Shin Corp Deal

On Monday January 23, 2006, three days after the Thai Telecommunication Act (2006) became effective on Friday January 20, the Shinawatra-family sold its remaining 49.6% stake in Shin Corporation, a leading Thai telecommunications company, to two nominees of Temasek Holdings (Cedar Holdings and Aspen Holdings). The Shinawatra and Damapong (Potjaman's maiden name) families netted about 73 billion baht (about $1.88 billion). Following Thai tax laws, they did not have to pay capital gains tax. Kularb Kaew was the holding company used to acquire Shin Corp.

The Temasek nominee problem (overview of selection of articles)

  • Shin probe go forward
  • Minister ponders nominee amnesty
  • Ministry hands Kularb Kaew case to police (September 1)
  • Somkid: Shin probe shows resolve (september 15)
  • SCB defends investment in Shin Corp deal (September 14)
  • No SET rules on foreign holdings (September 13)
  • Temasek certain Shin deal is legal (September 14)
  • Shin probe generates panic (September 13)
  • Temasek denies breaching laws (September 12)
  • Shin deal's critics take the stand in BDD probe (September 9)
  • DTAC: Shareholding in line with Thai laws (August 29)
  • Nominees likely to face more scrutiny (August 26)
  • Ministry to widen probe of Shin sale (August 24)
  • Regulations need to reflect reality (August 23)
  • Foreign ownership laws to be discussed (August 15)
  • Shin deal's critics take the stand in BDD probe (August)
  • Nominees put wind up foreign firms (August 2)
  • Govt 'buying time' on Kularb Kaew Co deal (July 28)

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I am not a nominee'

Ministry hands Kularb Kaew case to police

POST REPORTERS

Shin probe to go forward

Source: Bangkok Post October 18 2006

Any share sale by Temasek Holdings of its holdings in Shin Corp would not affect an ongoing criminal investigation into whether illegal nominees were used to break the 49% foreign shareholding limit, according to the Commerce Ministry. ''A sale by Temasek allowing Thais to increase their shareholdings (in Shin) in the future would be a positive move. But regardless, the investigation into whether wrongdoing occurred will continue,'' said Karun Kittisataporn, the ministry's permanent secretary.

Singapore-based Temasek, in an open letter to the media, said on Monday that it wanted to keep Shin a listed company.

''We would like to reduce our shareholdings in Shin Corp at the appropriate time and in an appropriate manner to maintain an orderly market,'' said Jimmy Phoon, a senior managing director of Temasek. He disclosed no details on the timing, price or size of any possible sell-off.

Shin currently has a free float of just 3.88%, well below the 15% minimum required by the Stock Exchange of Thailand. The company has until mid-2007 to amend its free float or risk possible delisting.

An increase in the free float could come through a sale in shares held by Shin or a public offering to dilute existing holdings.

Some analysts have speculated that a share sale could come as early as next month, as Temasek seeks to head off a high-profile investigation into Shin's shareholding structure.

Temasek controls 42% of Shin directly through wholly owned Aspen Holdings, and also has an indirect stake through Cedar Holdings, which holds another 54.5% of Shin, according to the SET. Cedar is owned by Kularb Kaew, Siam Commercial Bank and Temasek.

Surin Uptakoon, a Thai businessman who is the major shareholder of Kularb Kaew at 68%, said Temasek had not mentioned the issue of a share sale.

''There haven't been any discussions or consideration [of a sale],'' he said.

Khunying Jada Wattanasiritham, the president and chief executive of SCB, also denied any knowledge of a sale of Shin shares by Temasek.

The Commerce Ministry called for a criminal investigation last month into whether the Foreign Business Act was broken through the use of nominees acting on Temasek's behalf.

The prospect of a guilty verdict, which could result in jail, fines and even possible dissolution of the company or a revocation of Shin's concessions, has taken a stiff toll on Shin stock over the past few months.

Shares of Shin ended yesterday at 34.75 baht, up 0.75 baht, in trade worth 83.7 million baht. The stock has rallied in recent weeks from its year-low of 27.50 baht, but still remains well below the 49.25 baht paid by Temasek during its buyout of the 49% holdings of the family of Thaksin Shinawatra in January.

Analysts and fund managers said that given current market prices and uncertainties, a deal was unlikely to be concluded soon.

Adisorn Sermchaiwong, the president of SCB Asset Management, said that while Shin remained a very interesting stock, the pricing of any deal would determine the interest from investors.

Temasek, however, is unlikely to receive anywhere close to the 49.25 baht per share it paid during its takeover, he said, adding that the legal uncertainties should be addressed before any deal could be done.

Analysts say the ongoing investigations and court cases against the company are negative for Temasek's divestment plans.

''If the government can assure that the court cases would be sorted out, then it is worth looking at, but otherwise, no deal will get done,'' said a local analyst.

Richard Moe, a telecom analyst at Macquarie Securities, said one possible exit could be a state buyout of the stock.

''A potential solution could be to have TOT Plc and CAT Telecom take up the shares, and this could be a precursor to the future telecom sector reform that is set to take place,'' he said.

Another option, Mr Moe said, would be a sale to a state-controlled fund such as the Government Pension Fund, Social Security Office or the Vayupak fund. But GPF secretary-general Visit Tantisunthorn, who heads the country's largest institutional investor, denied that any overtures had been made.

''If offered at a good price, then we'd consider it,'' he added. ''But it's too early to even think about it. And if we did do something, it would only be as a portfolio investment, as just 1% of the company would cost up to one billion baht.''

Most analysts say the value of Shin ranges anywhere from 32 to 33 baht a share, although if the uncertainties were removed, its value would rise substantially to more than 40 baht. Shin generates the bulk of its revenues from its 42.8% holding in mobile market leader Advanced Info Service, and also controls large stakes in Shin Satellite, the broadcaster iTV and Thai AirAsia.

Minister ponders nominee amnesty

Source: Bangkok Post 17 October 2006

The Commerce Ministry could offer an amnesty to foreign joint ventures in violation of the Foreign Business Act in order to resolve problems with the use of nominees, according to Commerce Minister Krirk-krai Jirapaet.

Authorities plan to review the Foreign Business Act and other laws to close loopholes and modernise regulations. An amnesty, meanwhile, would give joint ventures that currently use nominee vehicles time to restructure their indirect holdings to fully comply with the law.

''If it is necessary to [offer amnesties] due to economic reasons, and it does not violate the principle of law, then we will look at it,'' the newly appointed minister said yesterday in an interview with the Bangkok Post.

Such an amnesty would include the telecom giant Shin Corp, which is the subject of a criminal investigation over whether Singapore's Temasek Holdings used nominee vehicles to violate the 49% foreign shareholding limit, he said.

''What is necessary is necessary, and we have to abide by the principles, and if that means that we have to give amnesty to [Temasek] then we'll have to do it, because we have to treat them in the same manner as everybody else,'' said Mr Krirk-krai, who ranked the nominee and Temasek issues as his fourth priority after farm products, retailing, and exports.

Temasek controls 42% of Shin directly through wholly owned Aspen Holdings, and also has an indirect stake through Cedar Holdings, which holds another 54.5% of Shin.

The Business Development Department earlier submitted a report to police investigators that Shin violated the 49% foreign limit due to the use of illegal nominees, an offence punishable by jail, fines or even dissolution of the business.

Mr Krirk-krai said it was time for the nation to move on and try to differentiate between political and economic problems.

''If there's something that is not right about the structure, then we'll adjust it, but if we try to mix politics and business together then we will be stuck, and in this case the biggest loser will be the economy and the investors' confidence in the Thai economy,'' he said.

Mr Krirk-krai added that the ministry under his guidance would look to amend various laws to suit the needs of the investors and the free-market economy.

''On the issue of nominees, we have to look at ways to sort it out. Once we have the laws ready, then we'll discuss it.

For example, if the 49% gives way for nominees, and your aim is to seek help in development of the country, especially in sectors in which we cannot compete, then why don't you give them 51%?'' he asked.

While companies that have nominee structures would be allowed to maintain the status quo, those set up in the future would have to follow any new regulations that would be put in place.

The market has welcomed the minister's views, saying they were a positive step for the country and would help restore lost confidence.

''If you ask me, this is great news as deals have remained low as foreign investors have shied away from investing in Thailand ,'' said an investment banker at one of Thailand 's leading brokerages.

Fund managers and lawyers also said Mr Krirk-krai's proposal was positive and that funds would likely start to flow in the future once policies were clearer.

''This is definitely very positive for the country,'' said Lance Depew, investment manager at Quest Capital, which manages $240 million in assets in Thailand .

The legal changes would bring the government's policy in line with reality as in the past the governments had turned a blind eye to the shareholding structures of companies, he added.

''The devil would be in the details, although I must say I support it wholeheartedly if the government can do it,'' added Supavud Saicheua, a managing director with Phatra Securities.

''It will be a very positive step for Thailand if the government can set the right framework for the future.''

It is estimated that 13,000 companies have nominee structures and fears of consequences arising from the Shin-Temasek investigations have prompted many investors to put decisions on hold.

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Ministry hands Kularb Kaew case to police

Source: Bangkok Post - 1 September 2006

The Commerce Ministry yesterday formally found that Kularb Kaew violated the Foreign Business Act and forwarded the case to the police for legal action.

The ministry's Business Development Department found that Kularb Kaew had breached Article 36 of the Act, which bans Thai investors from acting as nominees for foreigners to do business reserved for Thai nationals, including telecommunications.

"We need the police to take action against the company as the evidence indicates that money was transferred from abroad for Thai shareholders to buy Shin Corp shares," said Dusit Uchupong-amorn, deputy director-general of the department.

Kularb Kaew is one of several holding vehicles set up after the takeover of Shin Corp by Singapore 's Temasek Holdings. Temasek bought out the 49% shareholding in Shin held by the family of Thaksin Shinawatra in January for 73.3 billion baht.

Since mid-March, Kularb Kaew has been 68% owned by Surin Uptakoon, a Thai businessman based in Malaysia , with the rest controlled by Temasek. But direct shareholdings by Temasek stand at around 44% through Aspen Holdings, with the structure designed to allow Shin to maintain its status as a Thai company.

However, the Democrat Party and other critics claimed that Kularb Kaew was a proxy for Temasek and thus violated the Foreign Business Act.

Under the law, parties acting as nominees to evade the 49% foreign shareholding limit face jail of up to three years and/or fines of up to one million baht. The firm itself could be ordered dissolved.

Khunying Jada Wattanasiritham, the president of Siam Commercial Bank, declined to comment on the ministry's decision to forward the case to the police.

"We will need to wait and see what the latest developments will be. The bank's board undertook all decisions with the understanding that we were in compliance with all laws," she said.

SCB and subsidiary SCB Securities both played a major role in the Temasek takeover of Shin, with the bank making loans and investments of 16 billion baht in the deal. The bank took an initial shareholding of 10% in Cedar

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Somkid: Shin probe shows resolve

Bangkokpost 15 September 2006

KRISSANA PARNSOONTHORN

Thailand remains committed to promoting good governance in both the public and private sectors, according to caretaker deputy prime minister Somkid Jatusripitak. The high-profile case involving possible violations by Kularb Kaew and other holding vehicles of Shin Corp was a challenge to the country's governance, said Dr Somkid at the sidelines of the 2006 Asian Roundtable on Corporate Governance.

The Democrat Party has argued that Kularb Kaew is a nominee for Singapore 's Temasek Holdings to violate the 49% limit on foreign shareholdings for telecom companies.

''We are very concerned about this issue because it is in the public spotlight and will disclose the investigation results as soon as it is completed,'' Dr Somkid said.

He said the government recognised the importance of governance and its role in economic development and attracting foreign investment.

''With the arrival of 21st century, corporate governance has become even more complex. The rise of the so-called New Economy means greater ability, freedom and speed for not just organisations but individuals to directly connect and collaborate through the Internet,'' he said.

New business models are constantly emerging while rules and regulations may not be able to function as originally designed, he said.

''In the globalised society where investors are greatly concerned about corporate governance, we can't ignore it. If we want to attract foreign funds, we have to be ready and do something to assure them about this issue.''

In any organisation, he said, governance must be inseparable from leadership. ''Moreover, leadership must stand accountable to all stakeholders and command respect in and outside the organisation.''

Vipul Bhagat, country manager for Thailand and Philippines of the International Finance Corporation, said the agency in Asia was seeking to highlight the importance of governance in financial institutions and the role of non-executive directors.

As a major equity investor in banks across the region, the IFC has both the opportunity and necessity to develop a deep understanding of some of the unique governance risks and complexities of banks, where both depositors and shareholders are exposed to governance weakness and where the failure of one bank can threaten the entire system.

The IFC nominates non-executive directors to the boards of more than 30 companies in the region. This may be the most effective way to encourage better governance in companies by working from and within the board, Mr Bhagat said.

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SCB defends investment in Shin Corp deal

Bangkokpost September 14 2006

DARANA CHUDASRI

Siam Commercial Bank has denied any wrongdoing related to its role in the takeover of the local telecom giant Shin Corp by Temasek Holdings of Singapore. The bank was a key adviser for the Temasek deal, and a direct investor with a 10% stake in Cedar Holdings, one of several firms set up to hold Shin shares.

SCB's total exposure to the Shin deal is estimated at around 16 billion baht, including loans made to Temasek as well as direct investments made by the bank. SCB Securities, the bank's investment banking arm, played a major role in setting up the structure of the Shin takeover.

A growing investigation into the legality of the Temasek shareholding structure and its use of nominees has rattled many within the business community.

Khunying Jada Wattanasiritham, the SCB president, said the bank had no investment ties to Kularb Kaew, another holding company under the Temasek deal.

The bank's relationship to the deal was only as a shareholder in Cedar Holdings and a lender to Temasek, she said.

''Yes, we are one of three major investors in Cedar. When we made the decision to invest, it was with the general understanding that this would be a Thai company,'' Khunying Jada said.

Temasek holds a 44% stake in Shin directly through wholly-owned subsidiary Aspen Holdings. Another 52% of Shin is held by Cedar Holdings, which in turn is controlled by Temasek vehicle Cypress Holdings, Kularb Kaew and SCB.

A secret report drafted by the Business Development Department leaked on Monday said two Kularb Kaew investors, Pong Sarasin and Suphadej Poonpipat, purchased shares in the company using loans from SCB.

Authorities are investigating whether Kularb Kaew and the other holding vehicles used in the transaction violated telecommunications laws and the Foreign Business Act, which limits foreign shareholdings at no more than 49%.

Temasek has insisted that it is in compliance with the law and that Shin remains a Thai company as both Cedar and Kularb Kaew are Thai-controlled. Surin Uptakoon, a Thai businessman based in Malaysia , took a 68% stake in Kularb Kaew in March.

Temasek announced it would pay 73.3 billion baht to the family of caretaker prime minister Thaksin Shinawatra in late January for a 49% stake in Shin. A mandatory tender offer eventually resulted in the total shareholdings held by Temasek and Cedar rising to 97%.

SCB's shareholdings in Cedar, initially 10% when the Temasek deal was first launched in late January, now stands at just 5% after Cedar raised capital to support the Shin tender offer.

Khunying Jada said SCB's role in the Shin takeover was aimed at facilitating the needs of its clients.

The sheer size of the deal meant that a number of other banks were also involved, she added.

''Typically, you might see daily volume of $100 million in the foreign exchange market. This was a multi-billion-dollar deal, and it couldn't have been done through any single bank,'' Khunying Jada said.

''We can't deny our involvement in this deal. We decided to invest as we believed it was good business for the bank.''

Khunying Jada acknowledged that the ''complicated'' transaction had probably had an impact on the bank's image, and that the bank was now studying the situation in co-operation with outside legal experts.

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No SET rules on foreign holdings

Bangkokpost September 13 2006

A finding that Shin Corp may have violated foreign shareholding limits would have no impact on the company's status as a listed company, according to the Stock Exchange of Thailand.

Suthichai Chitvanich, a SET executive vice-president, said exchange regulations did not cover the nationality of shareholders or listed companies.

But Shin, 96% controlled by Singapore's Temasek Holdings and Thai investors, is in violation of free-float regulations, which states that listed companies must have at least 15% of total shares in the hands of minority shareholders.

Mr Suthichai said that as of April, Shin's free float was only 3.85%. The company has until May 2007 to meet the regulation or face transfer to the SET call market.

An investigation by the Business Development Department reportedly found that four holding vehicles _ Kularb Kaew, Cypress Holdings, Cedar Holdings and Aspen Holdings _ had all operated as nominees on behalf of Temasek, according to a story published by Matichon.

Pong Sarasin and Suphadej Poonpipat, two Thai investors in Kularb Kaew, purchased their shares with assistance from Temasek, the report said. Both arranged for loans from Siam Commercial Bank, another Kularb Kaew investor, to finance the share purchase which in turn was guaranteed by Cypress , a company fully controlled by Temasek.

Shin Corp is currently 44% held by Aspen Holdings, which in turn is wholly-owned by Temasek. Another 52% of Shin is held by Cedar, which in turn is controlled by Cypress , SCB and Kularb Kaew.

Korn Chatikavanij, a deputy secretary-general of the Democrat Party, called on caretaker commerce minister Somkid Jatusripitak to take action against Shin in light of the initial findings that shareholder laws had been violated.

''With the Business Development Department summarising that Kularb Kaew was a nominee, there is no need for further investigation. They say that further documents are required, but that's just an excuse to delay for time,'' Mr Korn said yesterday.

Mr Korn questioned whether Mr Surin, who became a shareholder in Kularb Kaew in March, was actually serving as a nominee for other interests in Shin Corp.

The ruling that Shin had violated the 49% shareholding law also raised other questions about the legality of Shin's subsidiaries, including Shin Satellite and Thai AirAsia.

Mr Korn added. ''We are concerned about the operations of the Commerce Ministry. A clear finding of wrongdoing has been made. Why aren't they taking action? The ministry must comply with the law, and not allow politics to interfere.''

Temasek purchased a 49% stake in Shin Corp from the family of caretaker prime minister Thaksin Shinawatra in January for 73.3 billion baht.

Shares of Shin Corp closed yesterday on the Stock Exchange of Thailand at 30.50 baht, up 25 satang, in trade worth one million baht.

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Temasek certain Shin deal is legal

Bangkokpost September 14 2006

POST REPORTERS

Singapore 's Temasek Holdings is confident that its investment in telecom giant Shin Corp will ultimately be cleared by Thai authorities. ''From our perspective, we are in compliance with all laws. We have cooperated fully with the Commerce Ministry, and are confident of a satisfactory review,'' said Jimmy Phoon, a senior managing director for Temasek.

Mr Phoon declined to comment on reports that the Business Development Department had found Shin to be in violation of foreign shareholding limits.

But he told the Bangkok Post that Temasek remained committed to Shin Corp, despite the controversy that has emerged since the takeover in January.

''We are a long-term investor, and have a strong belief in the future growth of the Thai economy,'' Mr Phoon said.

He denied that political factors played any part in the investment.

''This investment was made purely from a commercial consideration,'' Mr Phoon said, adding that Temasek had no intention of interfering in Shin management and only held one seat on the company's board.

Temasek is the investment arm of the Singapore government, with a portfolio of 129 billion Singapore dollars (around US$82 billion). Investments include financial institutions, telecommunications and infrastructure, with shareholder returns for the year ending in March of 24% and a net profit growth of 71%.

But the Shin deal, Temasek's largest investment in Thailand to date, has been a disaster. Shin shares now trade 37% lower than the price paid by Temasek in January.

''It is fair to say that the [controversy] was unexpected. But there is no point looking in hindsight, and we firmly believe that Shin remains a sound investment,'' Mr Phoon said.

Temasek and its local partners purchased a 49% stake in Shin from the family of caretaker Prime Minister Thaksin Shinawatra on Jan 23 for 73.3 billion baht. A tender offer resulted in the group holding 96% of Shin by March.

Currently, 44% of Shin is held by Aspen Holdings, a Temasek vehicle. Another 52% of Shin is held by Cedar Holdings, which is controlled by Temasek's Cypress Holdings, Siam Commercial Bank and Kularb Kaew.

Central to whether Shin is a Thai company is the status of Kularb Kaew, 68% owned by Thai businessman Surin Uptakoon and the rest by Temasek.

The Democrat party has alleged that Kularb Kaew was a nominee for Temasek, a conclusion reportedly affirmed by a report by the Business Development Department. The report found that Pong Sarasin and Suphadej Poonpipat had purchased their shares in Kularb Kaew with assistance from Temasek's Cypress .

Kiat Sittheeamorn, an executive director of the Democrat party, said the report showed that Temasek had intended to bypass the law through nominees. ''The entire process shows that there was an intention to evade the law and allow foreign investors to take over Shin,'' he said.

The Commerce Ministry has refused to release the report pending a review of the use of nominees by foreign firms. The Council of State is to give a ruling on the case today.

Mr Phoon acknowledged that Cypress had guaranteed the loans made to Mr Suphadej to purchase Kularb Kaew shares, but that they had been without his knowledge and made only to facilitate the transaction.

He flatly denied that Temasek had financed the investments of Mr Pong, Mr Suphadej or Mr Surin. ''All the Thai investors had the financial capacity to make their investments,'' Mr Phoon said.

Mr Surin also denied allegations that he was a proxy for Temasek.

Funds to pay for the 2.72 billion baht investment in Kularb Kaew was provided through a loan from his own company, Fairmont Investments Group in the British Virgin Islands .

Mr Surin said Fairmont in turn borrowed from other banks to facilitate the transaction, while Greenland served only as a custodian for the transaction.

''The money definitely did not come from Temasek. Everything that has happened is politically related. But I have done nothing wrong,'' he said.

Mr Surin, little known in Thailand, is known as Dato' Lau Kim Khoon in Malaysia, where he holds extensive shareholdings in three listed companies and has a personal net worth estimated at $750 million.

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Shin probe generates panic

Bangkokpost 13 Septemeber 2006

Local law firms flooded with queries

POST REPORTERS

Thai and international law firms are receiving a flood of new business inquiries as foreign companies grapple with the possible need to change their shareholding structures in the wake of an ongoing investigation into nominee companies.

The Business Development Department has reportedly concluded that the Singapore government's investment arm, Temasek Holdings, had violated the Foreign Business Act and telecom laws by controlling more than 49% in the local telecom giant Shin Corp.

But the report has remained sealed pending a broader inquiry into the use of nominee companies by foreign investors.

A survey of a dozen of the country's most prominent foreign investors, including Tesco, Holcim, Carrefour and others, showed a widespread use of multiple share classes, different voting rights, nominee structures and other techniques to bypass the 49% restriction.

Thai law defines the nationality of a firm based on the nationality of its shareholders _ if a majority of capital is controlled by Thais, then the company itself is considered Thai.

International accounting practice, however, typically takes a broader view, and considers not only the surface nationality of the shareholders, but also issues such as management control and the rights to financial benefits from the investment.

Yanyong Phuangrach, a deputy permanent secretary of the Commerce Ministry, said authorities were examining the broader implications of the issues raised by the Shin case and how they related to the law and foreign investment.

Mr Yanyong, who is chairing an inquiry panel into Shin shareholding structure, declined to comment on the reported conclusion by the Business Development Department that Shin was in violation of the law.

''What is of concern to us is the impact [the ruling] will have on business,'' he said. ''The conclusion from the investigation could be different from the one that [has been reported].''

Temasek currently holds 44% of Shin outright and has an indirect stake in another 52% through Cedar Holdings. Temasek has insisted that it is in compliance of the law, as Cedar is majority owned by Thais given Siam Commercial Bank's 10% shareholding and Kularb Kaew's 45% stake. Kularb Kaew is in turn 68% controlled by Sino-Thai businessman Surin Uptakoon, with Temasek holding the remainder.

Thanong Bidaya, the caretaker finance minister, acknowledged that the Shin investigation had raised widespread concerns among foreign companies, adding that the definition of a nominee was a contentious one.

''If a Thai investor borrows funds to purchase shares in a Thai company, with the loan guaranteed by a foreign bank, who has actual ownership? This is a practice that has gone on for 20 to 30 years in Thailand , and it is debatable whether you can say this is a clear case of a nominee,'' Mr Thanong said.

He said authorities needed to consider whether chain shareholdings across different levels of shell companies should be combined together for the purposes of the law. A foreign investor holding minority stakes across several shell companies has previously been classified as under the 49% limit, despite the fact that total shareholdings, direct and indirect, might exceed the limit.

''In the past, Japanese companies, for instance, invested heavily in Thailand and sought prominent Thais as partners. Many investors basically purchased shares on behalf of the Thai directors and we have never assumed that this was a violation,'' Mr Thanong said.

But the inquiry into the issue has made the business community nervous.

''The market is panicking and most of the companies are already looking at restructuring their shareholding structure,'' said a lawyer, who declined to be named but admitted that his office had received many inquiries about such deals.

Lawyers and investment bankers say that the problem is not just Shin, but the fact that the verdict could establish a principle that would catch hundreds of other companies in violation of the law.

''Our firm is having a problem now as foreign investors want to buy out a company, but, with the outcome of Shin still not out, the buyers are not willing to put up the funds for the acquisition,'' said one investment banker currently involved in a merger and acquisition deal involving a listed Thai company.

Lawyers say that there are few options open to companies to restructure their shareholdings because, under the law, voting rights for preferred shares cannot be changed after the formation of the company. Most foreign companies that are likely to be scrutinised are currently using preferred shares to exert control.

''We are restructuring our shareholding in the aftermath of the Shin deal,'' said a senior executive at a multinational firm that has invested billions of baht in its Thai operations.

Legal experts say they expect that eventually, they will receive some sort of accommodation from the authorities, with one possibility being a grandfather clause to give existing companies time to comply with the changes.

While few expect the government to agree to full liberalisation of foreign ownership, another option would be to revamp the Foreign Business Act to restrict its application to key sectors deemed critical to national interest. The act's so-called ''List 3'' covers a broad range of industries, including services, construction, engineering, law, trading, retail and tourism.

One foreign executive said that if Thailand decided to expand its enforcement of the 49% rule with a new definition of nominee, he would have no choice but to divest his shareholdings to comply.

''The laws have always been there. The companies have been trying to circumvent them and now they are realising that it is not the right way to go about it. So many will look to sell some of their shares in the proxy companies back,'' he said.

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Temasek denies breaching laws

Bangkokpost September 12 2006

Temasek Holdings yesterday denied allegations by the Democrat Party and the Democracy Confederation that it was in violation of foreign shareholding laws.

Last week, Weng Tochirakarn, the chairman of the Democracy Confederation, claimed that Temasek's own website showed the company holding a 96% stake in the telecom conglomerate Shin Corp.

But the Singaporean government's investment arm said that 96% of Shin was actually held through two companies, Cedar Holdings and Aspen Holdings.

The figure also included shareholdings held by partners Siam Commercial Bank and Thai investors through Kularb Kaew, Temasek said in a statement. ''The assumption that Temasek Holdings holds 96% is false.''

Temasek's own website said that, as of March 31, its holdings in Shin Corporation amounted to 44%, through its direct holdings in Aspen .

The remaining 52% in Shin is held jointly through Cedar Holdings, which includes Kularb Kaew and SCB as shareholders. Kularb Kaew is 68% held by Surin Upatkoon, a Thai-Chinese businessman, with Temasek the rest.

''This information regarding the shareholding structure of Shin Corp can be verified through the relevant Thai government agencies,'' Temasek said.

The Commerce Ministry is investigating Shin Corp's shareholding structure and whether the use of nominee companies is a violation of the Foreign Business Act and local telecom laws restricting foreign shareholdings at 49%.

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Shin deal's critics take the stand in BDD probe

Bangkokpost September 9 2006

POST REPORTERS

Executives of Siam Commercial Bank and Cedar Holdings will be called to testify on Sept 18 about Temasek Holdings' buyout of the telecom giant Shin Corp. Senator Chermsak Pinthong, who has alleged that the Temasek deal violated foreign shareholding laws, will also be asked to testify before a high-level investigatory committee.

Yanyong Phuangrach, the deputy permanent secretary at the Commerce Ministry and chairman of the investigative committee, said other parties would also be asked to give information.

Authorities are investigating whether Temasek Holdings, the investment arm of the Singapore government, violated the Foreign Business Act and telecom laws by exceeding foreign shareholding limits after its takeover of Shin Corp.

The transaction was structured through several holding companies to avoid violating the 49% foreign shareholding limit. According to the Stock Exchange of Thailand, as of April 7, Shin was 44% owned by Temasek holding company Aspen Holdings, and 52% held by Cedar Holdings.

Cedar is 45% owned by Kularb Kaew, 10% by Siam Commercial Bank with the rest Temasek. Kularb Kaew is 68% owned by Surin Upatkoon, a Thai-Chinese businessman, with Temasek the rest.

Representatives from the Democrat Party and the Democracy Confederation have both offered further information.

Weng Tochirakarn, the chairman of the Democracy Confederation, insisted that the Shin deal was ''unusual'', pointing to the fact that even though Kularb Kaew has been declared a Thai entity, originally Thais held only 5.1% of the voting rights.

Mr Surin took over a majority investment in Kularb Kaew in March as the company went for the outstanding shares of Shin under a mandatory tender offer. The Temasek deal was launched in late January after the family of caretaker Prime Minister Thaksin Shinawatra sold off its 49% stake in Shin for 73.3 billion baht. The initial shareholding level of the deal forced Temasek to launch a tender for all remaining shares.

This forced Temasek to use Cedar as the recipient for excess shares and find Thai partners to help maintain Cedar's status as a majority Thai-owned company.

A preliminary 800-page report by the Business Development Department into the legality of the transaction has reportedly concluded that Kularb Kaew was indeed a nominee for Temasek.

But the report has been kept confidential by the Commerce Ministry, pending a new investigation into the use of nominees by foreign businesses.

Mr Yanyong has previously said it would probably take two to three months for the study to decide whether the Foreign Business Act had been violated in the Temasek-Shin case and how the widespread use of proxies by foreign investors would have to be addressed in future.

Kiat Sittheeamorn, an executive director of the Democrat Party, criticised the committee for delaying its investigation.

The Democrat Party earlier this month petitioned caretaker commerce minister Somkid Jatusripitak to release the results of the inquiry. The ministry has assigned deputy commerce minister Preecha Laohapongchana to oversee the issue.

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TELECOMS / FOREIGN OWNERSHIP

DTAC: Shareholding in line with Thai laws 29-august

SRISAMORN PHOOSUPHANUSORN

The Norwegian chief executive of the local mobile operator DTAC has reiterated that the company's shareholding structure does not violate Thai foreign business law.

Sigve Brekke told the Bangkok Post that the current structure of DTAC's new parent company, Thai Telco Holdings, was in compliance with the law.

DTAC was taken over by Norway-based Telenor in October last year when it bought out the Bencharongkul family's holding in DTAC's parent, United Communication Industry (Ucom).

Under the deal, Thai Telco Holdings, a 49%-owned subsidiary of Telenor, purchased the Ucom shares from the Bencharongkul family.

Thai Telco Holdings currently holds 42.4% of the shares in Ucom. Other shares in Ucom are held by Telenor Asia Pte, a holding company set up by Telenor with a 47% stake, with the remaining 10.6% a free float, including 9% held by the Bencharongkul family.

In turn, DTAC is 41.6% held by Ucom, 32.9% by Telenor Asia Pte, 9% by TOT Plc and 0.5% by Thai Telco Holdings with a free float of 15.9%.

The Thai Telco Holdings structure has been seen as one that could come under scrutiny in a Commerce Ministry probe into foreign nominee holdings, prompted by the Shin Corp takeover by Temasek Holdings of Singapore.

But Mr Brekke insisted that DTAC did not violate the foreign shareholding limit.

He acknowledged that DTAC might not comply with new foreign dominance regulations _ which are separate from the Foreign Business Law as an indication of company control rather than shareholding _ that are currently being drafted by the National Telecommunications Commission (NTC).

"I can't elaborate in detail until the nominee investigation [of Kularb Kaew, a holding company set up by Temasek] is clarified and see what points the authorities single out," he said.

"But what I can say now is that there was nothing wrong in our holding structure. It was 100% clear and complies with current foreign limit regulations."

He said the Singaporean takeover deal had raised questions about "where the money came from", adding that the investment flow was clear in Telenor's case.

The Commerce Ministry is investigating whether Kularb Kaew is a nominee for Temasek and whether Shin is in violation of the foreign shareholding limit.

He said DTAC would need to comply with any resolutions on foreign dominance outlined by the NTC if DTAC's management was classified as foreign-controlled.

He said his mind was on other concerns at present. They included regulation of interconnection charges, third-generation mobile services, and "unhealthy price competition" that had resulted in a 10% contraction of revenue growth for the industry for the first half of the year.

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Nominees likely to face more scrutiny

August 26 Bangkokpost

Shareholders of 5% may be in spotlight

PLOY CHITSOMBOON

The Securities and Exchange Commission plans a ''nominee-monitoring'' measure that will require any shareholder with more than 5% in a listed company to disclose its identity.

The current information disclosure rule applies to shareholders with stakes of more than 10% in a listed company, according to Chalee Chantanayingyong, a senior assistant secretary-general of the Securities and Exchange Commission.

''We are basically checking everything to make sure that we're not far from the international standard, and in order to lock up the whole system to be in control,'' Mr Chalee said at a seminar held by the Thailand Development Research Institute yesterday.

The change is a response to recent concerns raised about the use of nominees to hold shares in companies on behalf of foreign entities. Such holdings could result in foreign shareholding limits in certain business sectors being exceeded.

Mr Chalee said the scrutiny of such holdings might take longer as regulators would need to consult with various parties about the possible impact.

As part of the process, he said, the SEC was considering sending a circular to all brokers about two important practices: Know Your Customer (KYC) and Client Due Diligence (CDD).

He said brokers must acknowledge the actual identities of each customer as to who is the account owner and its background, and whether those customers are qualified to open accounts.

''If we can sort out all these problems, I think we could solve the issue of nominees to some degree though it might mean more of a burden for securities brokers,'' Mr Chalee said.

According to the TDRI, Shin Corp now leads all listed companies in the use of nominees at 98.1% of total shareholdings, followed by the rubber producer Hua Thai Manufacturing at 97%, then Golden Land Property 85.4%, Tycoons Worldwide Group 83.4%, and Delta Electronics ( Thailand ) 82.6%.

The TDRI study showed that nominees held 24.1% of shares in all listed companies on the SET, or around one trillion baht in terms of share value.

Nominees were most prevalent in the technology sector, at 36.19% of total shareholdings, followed by finance at 30.27% and construction and property at 24.3%.

According to Supavud Saicheua, managing director of Phatra Securities, the use of nominees in the Thai stock market was widespread.

''[Nominees] have never been an issue until the [Shin] deal. But you have to differentiate the pros and cons of using nominees. Having a nominee doesn't necessarily mean a lack of transparency. You need to look at the intentions,'' Mr Supavud said.

New business registration rules that took effect on Aug 15 require all new companies with foreign shareholdings of more than 40% to declare their sources of funds, in guidelines issued by the Commerce Ministry.

The change was aimed at guarding against possible problems arising from the use of nominee shareholders and increasing transparency in the corporate registration process.

The rule will also apply to new companies that are controlled by foreign entities, even if their direct shareholdings are less than 40%.

Shareholders must submit evidence of financing used to hold shares, including bank statements and other documents.

The authorities have taken a stricter line on the practice of nominee shareholders following the takeover of Shin Corp by Singapore 's Temasek Holdings earlier this year.

Temasek has full control of Shin through the use of nominee companies, such as Kularb Kaew, despite the fact that Thai law limits foreign ownership of telecom companies at 49%.

The Commerce Ministry is currently investigating whether Kularb Kaew should be classified as a nominee for Temasek and whether Shin is in violation of the foreign shareholding limit.

Chalongphob Sussangkarn, the TDRI president, said that despite the experience of the 1997 crisis, corporate governance problems remained rampant.

''The political situation has obviously pulled down our economic confidence overall. And investment has continued to slow though we have some support from tourism and exports,'' he said.

Dr Chalongphob said economic growth this year was likely to be just 3.5% to 4%, compared with last year's 4.5% growth. But growth could rise to as high as 6% next year if the new government was formed quickly.

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Ministry to widen probe of Shin sale

Bangkokpost 24 August 2006

Kularb Kaew, foreign stakes under spotlight

WORANUJ MANEERUNGSEE & WICHIT CHANTANUSORNSIRI

Authorities yesterday agreed to widen an investigation into whether Kularb Kaew is acting as a nominee to allow Singapore's Temasek Holdings to control telecom giant Shin Corporation in violation of foreign shareholding laws.

Deputy permanent secretary for commerce Yanyong Phuangrach said the inquiry would take two to three months and include three other firms involved in Temasek's takeover of Shin Corp _ Aspen Holdings, Cedar Holdings and Cypress Holdings.

Authorities will also examine whether Section 36 of the Foreign Business Act, which stipulates penalties for Thai nationals aiding foreign entities to bypass shareholding limits, has been violated.

''The investigation should not focus only on one aspect of whether [Kularb Kaew] is a nominee. I would rather see the investigation also cover Section 36 as well as the impact on other companies. I am not pre-judging anything, but only looking at the facts,'' Mr Yanyong said.

The Democrat party has charged that Kularb Kaew is acting as a Temasek nominee to bypass the 49% foreign stake limit on local telecom operators.

Temasek in January bought out the 49% stake in Shin Corp held by the family of caretaker Prime Minister Thaksin Shinawatra for 73.3 billion baht. Temasek and a group of Thai investors, including Siam Commercial Bank (SCB) and Surin Upatkoon, ultimately raised their shareholdings to 97% after a mandatory tender offer was made in March.

Kularb Kaew holds 45% of Cedar Holdings, which together with Temasek and SCB, hold 55% of Shin. Another 42% of Shin is controlled by Temasek's holding company Aspen Holdings.

Shin faces fines and the loss of its operating licences if Kularb Kaew is deemed an illegal proxy for Temasek, despite the fact that its majority shareholders are Thai.

A preliminary 800-page report by the Business Development Department, the unit responsible for corporate registrations in Thailand , reportedly summarised that Kularb Kaew was indeed a nominee.

But the Commerce Ministry has refused to release the report, saying that the new committee headed by Mr Yanyong and including officials of the Securities and Exchange Commission, the Finance Ministry, the Bank of Thailand, and the Council of State, which is the government's legal arms, would have to consider the broader implications of the case.

A ruling that Kularb Kaew is an illegal entity would have a huge impact on foreign businesses in Thailand given the widespread use of holding vehicles and nominees here, legal experts said.

Mr Yanyong said the committee would work carefully as its ruling would be used as a standard for all businesses in the country.

''The term nominee should be clarified. What is a nominee, and is the shareholding for themselves or for others?'' he said, acknowledging that the issue was a sensitive one for foreign investors.

Caretaker Finance Minister Thanong Bidaya cautioned yesterday that the case was raising concerns among foreign investors in Thailand .

He said the issue of foreign shareholding limits was sensitive, and that the review should be made comprehensively to judge the merits of the case.

Foreign investors are typically limited to shareholdings of no more than 49% in many businesses, although certain sectors such as telecommunications and financial services operate with restrictions set under specific laws.

Mr Thanong said the practice of nominees was a long-standing one in Thailand as foreign investors sought to exercise management control or bypass shareholding limits set under the law.

''Foreign investors have expressed concern about the case and want the law to be scrapped given that it impedes investment,'' he said.

If Thailand insisted on maintaining shareholding limits, it was unavoidable that foreign investment interest would drop in the future, he said, adding that many countries have scrapped such restrictions to attract investment capital.

Mr Thanong said the investigating committee would ultimately have to submit its findings to the government for further action. ''The committee should take into account what business practices have been, and whether the Kularb Kaew case is the same or different and how best to address the situation,'' he said.

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Regulations need to reflect reality

Bangkokpost 23 August 2006

A new investigation panel led by the Commerce Ministry plans to hold its first meetings today as part of an investigation into the status of Kularb Kaew and its shareholdings in telecom giant Shin Corp. Temasek Holdings, the investment arm of the Singapore government, set up Kularb Kaew and two other holding companies as part of its takeover of Shin Corp in late January. Authorities are looking into whether Kularb Kaew, now 68%-owned by Sino-Thai businessman Surin Upatkoon, is a legitimate Thai company, or is in fact a nominee for Temasek. The question has profound implications for both Shin Corp and Thailand's business community _ if Kularb Kaew is deemed a nominee, Shin would be in potential violation of the Foreign Business Act and the Telecommunications Act, and could face fines or revocation of its operating licences for violating the 49% foreign shareholding limit for telecom operators. The investigation is being nervously watched by foreign businesses, as authorities are not looking only at the nationality of the shareholders to determine the status of Kularb Kaew, but the more subtle question of management control and the flow of funds from dividends paid by Shin to the shareholders.

Legal experts say if Kularb Kaew is indeed deemed a nominee under a new, expanded definition, so are tens of thousands of other joint ventures that operate with foreign shareholders. Indeed, Shin's largest competitor in the mobile phone sector, Dtac, is majority-controlled by Norway 's Telenor through holding structures not unlike that used by Temasek and other companies. A cursory glance at the shareholder registrations for Thailand 's listed companies shows that nominees are commonplace. PTT Plc, the largest and most profitable company on the Stock Exchange of Thailand, boasts among its top-10 shareholders innocuous names such as HSBC ( Singapore ) Nominees, State Street Bank and Trust, Nortrust Nominees and Chase Nominees. All four entities represent leading international financial institutions holding shares on behalf of anonymous foreign clients.

Nominees serve several purposes. For one, nominees allow the actual investors to hide their identity from public scrutiny. Institutional and individual investors alike often take pains to mask their interest in a public company due to market sensitivities. While not necessarily keeping with the principles of good corporate governance and transparency, nominees do help investors maintain a degree of secrecy from competitors regarding their investment strategy. Nominees also serve a more questionable purpose, by helping companies and individuals skirt tax and foreign shareholding laws.

The Foreign Business Act lists dozens of professions banned or restricted to foreigners for three broad reasons: national security, in the case of agriculture and mass media; the need to protect traditional Thai art, culture and handicrafts, such as in the production of Thai musical instruments; or industries where Thais simply cannot compete with foreigners, such as accounting, law, architecture and engineering.

Foreign shareholding restrictions are an anachronism in today's globalised economy. Yes, most countries maintain limits on foreign shareholding in key industries. But the fact is that limits do more harm to consumers than good, as restricted competition shelters domestic producers from market pressures to improve their products, services and prices. Protectionist policies all too often are politically motivated to protect domestic special interest groups, rather than based on sound economics.

Proponents of foreign investment restrictions argue that there is a real need to ensure that so-called sensitive industries, such as telecommunications, financial services or energy, are held in local hands in the interests of economic and national security. But the nationality of a company's shareholders offers no guarantee of a company's competence or commitment to customers and country. Independent regulators also exist to ensure that business operators comply with labour, environment and consumer protection rules. Allowing nominees to continue to operate unchecked only perpetuates the fiction that Thailand 's outdated laws remain relevant. It would better serve the public if we strengthen the hand of regulators, liberalise our markets and revamp our laws to reflect the realities of today's world.

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Foreign ownership laws to be discussed

Bangkokpost: 15 August 2006

Will new regulations apply to all parties?

UMESH PANDEY

The Joint Foreign Chambers of Commerce will meet on Monday to discuss the impact that an ongoing investigation into the shareholding structure of Shin Corp will have on foreign businesses in Thailand .

''We have monthly meetings, and Monday's meeting is part of that procedure, but what is different is that a lot of our members have sought an explanation on the new regulations issued by the Ministry of Commerce,'' said Peter Van Haren, the president of the Joint Chambers of Commerce (JFCC).

''What has spooked a lot of our members is the new declaration by the Ministry of Commerce that states that a company with more than a 40% [foreign] shareholding or with more than one foreign director has to state the source of its funds.''

The declaration by the ministry, which took effect from Aug 15, came during an official investigation into whether Kularb Kaew _ a firm that is a major shareholder in Cedar Holdings, which in turn holds 55% of Shin Corp _ was a foreign nominee for Singapore 's Temasek Holdings.

The country's political crisis was triggered in part by the tax-free sale of a 49% stake in Shin by the family of caretaker prime minister Thaksin Shinawatra to the Singaporean state investment group.

The Commerce Ministry on Wednesday widened its investigation to encompass other firms holding stakes in Shin Corp.

''The view is that these regulations are going to be implemented for new companies, but this is not certain and nobody has said that companies that are operating under this structure would not be impacted,'' Mr Van Haren said.

He added that a lot of the members of the Joint Chambers of Commerce had asked for clarification of this issue.

''This would be a fact-finding mission for us as we will have an expert in foreign business law come and talk to us and we will discuss the issues. We are also going to discuss whether we need a contingency plan,'' he added.

The ministry's stepped-up scrutiny of foreign ventures has kept investors at bay, with some having opted to stay out of the Thai market pending clarification.

'' Thailand has to make a decision on whether it wants foreign direct investment (FDI) or not, as these kinds of moves only help to keep FDI away from the market,'' Mr Van Haren said.

Market analysts and legal experts had all expressed concern about the impact on FDI this investigation may have and have voiced their opinions to keep investment as open as possible, especially with Thailand now facing formidable competitors such as Vietnam , China and India .

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GOVERNANCE

Shin deal's critics take the stand in BDD probe

POST REPORTERS

Executives of Siam Commercial Bank and Cedar Holdings will be called to testify on Sept 18 about Temasek Holdings' buyout of the telecom giant Shin Corp. Senator Chermsak Pinthong, who has alleged that the Temasek deal violated foreign shareholding laws, will also be asked to testify before a high-level investigatory committee.

Yanyong Phuangrach, the deputy permanent secretary at the Commerce Ministry and chairman of the investigative committee, said other parties would also be asked to give information.

Authorities are investigating whether Temasek Holdings, the investment arm of the Singapore government, violated the Foreign Business Act and telecom laws by exceeding foreign shareholding limits after its takeover of Shin Corp.

The transaction was structured through several holding companies to avoid violating the 49% foreign shareholding limit. According to the Stock Exchange of Thailand, as of April 7, Shin was 44% owned by Temasek holding company Aspen Holdings, and 52% held by Cedar Holdings.

Cedar is 45% owned by Kularb Kaew, 10% by Siam Commercial Bank with the rest Temasek. Kularb Kaew is 68% owned by Surin Upatkoon, a Thai-Chinese businessman, with Temasek the rest.

Representatives from the Democrat Party and the Democracy Confederation have both offered further information.

Weng Tochirakarn, the chairman of the Democracy Confederation, insisted that the Shin deal was ''unusual'', pointing to the fact that even though Kularb Kaew has been declared a Thai entity, originally Thais held only 5.1% of the voting rights.

Mr Surin took over a majority investment in Kularb Kaew in March as the company went for the outstanding shares of Shin under a mandatory tender offer. The Temasek deal was launched in late January after the family of caretaker Prime Minister Thaksin Shinawatra sold off its 49% stake in Shin for 73.3 billion baht. The initial shareholding level of the deal forced Temasek to launch a tender for all remaining shares.

This forced Temasek to use Cedar as the recipient for excess shares and find Thai partners to help maintain Cedar's status as a majority Thai-owned company.

A preliminary 800-page report by the Business Development Department into the legality of the transaction has reportedly concluded that Kularb Kaew was indeed a nominee for Temasek.

But the report has been kept confidential by the Commerce Ministry, pending a new investigation into the use of nominees by foreign businesses.

Mr Yanyong has previously said it would probably take two to three months for the study to decide whether the Foreign Business Act had been violated in the Temasek-Shin case and how the widespread use of proxies by foreign investors would have to be addressed in future.

Kiat Sittheeamorn, an executive director of the Democrat Party, criticised the committee for delaying its investigation.

The Democrat Party earlier this month petitioned caretaker commerce minister Somkid Jatusripitak to release the results of the inquiry. The ministry has assigned deputy commerce minister Preecha Laohapongchana to oversee the issue.

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Nominees put wind up foreign firms

The Nation - 3 August 2006

Thailand Securities Depository (TSD) president Sopawadee Lertmanaschai has blamed the absence of laws governing the disclosure of local shareholder nominees for low corporate governance scores given by foreign investors.

Unlike the United States , Thailand has no law forcing nominees to disclose their shareholders' names, Sopawadee told reporters yesterday.

"We cannot force them to disclose their shareholders' names because of the lack of law. What we can do now is wait for information after listed companies close their new shareholders registration," she said.

Although TSD serves as a register of the country's listed companies, it cannot track who the real investors behind nominees are, she said.

"Corporate governance is beyond the law. Executives of companies with good corporate governance would not participate in stock manipulation," she said.

Chalee Chandanayingyong, assistant secretary-general of the Securities and Exchange Commission, said a nominee law was in the process of being drafted by the  watchdog's legal affairs team.

"The SEC would be circumspect in issuing a nominee regulation because it is a sensitive issue. Some investors don't want to reveal their names publicly. The SEC would have to balance the advantages and disadvantages," he said.

Meanwhile, a source in the brokerage community, said it was difficult to check who the real shareholders are because most big investors and politicians make transactions through nominees, which can be easily established domestically or internationally.

Buying a stake through nominees is periodically adopted to skirt laws mandating the start of tender offers after 25 per cent of a company's shares are purchased. No one knows if several nominees holding a sizeable stake in a listed company are from the same group, the source said.

"We have to accept that there are is an abundance of nominees in the Thai stock market and retail investors lose the advantage because they don't know who the real shareholders are. Foreign investors have paid attention to information disclosure, so the Thai stock market scored within the low range for corporate governance," the source said.

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Govt 'buying time' on Kularb Kaew Co deal

SURASAK GLAHAN

The Democrat party has warned Deputy Commerce Minister Preecha Laohapongchana to refrain from trying to needlessly prolong an investigation into the foreign shareholding in Kularb Kaew Co.

Kiat Sittheeamorn, a party executive, said the plan by Mr Preecha to spend two more months verifying the foreign ownership of the firm _ a holding company of Singapore 's Temasek Holdings _ was unnecessary. Mr Preecha also was not entitled to make such decision, he said, threatening to take legal action if there was an attempt to delay the investigation.

Kularb Kaew is registered as a Thai-owned company. It was used by Temasek as a key vehicle in the takeover of Thailand 's telecom giant Shin Corp in January. Mr Kiat said Mr Preecha's move to set up a new committee to further investigate the company's shareholding status and to define the term "nominee" was wrong.

The ministry's Business Development Department had preliminarily concluded that Kularb Kaew was a proxy of Temasek but Mr Preecha has set up a committee to investigate. The panel is due to meet the Finance Ministry, the Judicial Council, the Bank of Thailand and the Business Development Department on Wednesday to discuss the problem.

Mr Kiat said Mr Preecha's requirement to redefine Kularb Kaew's status was not right because it had already been clearly defined under the Alien Business Act. As a person involved in drafting and applying the law, he said the intention of the law was to bar both direct and indirect foreign ownership in Thai companies beyond legal limits.

"No other countries issue criteria to define the term 'nominee' because they want the law to be broadly applicable," he said. "Setting the criteria is the act of creating a trap for ourselves." He said the ministry has constantly changed the focus of the issue as an attempt to buy time.

The attempt to bring in tax experts by involving other parties like the Finance Ministry into the investigation was also unnecessary, he said. "The issue of shareholding nominees only involves monetary matters in which practices and misconduct have already been stated in the law," he added.

Mr Kiat said Mr Preecha had no power to appoint a working committee to investigate the issue since the authority belonged to the commerce minister.

Mr Preecha and some members of his panel had no right to investigate the case further because the law empowered certain officials of the Business Development Department only, he said.

A delay in revealing findings from the initial investigation allows time for the evidence to be tampered with, he said. He believed the department now was ready to submit its findings to the police, and urged Mr Preecha to stop interfering.

Caretaker Commerce Minister Somkid Jatusripitak or Mr Preecha could face a lawsuit in the Administrative Court if they attempted to delay the process, Mr Kiat said.

Meanwhile, Korbsak Sabhavasu, another member of the Democrat party, has launched his third book to reveal what lied beneath the Shin Corp sale.

The book asked Thaksin Shinawatra if he had received 329 million baht for the sale of his 329 shares to Ample Rich _ a deal that Mr Thaksin claimed occurred before his premiership six years ago. Mr Thaksin had to show a receipt of payment, he said. If the caretaker premier had no receipt, it meant Ample Rich still owed him the money, he added, pointing that this record did not appear in Mr Thaksin's assets declaration.

"Once the National Counter Corruption Commission is formed, I will file a complaint to them requesting an investigation into the matter," he said.

Mr Korbsak said he had raised a question in the book whether the sale was an act of money laundering. He said it was not too late for the government to demand Temasek Holdings enter an agreement to ensure the firm strictly complies with Thailand 's security rules.

Korn Jatikavanich, a Democrat financial expert, said yesterday he would submit a letter to the office of the Securities and Exchange Commission to request an explanation on the Shin Corp deal. Too many questions remained unanswered, and the public had a right to know what lay behind the deal.

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EXCLUSIVE

'I am not a nominee'

Little-known tycoon Surin Upatkoon talks with Chiratas Nivatpumin and Nuntawun Polkuamdee at his offices in Kuala Lumpur about the controversy over his investment in Kularb Kaew. Surin Upatkoon offers a wan smile and a shrug. "I strongly believe that my case basically boils down to politics. Under normal circumstances, this kind of investment wouldn't attract this kind of interest at all."

But the reclusive 57-year-old tycoon now stands firmly in the limelight, following his US$70 million investment in March to take an indirect stake in the local telecom giant Shin Corp.

The Commerce Ministry has launched an investigation into whether Mr Surin is acting as a nominee for Singapore 's Temasek Holdings to control Shin in a possible violation of Thai law.

The landmark case is being closely watched by the Thai and foreign business communities. A ruling against Shin could not only hurt the company's television, telecommunications, satellite and aviation units, but would also raise questions about the legitimacy of thousands of foreign joint ventures in Thailand that have operated for years using nominees to skirt foreign shareholding limits.

For Mr Surin, the public attention marks a decidedly poor welcome for his first business investment in Thailand .

"I am Thai. What did I do wrong? I am not someone without standing. I have every right and the ability," he said.

"Everyone is saying that I'm a nominee for Temasek. It's more politics than anything else. For me, with my position today, why would I want to be a nominee for someone else? I am not a nominee."

Mr Surin said all he wanted was "fair treatment" from the Commerce Ministry. "My investment in Shin has nothing to do with politics. I intend this as a long-term investment," he said.

Better known in Malaysia as Dato' Lau Kim Khoon, Mr Surin is a major shareholder and director of three listed companies with a combined market capitalisation of $1.1 billion: Magnum Corp, Malaysia 's oldest and largest licensed lottery operator; MWE Holdings Berhad, a conglomerate with interests in electronics, textiles and property; and Multi-Purpose Holdings Berhad, a holding company with interests in gaming, financial services and stockbroking.

His involvement in Shin started shortly after the Temasek deal was announced, when Goldman Sachs, Temasek's financial adviser, contacted him about a chance to participate in the transaction.

For Temasek, Mr Surin's investment helps Shin remain majority owned by Thais.

For Mr Surin, the deal was a golden opportunity to make his first investment in his mother country. "Sometimes you might want to [invest], but it's all about opportunity. When the opportunity comes, you take it," he said in his 40th floor offices high above the Kuala Lumpur skyline.

"Some people ask me, why did you make the decision to invest in Shin, and for such a big amount, all in just a few weeks? I reply, sometimes you make a decision just overnight. If it's a good opportunity, you have to grab it."

He shrugged. "I looked at the numbers, looked at the partners, looked at the people. I have a lot of confidence in Khun Boonklee [Plangsiri, the Shin chief executive officer]."

Mr Surin, who has a personal net worth of $750 million, now owns a 68% stake in Kularb Kaew, a holding company set up by Temasek. Kularb Kaew in turn holds 45% of Cedar Holdings, which together with Temasek and Siam Commercial Bank, hold 55% of Shin. Another 42% of Shin is owned by another Temasek holding company, Aspen Holdings.

The Temasek buyout, the largest takeover in Thai history, netted the Shinawatra family a payout of 73 billion baht for their 49% stake. Prime Minister Thaksin Shinawatra said the deal marked his exit from the business arena and his full commitment to national politics.

But the deal has proven to be a political nightmare for Mr Thaksin, after opponents claimed that the tax-free nature of the transaction and the use of offshore holding vehicles were evidence of illicit activity by the Shinawatra family.

Mr Surin grimaces at the thought that his investment has now been caught up in Thailand's political maelstrom.

"Before the deal, I knew of Shin, but not in detail. As for Mr Thaksin, I have met him once, years ago. I don't think he remembers me," he said. "It is purely business. I am Thai, and wanted and was willing to invest my own money. What's wrong with that?"

He laughed. "In any business, you cannot always think of all the angles. Sometimes there are certain calculated risks that you have to take. But politics isn't something that is easily understood.

"The telecoms business is definitely a good one, with a lot of potential and future ahead. Most of the businesses inside Shin, we went through them, they are very good. That's why I made the decision to go in."

Mr Surin left Bangkok in his early teens to study at a Chinese school in Penang, and later joined his father to work at the family's textiles firm, a business that continues today through MWE Holdings.

"I am definitely Thai. I have been here for the past 40 years, but I have never considered myself any different," he stressed, adding that his two daughters and only son also hold Thai citizenship.

Fluent in Thai, English and several Chinese dialects, Mr Surin acknowledged that his penchant for privacy has added to the public questions over the Shin investment.

"I think I am now better known in Thailand," he says dryly. "I wouldn't say that it has been difficult, but it has been an experience." "A lot of people don't understand Temasek. If you talked with anyone outside [Thailand], no one would believe that Temasek would do anything illegal or use nominees."

Mr Surin said he was earnest in helping Shin, and hoped to increase his investments in Thailand in the future.

"[Shin] still has a lot of potential, particularly when compared with countries such as Malaysia or Singapore," he said, adding that he believed Shin's stock, now trading at 32 baht each, was worth double the price.

Leisure time is devoted to golf, scuba diving and yachting. And while Mr Surin never attended university, he is a strong supporter of education, making philanthropic contributions of around 80 million baht each year to various charities.

Mr Surin said that while in the past, trips to Thailand were mostly family visits or for vacation, business would increasingly become the focus in the future.

"I would consider other investments in Thailand. But I have to make sure this one goes well first."

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Ministry hands Kularb Kaew case to police

Source: Bangkok Post - 1 October 2006

The Commerce Ministry yesterday formally found that Kularb Kaew violated the Foreign Business Act and forwarded the case to the police for legal action.

The ministry's Business Development Department found that Kularb Kaew had breached Article 36 of the Act, which bans Thai investors from acting as nominees for foreigners to do business reserved for Thai nationals, including telecommunications.

"We need the police to take action against the company as the evidence indicates that money was transferred from abroad for Thai shareholders to buy Shin Corp shares," said Dusit Uchupong-amorn, deputy director-general of the department.

Kularb Kaew is one of several holding vehicles set up after the takeover of Shin Corp by Singapore 's Temasek Holdings. Temasek bought out the 49% shareholding in Shin held by the family of Thaksin Shinawatra in January for 73.3 billion baht.

Since mid-March, Kularb Kaew has been 68% owned by Surin Uptakoon, a Thai businessman based in Malaysia , with the rest controlled by Temasek. But direct shareholdings by Temasek stand at around 44% through Aspen Holdings, with the structure designed to allow Shin to maintain its status as a Thai company.

However, the Democrat Party and other critics claimed that Kularb Kaew was a proxy for Temasek and thus violated the Foreign Business Act.

Under the law, parties acting as nominees to evade the 49% foreign shareholding limit face jail of up to three years and/or fines of up to one million baht. The firm itself could be ordered dissolved.

Khunying Jada Wattanasiritham, the president of Siam Commercial Bank, declined to comment on the ministry's decision to forward the case to the police.

"We will need to wait and see what the latest developments will be. The bank's board undertook all decisions with the understanding that we were in compliance with all laws," she said.
SCB and subsidiary SCB Securities both played a major role in the Temasek takeover of Shin, with the bank making loans and investments of 16 billion baht in the deal. The bank took an initial shareholding of 10% in Cedar

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JUSTICE SHIN CORP-TEMASEK DEAL

DSI meets tomorrow on Kularb Kaew case

Source: Bangkok Post February 20 - 2007

BHANRAVEE TANSUBHAPOL PRASIT TANGPRASERT

The Department of Special Investigation (DSI) will decide tomorrow whether to take over the Kularb Kaew case from the police, DSI director-general Sunai Manomai-udom said yesterday.

The decision will be made during a meeting of the DSI board, to be attended also by Prime Minister Surayud Chulanont.

If the DSI detected any irregularities, it would be easier for the state to revoke the Shin Corp-Temasek deal, he said.

According to Mr Sunai, the prime minister expressed his concern over the Kularb Kaew case as the police had been working on it a long time without making progress.

''If the case is transferred to the DSI, I believe we can do a quicker job in concluding the investigation and then sending it to the prosecutors,'' said Mr Sunai.

''The DSI has its own board members who can press investigators for a faster decision,'' he said.

Meanwhile, the People's Alliance for Democracy (PAD) and the Assembly of Northeastern People plan a rally tomorrow, at Wing 23 air base in Udon Thani province as part of their campaign for the return of ''national assets'' sold to Singapore 's Temasek Holdings by deposed prime minister Thaksin Shinawatra.

Key PAD leader Somkiat Pongpaiboon, and representatives of the Assembly of Northeastern People, said they would demand the Singapore government return the satellite concession, mobile phone frequencies, iTV television station and Wing 23 air base in Udon Thani.