Hughes Krupica: Will BOI attract more interest from foreign investors in 2015?

With the recent news in the Bangkok Post (and other national media platforms) that the Thai government is largely considering a change to the provisions in the Foreign Business Act (FBA) in relation to the definition of a ‘foreign’ Thai limited company, one begins to wonder whether the Board of Investment of Thailand (BOI) will attract more interest from foreign investors looking to do business in Thailand in 2015 and beyond.

Make no mistake, the BOI and its investment incentive programmes have, in the past, been one method for foreign companies and foreign investors to obtain control over their business affairs in Thailand. However, if the FBA is amended, the BOI may attract more interest than it has in the past, even for much smaller businesses which have in many cases, up to now, relied on the existing rules (under the FBA) on foreign control over Thai limited companies, often viewing the BOI in many cases as more difficult and impractical to seriously consider as a realistic option.

For those that are not familiar with the proposed changes to the FBA, it has been recently publicised that the Thai government is strongly considering changing provisions of the FBA that would affect the definition of a foreign owned or controlled Thai limited company, requiring a foreign business license to operate in Thailand. Essentially, the proposal is to change what is considered by some in various professional circles to be a ‘loophole’ in the current law.

Currently the FBA primarily restricts the ‘shareholding’ element of a Thai company only. That is to say, the famous (and current) 51/49 rule that most professionals and foreign investors in Thailand are keenly aware of. Under the proposed amended rules, the FBA would extend restrictions to include ‘foreign controlled’ Thai companies, meaning companies even with 51% Thai majority shareholding would be deemed to be ‘foreign’ under the FBA if actual control – either though adjusted voting structures or directorships – is in the hands of foreign nationals or foreign businesses.

Of course, previous Thai governments have reviewed the FBA (most recently in 2007) and similar amendments have been considered in the past. However, steam seems to be gathering this time around to finally pass an amendment and put the amended FBA in place with at least some of the publicised proposals.

Whether existing Thai companies with ‘foreign control’ that do comply with the existing FBA would be ‘grandfathered in’ to the new amendments is yet to be seen, but we have heard ‘rumours’ that this may be the case, or that the government may alternatively provide a transition period to comply. In any event, it is yet to be seen what the actual final bill will look like, and what exact provisions it will contain. But it does seem likely that a final bill will be put forth in the very near future. Existing and future planned businesses will therefore likely need to be reviewed for corporate structure compliance under any amended FBA.