Thai Business Law

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Business Laws Thai Company (Ltd.)

Company Formation and Thai Nominee Shareholders

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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. By using Thai nominee shareholders or proxies in the company foreigners circumvent foreign ownership and business restrictions and operate for foreigners prohibited and restricted business in Thailand. Control and voting rights are under the current Foreign Business Act (FBA) not used as a criterion in defining a Thai incorporated company foreign (section 4 FBA).

Foreigner definition of Thai companies

The use of Thai nominee shareholders by foreigners to circumvent the FBA is illegal (sections 36 & 37 FBA) and could lead to criminal charges. A minority foreign owned Thai company using Thai nomiee shareholders is a foreign company, however there is currently no clear definition of what exactly a Thai nominee shareholders is and as long as the Thai government will not implement a stricter enforcement of existing anti-nominee laws or on other grounds scrutinize a company structure these foreign controlled Thai companies can continue operating for foreigners prohibited or restricted businesses in Thailand.

Note: certain business licenses (for example TAT tourist license) required for operating specific businesses could aditionally restrict foreign participation in a Thai company. A business licenses could require a majority Thai management (directors) in the limited company and could lower the allowed percentage of foreign shareholdings to 39% (foreigner definition under the Thailand Vessel Act).

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 when forming the Thai company or when transferring land to a company (often at the discretion of the officials involved). For new companies the government makes it more difficult to form a company for foreigners (business registration) and transfer land to a partly foreign owned company (ownership registration).

Section 4 Foreign Business Act: "Foreigner" means:
  1. Natural person not of Thai nationality.
  2. Juristic person not registered in Thailand .
  3. Juristic person registered in Thailand having the following characteristics.a- Having half or more of the juristic person's capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic parson.b- Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.
  4. Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2) or (3), or a juristic person having the persons under (1), (2) or (3) investing with the value of half or more of its total capital.
For the purpose of the definition, the shares of a limited company represented by share certificates that are issued to bearers shall be deemed as the shares of foreigners unless otherwise provided by ministerial regulations.


The extent and application of section 4 Foreign Business Act is further specified in regulations that must be applied by the land offices and business registration departments. The first anti-misuse regulations of companies by foreigners were issued in 2006 and aim to prevent the use of nominee shareholders by foreigners in a Thai company:

  1. First regulation: 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. First regulation: 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).

Control and directors in a Thai company

There are currently no general restrictions on the nationality of directors who control a Thai limited company in Thailand (certain business licenses require a higher percentage of Thai shareholders in the company and majority of Thai directors and a managing Thai director, e.g. TAT license, boat 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 most foreigners (small and medium-sized businesses SMB's) operate restricted or prohibited businesses in Thailand through majority Thai owned but foreign controlled limited companies, but articles in the press about a possible crack dow on illegal foreign run Thai companies will keep coming back (sample article 2007/ sample 2012) and possible changes to the 1999 Foreign Business Act (sample amendments) is still point of discussion in the Thai government.