Sale of Shin Corporation to Temasek Holdings

The 2006 sale of the Shinawatra family's share of Shin Corporation (ShinCorp) to Temasek Holdings caused great controversy in Thailand. The sale was in response to long-standing criticisms that the Shinawatra family's holdings created a conflict of interest for Thai Prime Minister Thaksin Shinawatra. Criticisms of the sale focused on the insistence by Thaksin and a compliant government that the transaction was exempt from capital gains tax (as per Revenue Department and Stock Exchange of Thailand regulations, later determined by Thai courts not to be legal), the fact that the Thai company was sold to a Singaporean company, and the fact that the Thai law regarding foreign investments in the telecom sector had been amended just prior to the sale (although the amendment had been proposed since 2001). Thaksin's sale also impacted holdings, among other parties, of the Crown Property Bureau that had an investment in Siam Commercial Bank that held ShinCorp stock.

On 23 January 2006, the Thai Telecommunication Act (2006) became effective, raising the limit on foreign holdings in telecom companies to 49 percent. The act replaced the Telecom Business Law, which took effect in November 2001, that put the foreign investment cap at 25 percent. At the time, AIS was 49 percent owned by the Shinawatra family. Competitors DTAC and TA Orange were 40 percent owned by Norway's Telenor and 49 percent owned by France's Orange. The law was not retroactive, thus DTAC and TA Orange criticised the government for discriminating against foreign investors and urged it to increase the cap.

On Monday, 23 January 2006, the Shinawatra family sold its remaining 49.6 percent stake in Shin Corporation 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 US$1.88 billion). In accordance with Thai tax laws, they did not have to pay capital gains tax.

In an unrelated transaction, the two families had earlier not paid taxes when Thaksin transferred shares to his sister Yingluck Shinawatra and his wife, Potjaman Shinawatra, transferred shares to her brother Bannapoj Damapong. The tax exemption was granted on grounds that the transfer, at a par value of 10 baht, took place through the stock market.

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