Limited Company
nominee shareholders in a Thai company

A limited company in Thailand must have a minimum of 3 shareholder at all times. Thai nationals operating a business under a company often use nomine shareholders to complete the number of 3 shareholders in the limited company. There is no general restriction for Thais that prohibited the use of nominee shareholders in a business. This is different for foreigners. Foreign investors are prohibited from using nominee shareholders in a Thai company under the foreign business act. Also bearer shares (shares owned by whoever holds the physical share certificate) are prohibited

Foreigners are not free to operate businesses in Thailand. Foreign natural or juristic entities that want to operate a businesses in Thailand can in some cases, and following a strict procedure, have a foreign business license or permit granted in accordance with the Investment Promotion Act (through the Board of Investment of Thailand), the Foreign Business Act (through the Department of Business Development), a treaty or other laws. Such companies can be 100% foreign owned and will be allowed to operate a specific (licensed) business in Thailand as a foreign company.

Nominee shareholding structures

Nominee shareholding structures in a Thai company (as a juristic person) are commonly used by foreigners to circumvent the licensing procedure and general restrictions under the Foreign Business Act or other laws prohibiting specific business categories for foreigners. Nominee structured companies with foreign participation and control are set up as majority Thai owned to be classified as Thai companies and as such not to be restricted by foreign ownership or foreign business laws. The drawback is that the Thai shareholders could be deemed 'nominees' acting on behalf of the foreign investor (meaning that the actual owner of the shares is the foreigner making the company foreign by majority foreign ownership). The use of Thais as nominee shareholders by foreigners is strictly prohibited under the Foreign Business Act.

Section 36 (foreign business act) 'A Thai national or juristic person that assists a foreigner in avoiding the Foreign Business Act by means of holding shares as a nominee or being a nominal owner of the company, shall (including the foreigner allowing Thai nationals or juristic persons to do so) be liable for a fine of 100,000 to 1,000,000 Baht and/ or imprisonment of up to three years'.

Any suspected use of nominee shareholders by foreigners should be forwarded to the police and ultimately to a court to determine if in a specific case nominees are used by the foreigner.

Definition of a nominee shareholder

The Thai partners or shareholders must comply with the Business Registration Rules when forming a company with foreign shareholders involved, and in such case must submit evidence of financing used to hold shares, including bank statements and other documents. Business registration rules for Thai companies with foreigners involved could be circumvented by setting up a 100% Thai owned company and only in a later stage involve the foreign investor in the company.

There have been plans in the government to amend the foreigner definition in the Foreign Business Act, and by this way solving the nominee problem in Thailand. Under current laws and policy it is relatively simple (but illegal) for foreigners to operate restricted businesses by using Thai nominee shareholders and controlling the company through preference shares and majority voting rights in the company

Sample definition of nominee
  • a) A nominee shareholder, being either a natural person or juristic person, who is registered as the holder of shares in the partly foreign owned company but who does not actually invest in the company, nor has the financial means to pay up his shares, nor has a beneficial interest in the company, nor has any form of control in the company.
  • b) Is there an intention to evade the law? Indicators would be:
    • - how is management control in the company structured,
    • - is there a loan investment supplied or guaranteed by the foreigner (did the Thai shareholder actually invest in the company),
    • - unbalanced voting rights attached to shares held by the foreigner giving him absolute control,
    • - and the flow of funds from dividends paid by the company to the shareholders.

Foreigners who want to operate a business through a majority Thai owned limited company should comply with the business registration rules, which are aimed at preventing the use of Thai nominee shareholders. Generally these rules are circumvented and the share structure is changed after the formation of the company. It is recommended that the company is formed with the shareholding structure as it will operate the business under, even if this means a certain scrutiny of the Thai shareholders when forming the company.

Government policy

It is not the government's policy to investigate existing partly foreign owned companies operating restricted businesses, but it is also not fully ignored. Investigations happen on a case-by-case basis. The most likely solution to solve the nominee shareholding issue in partly foreign owned companies is an overhaul of the Foreign Business Act and the foreigner definition (i.e. how a Thai company is deemed a foreign company). This will likely affect existing companies as the directors in the company must rotate and be re-elected yearly. Foreigners would simply be ineligible for re-election as sole or managing director and would loose this way control in the company.

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