of shares with different voting rights. This means that in some instances a company may appear "local" even though foreign interests control it.
An internal briefing document circulated among foreign embassies sparked fears about possible amendments to the FBA. The changes propose closing loopholes that allow Thai designates to be used by foreign companies. One embassy believes the initiative is being pushed by the TCC as a means to benefit local businesses which are afraid of competition from foreign companies. The minister of commerce is planning to present this amendment, and it appears that the PM might be supportive as well.
The change would also revise accounting standards, known as Thai Financial Reporting Standards (TFRS), to address the issue of Thais being used by foreign companies to qualify the company as "local" . The proposed amendment will not affect foreign businesses which operate under international agreements, nor businesses that have representative offices in Thailand and businesses that have been given investment promotion privileges by the Board of Investment (BoI). Companies which might be affected by the law change include e-commerce, telecommunications, logistics, technology-related businesses, and foreign businesses that have been granted permission, but have not begun operation.
The proposed change would also ease restrictions on some industries, such as banking, insurance and stock brokerages and foreign businesses will no longer be required to seek permission from the Foreign Business Committee. The proposed law change will also reserve certain businesses and occupations only for Thais such as restaurants, food shops, and tourist guides, after it was found that many of these businesses are run by foreign nominees, particularly in the provinces that are major tourist spots, such as Chiang Mai, Phuket, and Surat Thani.