Questions to put to your Thai lawyer.

Why independently instructed matters

A great many foreign owned Thai structures were formed by a firm that also introduced the Thai shareholders, provided the registered address, prepared the annual filings and, in some cases, still administers the company. That firm may be entirely competent and entirely honest. It is nonetheless being asked to give an opinion on work it did itself, on a structure it recommended, in circumstances where an adverse conclusion reflects on its own advice and possibly its own exposure. That is a conflict of interest in the ordinary professional sense, and it does not require anyone to behave badly to distort an answer.

Independently instructed simply means counsel engaged by the owner, with no prior involvement in forming or administering the structure, no relationship with the Thai shareholders, and no ongoing fee income that depends on the structure continuing as it is. An owner is free to keep the existing firm for administration. The opinion should come from somewhere else.

The conflicts worth asking about directly

• Did you or your firm form this company, prepare its filings, or provide its registered address at any time?
• Do you or your firm have any relationship, past or present, with any of the Thai shareholders or directors?
• Does any part of your firm's income depend on this structure remaining in its present form?
• Who is your client in this matter: me personally, the company, or another party?
• If your advice is that the structure should change, is your firm able to act on that change, and does that create any conflict?

Asking these is not an insult and a good lawyer will not treat it as one. The answers are also useful in themselves: a firm that is candid about a prior involvement and proposes that a colleague outside the firm gives the opinion is behaving properly.

The questions about the structure itself

These are the questions an owner should put in writing and expect to be answered in writing. They are deliberately blunt, because polite questions produce polite answers.

• On these documents and these facts, what do I actually own, and what does the company own?
• Does anything in this structure raise a question under Section 36 of the Foreign Business Act, and if so, what is the nature of the exposure and who carries it?
• Are the Thai shareholders genuine shareholders in substance, on the evidence available, and what would be needed to demonstrate that?
• What is the position under the Land Code for the land element, if any, and would my heirs be able to hold what they would inherit?
• What would a registrar, a buyer's lawyer or a lender's compliance team see if they read this file today?
• Which lawful alternatives are open on my facts, and what are the limitations of each?
• If we do nothing, what are the realistic events that would cause this to be examined, and on what timescale?
• What is your advice on disclosure, both to counterparties and to any authority, and what are the consequences of each course?

The last question deserves emphasis. Disclosure is a legal question with real consequences in both directions, and it belongs to counsel. It is not something an owner should decide alone, and it is certainly not something to be resolved by delay. Where an owner may already be exposed, the correct step is to instruct qualified Thai counsel immediately and give them everything.

The questions about alternatives

An opinion that says only what is wrong is half an opinion. Ask counsel to address each of the lawful routes and to say why it is or is not available on your facts: foreign freehold of a condominium unit within the building's 49 percent foreign quota, with funds remitted from abroad in foreign currency and evidenced by the bank; a registered leasehold, with the statutory thirty year maximum per registered term explained honestly, including why a renewal promise is weaker than sellers present it; a usufruct, a superficies or a right of habitation; a genuinely Thai majority company with real Thai capital and real governance; Board of Investment promotion where the activity qualifies, which can carry land rights for the promoted activity; the Treaty of Amity for United States nationals, which permits majority US ownership in many sectors but is not a route to land ownership; and Section 96 bis of the Land Code, which requires a substantial qualifying investment commonly described as 40 million baht with residential use and ministerial approval, and is so restrictive that it is rarely usable in practice.

What a proper written opinion should cover

Two warning signs are worth naming. An opinion that avoids a conclusion entirely, and consists of a description of the law followed by a recommendation to seek further advice, has not been worth its fee. And any assurance given verbally, in confident terms, without documents having been read, should be treated as conversation rather than advice.

Being complete, including about the awkward parts

Here is a composite drawn from situations advisers in this market see repeatedly, not an account of any individual client. An owner has held a villa for years on the strength of a verbal assurance, given at the time of purchase by the firm that formed the company, that the arrangement was normal and safe. He has never asked for that assurance in writing, never asked who the firm was acting for, and never had a second opinion, because the first one was confident and free. Years later a buyer's lawyer asks a question the assurance does not answer, and the owner discovers that he has no written advice to rely on and no adviser who is independent of the structure. The point is a small one and it repeats constantly: an assurance nobody would put in writing was never an opinion.

The most common reason an opinion turns out to be wrong is that the lawyer was not told everything. Owners edit their history out of embarrassment, out of loyalty to whoever set the structure up, or from a belief that a lawyer who does not know something cannot be troubled by it. The opposite is true. Counsel who has the full picture, including the undocumented understandings, the payments that were never recorded and the promises made verbally years ago, can identify a lawful route. Counsel working from a tidied account will produce advice that collapses the first time a buyer's lawyer or a registrar asks a question.

Asia Global Partners is a private office and not a law firm, and gives no legal advice. Where a client asks the office to arrange a review, its role is to identify and instruct suitable independent Thai counsel, assemble the documents, hold the timetable, and coordinate with the client's advisers at home where home country obligations arise. The opinion is counsel's. The accountability for the process is the office's.

This article is general information and not legal advice, and the questions above are a starting point rather than a substitute for advice. Instruct independently instructed Thai counsel on your own facts and be complete with them. Verify company and shareholder requirements with the Department of Business Development, land and title questions with the Land Department, and promotion eligibility with the Board of Investment.

This briefing is general information, not legal, tax or investment advice. Thai rules change frequently and individual cases differ. Verify current requirements with the relevant authorities, including the Immigration Bureau, the Board of Investment, the Land Department, the Department of Business Development and the Revenue Department, and take advice on your own facts before acting.