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Published on August 8, 2007

Six committee members of the National Legislative Assembly (NLA) will today launch a last-ditch attempt to amend the Foreign Business Act by adding a "management control" clause to prevent foreign investors from using nominees to dominate the management of Thai firms.

Viriya Namsiripongpan, a member of the NLA committee, said the government should consider adding controls on the management of foreign shareholders in the amended act as it would create a stronger regulation to prevent the nominee problem in the future.

"It is crucial that the act should extend to control of shares and voting rights as it will ensure that foreigners will have limited authority to control businesses that are protected by the law," he said.

Today's proposal will concentrate on defining alien companies in Article 4 through management control.

Other committee members include Somchai Sakulsurarat, Kamnoon Sitthisamarn, Bodin Asavanich, and Parn Peungsujaritkul.

The NLA today will vote whether to accept the draft amendment of the Foreign Business Act, and decide whether to accept the proposal for expanded control of management.

The Foreign Business Act is subject to amendment in the wake of the controversial takeover of Shin Corporation by Singapore's Temasek. Thai lawyers now want to make the issue of foreign ownership clear once and for all. The legal amendment will bar foreign investors from using nominees and curb their control of shares, voting rights and management in companies doing business in sensitive sectors.

Viriya said the government must also consider increasing the penalties for lawyers who advise their foreign clients on how to circumvent the foreign ownership law.

So far, the final version approved by the scrutinising committee states that the amended act will extend control of shareholding to voting rights. That is, a company registered in Thailand with foreign shareholders would have to limit the shares or voting rights of foreigners to below 50 per cent. The government has not extended controls on management as it would be too stringent and too difficult to inspect.

Although the government said it would be difficult to control management, Viriya said the government should develop its inspection efficiency along the lines of the Revenue Department's investigations of revenue payment violators.

He said that the Japanese government also restricts foreigners through management control, which is in imitation of European laws.

NLA member Pattarak Khumphitak said that companies with more than 49 per cent of the shares owned by foreigners but with special management rights over Thai shareholders should be defined as "foreign management controlled".

This would make the company a "foreign" business and therefore required to be registered by the Commerce Ministry.

He said that the amendment of the draft act would be meaningless unless the government imposed controls on management. Foreigners would seek other ways to control companies protected by law by increasing their management operations.

Petchanet Pratruangkrai

The Nation