Thursday, January 31, 2013 5:00:19 PM Many foreigners in Thailand know how influential in-laws can be in this country, so it is quite understandable to want to do something nice for your partner while protecting the business from having its assets looted the first time there is a serious financial issue in the family.Unfortunately, Thai law doesn�t treat trusts in the same manner as most of us from common law countries are used to. The only trusts recognized officially by Thai law are those set up for the benefit of certain capital market transactions, and a small business such as a guesthouse would not qualify.Trusts as most Westerners think of them are simply not recognized here, and if they were it would be a very simple way to skirt the laws against foreign ownership of land. While many foreigners use a similar approach to get around these laws by setting up a company to own land and use nominee shareholders, this is technically illegal as well.This is a big difference in the general approach to law from that in West, which developed out of common law. It is worth mentioning that every few years the Thai government warns of a crackdown on this practice, but I have never known or heard of the crackdowns ever actually happening. The most common business set up is for two classes of shares, so that while the Thai family owns the majority of the business you own more than 50 per cent of the voting shares and thus are in control.If you want to do things the right way � and in strict accordance with the law � it is very difficult to set up a business for a Thai national where they control the business and then place any restrictions on them.Where land is involved you are essentially required to gift them the money and they would then buy the land and set up the company. At this point shares can be transferred back to you, but there is always a window where trust is involved. Most land offices go so far as to make the husband of a Thai sign a disclaimer that they have no right to the land prior to officially registering the purchase of a property in the wife�s name.If you ask around there will be plenty of lawyers at varying prices, usually correlated with their English language ability, willing to set things up for you that may or may hold up in court, but it is always a gamble to some degree.One clever scheme I heard of was to hold a non-recourse loan with a lien on the property, which would prevent the asset from being sold without clearance from the foreigner while still protecting the family from the foreigner foreclosing on the property on them.I know at least one person who set up their property this way. It effectively kept things �locked up� against the family influencing foreigner�s partner to cash out the property, but it is questionable whether or not this would hold up in court if they tried to liquidate the property against the foreigner�s will. Since a foreigner can�t own the property it may not be considered a legal contract.As always, there is plenty of gray when it comes to foreigners� rights in Thailand. My advice to someone thinking about setting up a business for their Thai partner is to limit the damage that could be done if things went totally wrong, especially if one hasn�t been living in the country very long.Once you have been here for a while and get an idea for how things typically work you will begin to develop a sense of how much you are willing to place at risk.David Mayes MBA resides in Phuket and provides wealth management services to expats around the globe, focusing on UK pension transfers. He can be reached at david.m@faramond.com or by calling 085-3358573.