Thai shareholders in a partly foreign ownerd Thai limited company

Thai companies with foreign participation and control in Thailand are often set up as majority Thai owned companies to be classified as Thai companies and not to be restricted by foreign ownership or foreign business restrictions in Thailand. By using Thai nominees or proxies in the company foreigners circumvent foreign ownership and business restrictions and operate prohibited and restricted business for foreigners in Thailand through majority Thai owned but foreign controlled Thai compnaies. Control and voting rights are under the present Foreign Business Act not used as a criterion in defining a Thai incorpoprated company foreign (section 4 FBA).

The use of Thai nominee shareholders by foreigners to circumvent the FBA is illegal (sections 36 & 37 FBA), however, there is currently no enforced definition of what exactly a Thai nominee shareholders in an existing Thai company is. Under present law and regulations the indication for a nominee shareholder lies primarily in the source of the capital investment and the financial credibility of the Thai national shareholders (often at the discretion of the officials involved) when forming the Thai company or when transferring land to a company. This is specified in 2 regulations which aim to prevent the use of nominee shareholders by foreigners:

1. Under the May 2006 Land Office guidelines, before allowing a land transfer to a partly foreign owned company, every Thai shareholders in that company must; show evidence of sufficient income for his investment (e.g. work history, monthly salary), and if the capital investment is funded by a loan then evidence must be provided
2. Under the August 2006 Business Registration Rules (in case of a foreign shareholding or foreign management/ foreign managing director) the Thai shareholders must submit the evidences showing the source of the investment together with the application form of the business registration (copy of the bank statement of the most recent record of the last 6 months or; any document which issued by the Bank to certify the financial status of the shareholder or; copy of the evidence that shows the source of the investment that the Thai shareholder invested in the partnership or company limited).

There are currently no general restrictions on the nationality of directors who control a Thai limited company in Thailand (certain business licenses require a majority of Thai directors, e.g. TAT license). Future law and regulations (e.g. planned but withdrawn revision of the FBA) could make the foreign retiring director ineligible for re-election as the sole managing director and could restrict majority foreign voting rights in a Thai company.

The current practice is still that foreigners operate restricted or prohibited businesses in Thailand through majority Thai owned but foreign controlled limited companies.