Thailand

By Chandler MHM Limited
www.chandlermhm.com

On 30th January 2018, the Ministry of Industry issued a new notification regarding prohibited actions for foreigners; “Notification of the Ministry of Industry re: Prohibition of Actions which are by Nature, a Mining Business When Taken Over by a Foreigner, and the Prohibition of the Submission of an Application for a License Beneficial to Another Person B.E. 2560 (2017)” (the “Notification”).

The purpose of the Notification, as stated in the preamble, is to prohibit foreigners from operating mining businesses through the use of “cover up” schemes in order to conceal ultimate foreign ownership.

The Notification prescribes 3 major provisions as follows:

1. As provided in Clauses 3 and 4, foreigners are prohibited from initiating a “business takeover”. Note that the notification itself does not alter the definition of “Foreigner” under the Foreign Business Operations Act B.E. 2542 (1999). Instead, it prescribes the definition of the term “business takeover”.

A business takeover means “having the control, power or influence, whether directly or indirectly, by a foreigner in determining the policy, management, operations, appointment of directors or high-level executives which may result in undermining the business management of a company. Having such control, power, or influence may be achieved through; 1) the holding of shares with voting rights as expanded from one half of the total number of voting rights to control of the majority votes in a shareholders meeting, or 2) by the appointment or removal of directors from one half of all directors”.
Actions that can be constituted as affecting a business takeover and which are thus prohibited, include the following:

  • business takeover through a nominee;
  • business takeover through a special voting right;
  • business takeover through the control of power;
  • business takeover through the source of investment;
  • business takeover through a contract related to intellectual property or a contract which renders the exclusive right to a foreigner or juristic person in an affiliate, and such contract results in the transfer of the cost and remuneratory benefit to the foreigner;
  • business takeover through a procurement agreement and management agreement;
  • business takeover through a joint operation agreement, and
  • business takeover through transfer pricing

2. Clause 5 of this Notification prescribes that submission of an application for a license beneficial to another person having the following characteristics is prohibited:

  • Being a nominee for submitting an application for a mining lease under the law on minerals;
  • Being a nominee for submitting an application for a license for minor-scale mining, or minor-scale mining for another person or for the benefit of another person; and
  • Being a nominee for reporting of mineral panning for another person or for the benefit of another person.

3. In Clause 6, applicants and holders of a license are required to self-certify. Self-certification under this Notification applies to both license applicants and current holders.

  • License, according to this Notification, means a prathanabat, (a mining lease under the law on minerals), i.e. a license for minor-scale mining and for reporting of mineral panning under the law on minerals; and
  • This “self-certification” process is meant to ensure that license applicants and holders do not undertake any actions which are contradictory to this Notification. This means that applicants and operators must certify that they are not involved in any cover up schemes.

Conduct contradictory to this Notification may result in the cancellation of a license application or revocation of a license.

However, this Notification is silent as to how its provisions would be implemented with regard to existing licensees. Thus, it remains to be seen whether existing licensees will be required to comply with this Notification forthwith, or upon the renewal of their licenses.

As these regulations will have an impact on the mining business in Thailand, operators may want to seek consultation in light of this new Notification.

Chandler MHM Limited
7th-9th, 12th and 16th Floors
Bubhajit Building
20 North Sathorn Road
Bangkok 10500, Thailand
www.chandlermhm.com

This article is intended to highlight an overview of key issues for ease of understanding, and not for the provision of legal advice. If you have any questions about this publication, please contact your regular contact person(s) at Mori Hamada & Matsumoto or Chandler MHM Limited, or any of the Key Contacts listed in the far-right column.

Related Articles by Firm
Secondary laws under the Trade Competition Act BE 2560
The enactment of these five Notifications represents a significant leap of progress.
Thailand Update: Amendment to Work Permit Law
In response to criticism, the government decided to amend the Emergency Decree on Managing of Foreigners with relaxed penalties ...
Leasing of residential buildings − A contract-controlled business
The Contract Committee of The Consumer Protection Board recently announced a new Notification which designates the lease of residential property as a “contract-controlled business”.
Mergers and acquisitions in Thailand
A number of factors are making Thailand a target of choice for international and regional investment ...
Thailand Anti-Corruption Update
National Anti-Corruption Commission Guidelines to Supplement Section 123/5 of the Organic Act on Counter Corruption ...
Amendment to the Thai Civil and Commercial Code
Part IX: Combination of Limited Companies ...
Thailand: Amendment to the Public Company Act
The National Council for Peace and Order has considered the lack of clarity on conditions, procedures and time limitations related to the laws governing business operations ...
Thailand: The Act on the Amendment to the Civil Procedure Code (No. 30) B.E. 2560 (2017)
There are a number of amendments to the current Civil Procedure Code (CPC) as part of its legal execution ...
Projects & Energy Special Report: Thailand: New Minerals Act
A new Minerals Act (BE 2560 (2017) was published on March 2, 2017 and took effect on August 30, 2017 (180 days after the publication date) ...
Thailand: ERC Announcement - Purchase of Electricity From Hybrid-Renewable Energy Small Power Producers
The Energy Regulatory Commission (ERC) issued an invitation to bid for the sale of electricity from Hybrid-Renewable Energy Small Power Producers (SPP) on 4 August 2017 ...
Thailand: New Amendment to the Labor Law
The Labor Protection Act B.E. 2541 (“LPA”) was first enacted in February 1998; the LPA has been amended several times ...
Thailand: Extension of the Reduced VAT Rate
Value added tax (VAT) is an indirect, non-cumulative, consumption tax levied on the supply of goods or provision of services in Thailand ...
Thailand: Ten year visa extension
Due to the rapidly increasing number of foreign senior-citizens seeking Thailand as a retirement destination, Thailand’s Cabinet recently approved the ten-year retirement visa extension ...
Thailand: The New Trade Competition Act
On 24 March 2017, the National Legislative Assembly (the “NLA”) in Thailand passed the final reading of the draft Trade Competition Act ...
Thailand: Amendment to BOI Act to create new BOI benefits
The Thai government has recently been promoting “Thailand 4.0”, which refers to creative and innovative industries ... as a master plan to pull Thailand out of the middle-income trap and toward becoming a high-income country ...
Energising Thailand’s M&A sector
With a focus on the energy and natural resources sector, Chandler & Thong-ek Partner Ratana Poonsombudlert answers our questions on Thailand’s M&A present and future
Related Articles
New anti-money laundering law
The new law introduces subtle but important changes to the AML landscape in the UAE.
Nobody's got time for that! General counsel and legaltech
How to overcome the lack of time, resources and knowhow needed to implement technology solutions.
Secondary laws under the Trade Competition Act BE 2560
The enactment of these five Notifications represents a significant leap of progress.
Related Articles by Jurisdiction
Peangpanor Boonklum, PTT
One of the most prominent corporate lawyers in Thailand, PTT's head of legal spoke to the In-House Community's Tim Gilkison ...
Thailand Update: Amendment to Work Permit Law
In response to criticism, the government decided to amend the Emergency Decree on Managing of Foreigners with relaxed penalties ...
Latest Articles
The thing about … Carl Im
The brains behind eYulchon talks to Patrick Dransfield about his algorithmic approach to corporate compliance ...
New anti-money laundering law
The new law introduces subtle but important changes to the AML landscape in the UAE.