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Thai Nominee Shareholders Crackdown

Thai Nominee Shareholders Crackdown

An investigation is ongoing to identify and prosecute the Thai people who are involved in Nominee Shareholding as well as the companies illegally using them as Nominee Shareholders. The offense is punishable by imprisonment for not more than 3 years and/or a fine from 100,000 to 1M Baht. There is also a daily fine until the violation is stopped.

The Deputy Commerce Minister ordered the Department of Business Development to define guidelines for preventing nominee businesses both before and after the registration of a juristic person.  That is, before registration, applicants have to submit documents issued by banks to show the financial status of Thai partners or shareholders who invest or hold shares in the company together with foreigners.

What is a nominee shareholder?

A nominee shareholder is a person who is officially registered as the holder of company shares on behalf of the real shareholder. Thai law prohibits foreigners from using Thai people as shareholders to form a majority Thai-owned company. Some foreign nationals have used Thai Nominee Shareholders to hold their company shares on their behalf to evade the licensing procedure and restrictions on foreign business ownership. These foreigners are illegally running their business in Thailand as a foreign company though the company is registered as a majority Thai-owned.

How many shareholders are required to form a Thai company?

A Thai limited company has to consist of 1 or more directors and a minimum of 3 shareholders. Thai nationals must own the majority company shares. This means that foreign ownership of the company cannot be more than 49%. Foreigners can hold 100% ownership of businesses in non-restricted categories, such as exporting businesses and certain types of manufacturing businesses.  Other methods to obtain 100% non-Thai control are through application for an alien business license, Board of Investment (BOI) Promotion.

Aside from requiring less registered capital and less paperwork compared to setting-up a foreign company, a Thai majority-owned company has the capacity to acquire land. Only Thai nationals and registered Thai companies are allowed to own land or have a confirmed right of possession of land in Thailand. This is one of the reasons why foreigners resort to nominee shareholding arrangements with Thai nationals. They are trying to use Nominee Shareholders to form a Thai company to purchase land under the Thai company. For those who are not aware, this shareholding structure is absolutely illegal and could result in criminal charges.

If you have any uncertainties regarding your company structure, Magna Carta Law Firm provides a team of experts on Partnership and Company Law and all matters concerning nominee shareholder issues.  Book an appointment now! We also provide online legal consultation.

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