Introduction
Using Thai nationals as nominee shareholders to circumvent foreign ownership restrictions remains a significant legal risk for foreign investors doing business in Thailand. Although a Thai limited company may legitimately have both Thai and foreign shareholders, the registered shareholding structure must reflect genuine investment and must not be used to conceal foreign control in violation of Thai law.
The distinction is important. Foreign participation in a Thai company is not inherently unlawful, and a Thai shareholder holding shares in a company with foreign investors does not automatically constitute a nominee arrangement. The legal concern arises when Thai nationals hold shares on behalf of foreign investors to enable the latter to operate a restricted business in circumvention of the applicable legal requirements.
The consequences extend beyond criminal penalties. A suspected nominee structure can expose the company and its stakeholders to regulatory scrutiny, disruption to business operations, difficulties in maintaining a compliant corporate structure, and risks concerning the enforceability of related arrangements.
As Thailand strengthens its scrutiny of foreign business structures, investors should assess not only the percentage of shares registered in each shareholder’s name, but also whether the underlying investment and business arrangements comply with Thai law.
1. What Is a Nominee Shareholder?
In the context of foreign investment in Thailand, a nominee shareholder is generally understood as a person who holds shares on behalf of another party, while the underlying arrangement conceals the true investment or ownership position for an unlawful purpose.
A typical arrangement may involve a foreign investor providing the funds for shares registered in the name of a Thai national. The Thai shareholder may have little or no genuine financial participation, while the foreign investor retains the substantive economic benefits or control of the business. The arrangement is used to make the company appear to satisfy Thai ownership requirements even though the actual structure is intended to circumvent restrictions on foreign business operations.
However, the analysis should not be reduced to a single indicator. A foreign investor providing funds to a Thai company, a foreign shareholder holding a substantial interest, or a Thai shareholder having limited involvement in daily management does not, in isolation, establish an unlawful nominee arrangement. The relevant facts must be examined in context, including the source of the investment funds, the actual payment for shares, the parties’ rights and obligations, and the purpose and operation of the arrangement.
The central issue is whether the registered structure reflects genuine investment or has been arranged to conceal a prohibited form of foreign participation.
2. The Legal Framework Under Thai Law
2.1 Foreign Business Act B.E. 2542 (1999)
The principal legislation governing nominee shareholding used to circumvent foreign business restrictions is the Foreign Business Act B.E. 2542 (1999) (FBA).
Section 36 addresses Thai nationals and Thai juristic persons who assist, support, or participate in the operation of certain businesses by foreigners where the foreigner is not permitted to operate those businesses. It also addresses arrangements in which Thai nationals hold shares as nominees to enable foreigners to operate businesses in circumvention or violation of the Act. The provision further covers foreign persons who allow such conduct to occur.
The provision therefore targets more than the person whose name appears on the share register. Depending on the facts, both the Thai nominee and the foreign investor who permits the arrangement may face liability.
The application of Section 36 must nevertheless be assessed against the statutory elements. The analysis requires consideration of the relevant business activity, the foreigner’s legal position, and whether the arrangement is intended to circumvent or violate the Act. It is not correct to conclude that every company with Thai and foreign shareholders violates Section 36.
2.2 Foreign Ownership Restrictions and the Nature of the Business
Under the FBA, whether a company is treated as a foreigner depends on the statutory definition and the relevant ownership or control structure. The Act restricts foreign participation in specified categories of business, subject to applicable exceptions and permissions.
Accordingly, the first step in assessing a proposed structure is to identify the actual activities the company will conduct and determine whether those activities are restricted to foreigners under the FBA or another applicable law.
Where a business requires a Foreign Business Licence (FBL), a Foreign Business Certificate, or another applicable authorisation, the company should assess whether it can lawfully obtain and operate under that permission. Where an exemption or other lawful route is available, it should be evaluated on its own terms.
A nominee arrangement is not a lawful substitute for obtaining the required permission.
2.3 Genuine Thai Shareholding
A company’s shareholding structure should reflect the shareholders’ actual investments and legal rights. Thai shareholders should genuinely subscribe for and pay for their shares rather than merely lend their names to satisfy a formal ownership threshold.
Evidence of genuine investment may include payment records, bank statements, subscription documentation, and records consistent with the shareholders’ financial capacity and actual participation. These materials should be considered together with the company’s corporate documents and the substance of the arrangements between the parties.
No single document necessarily determines the legal outcome. A share register showing Thai majority ownership does not, by itself, establish that the structure is lawful if the underlying arrangements indicate otherwise.
3. Legal Penalties and Consequences
3.1 Criminal Liability
Section 36 of the FBA provides for imprisonment for a term not exceeding three years, a fine ranging from THB 100,000 to THB 1,000,000, or both, for conduct falling within the provision.
The provision covers relevant conduct by Thai nationals or Thai juristic persons and also addresses foreign persons who allow the prohibited nominee arrangement. Liability depends on the facts and the applicable legal requirements; it should not be assumed that every shareholder or director of a company under investigation is automatically guilty.
Where a court orders the cessation of the prohibited assistance, business participation, or shareholding, the parties must comply with that order. Violation of the order can result in an additional daily fine of THB 10,000 to THB 50,000 for the period of non-compliance.
The potential consequences are therefore not limited to a one-time financial penalty. A court order may also require the parties to discontinue the arrangement that enabled the prohibited business operation.
3.2 Orders to Cease Prohibited Activities or Shareholding
In addition to criminal penalties, Section 36 empowers the court to order the cessation of the relevant assistance, participation, or shareholding, as applicable.
Such an order can affect the company’s ability to continue operating under its existing structure. The parties may need to address the legal basis for the business, restructure the ownership in a lawful manner, or discontinue activities that cannot lawfully be conducted.
The practical consequences will depend on the terms of the court order and the company’s circumstances. Investors should not assume that transferring shares after an investigation begins will automatically eliminate existing liability or resolve all regulatory concerns.
3.3 False Information and Registration Risks
Nominee-related issues can also arise during company registration or the registration of corporate amendments.
The Department of Business Development (DBD) has introduced additional requirements for certain registration changes involving foreign participation. Under DBD Order of the Central Partnership and Company Registration Office No. 1/2569 (2026), effective from 1 April 2026, specified partnership amendments and certain changes involving foreign authorised directors or co-signatories may require a confirmation of genuine investment by Thai partners or shareholders.
The confirmation addresses whether the relevant partners or shareholders have genuinely invested and paid their capital contributions or shares, whether Thai nationals are acting as nominees for foreign nationals, and the potential consequences of violations. The applicable requirement depends on the type of entity and the circumstances of the proposed amendment.
Providing false information to the Registrar may give rise to separate criminal consequences under the applicable law. Companies should therefore ensure that declarations and supporting records are accurate and consistent with the actual investment arrangements.
These requirements do not mean that every company with foreign shareholders must submit the same declaration for every filing. Their application should be checked against the particular transaction and the relevant DBD order.
4. How Authorities May Identify Suspected Nominee Arrangements
A company’s registered shareholding percentage is only one part of the overall assessment. Authorities may examine whether the underlying investment is genuine and whether the business is being operated consistently with the registered structure.
Relevant matters may include:
- Source of funds: Whether Thai shareholders have the financial capacity to make the investments attributed to them and whether the payment records support the declared capital contributions.
- Payment for shares: Whether the shareholders have actually paid for their shares and whether the supporting records are consistent with the company’s registered capital and transaction documents.
- Economic participation: Whether the shareholders’ financial rights and obligations are consistent with their registered ownership, taking account of the actual arrangement.
- Corporate decision-making: Whether the registered shareholders and directors exercise their legal roles or whether the company’s affairs are controlled through arrangements that contradict the stated structure.
- Supporting agreements and records: Whether loan arrangements, powers of attorney, share-related agreements, or other documents indicate that the registered shareholders are holding shares on behalf of another party.
- Consistency of information: Whether company filings, accounting records, banking documents, and explanations provided to the authorities are consistent with each other.
These matters are potential indicators for further examination, not a definitive checklist under which any single factor automatically establishes an offence. Their significance depends on the facts and the relevant legal provisions.
The DBD’s enforcement efforts have included scrutiny of higher-risk sectors and requests for explanations or supporting documents from businesses suspected of nominee arrangements. Investors should therefore be prepared to substantiate the genuine investment position of Thai shareholders rather than rely solely on the company’s registration documents.
5. Business and Investment Risks Beyond Criminal Penalties
5.1 Disruption to Business Operations
An investigation or enforcement action may require the company and its stakeholders to respond to document requests, explain the ownership structure, and review the legal basis for the business.
If the structure is found to violate applicable law, the company may need to discontinue prohibited arrangements or activities. This can affect commercial commitments, operational continuity, and relationships with customers, suppliers, landlords, lenders, and other counterparties.
The extent of the disruption depends on the circumstances and the measures imposed by the relevant authorities or the court.
5.2 Shareholder Disputes and Loss of Control
A nominee arrangement can create uncertainty over who has the legal and economic rights associated with the shares.
For example, a foreign investor who provides the funds for shares registered in another person’s name may later face a dispute over the ownership of those shares, voting rights, dividend entitlements, or the authority to transfer them. The registered shareholder’s legal position cannot simply be disregarded because another person claims to have provided the money.
Where the arrangement itself was designed to circumvent mandatory legal restrictions, the investor may also face substantial difficulties in seeking to enforce related agreements. The outcome depends on the nature of each agreement, the applicable law, and the relief sought; it should not be assumed that every related contract is automatically void or that every payment is necessarily irrecoverable.
This uncertainty is a material commercial risk in addition to the potential criminal consequences.
5.3 Due Diligence and Transaction Risks
A suspected nominee structure can complicate a share sale, acquisition, joint venture, financing, or other investment transaction.
A prospective purchaser or investor may need to verify the source of the share capital, the actual ownership arrangements, the authority of the directors, and whether the company has complied with foreign business restrictions. Unresolved issues can delay completion, require additional contractual protections, or lead a counterparty to reconsider the transaction.
Investors conducting due diligence should examine the substance of the shareholding arrangement rather than relying exclusively on the company affidavit, shareholder list, or other corporate registration documents.
5.4 Regulatory and Reputational Exposure
Where authorities suspect that a company has been structured to circumvent foreign business restrictions, the resulting scrutiny can affect its relationship with regulators and commercial counterparties.
This may create additional compliance costs and uncertainty, even before a final determination of liability. The potential impact will depend on the nature of the investigation, the evidence, and any action taken by the authorities.
A properly documented and legally compliant ownership structure reduces these risks and provides a clearer basis for demonstrating the company’s position if questions arise.
6. Lawful Alternatives for Foreign Investors
Foreign investors who wish to operate a business in Thailand should select an ownership and licensing structure that matches the actual business activity. The appropriate route depends on the sector, investment plan, and applicable legal restrictions.
6.1 Foreign Business Licence
Where the proposed activity falls within a restricted category and a licence is available, the investor should assess the requirements for obtaining a Foreign Business Licence under the FBA.
The assessment should be conducted before commencing the restricted activity. The investor should not assume that a company can operate first and resolve the licensing position later.
6.2 BOI Promotion
For eligible activities, investment promotion by the Board of Investment (BOI) may provide a lawful route to foreign participation, together with applicable investment incentives.
However, BOI promotion is activity-specific and subject to the relevant criteria and conditions. It does not automatically authorise every business activity the company may wish to conduct, nor should it be treated as a general exemption from all Thai regulatory requirements.
The proposed project should be assessed against the eligible activity categories and the privileges available for that particular investment.
6.3 Treaty or Statutory Exemptions
Certain foreign investors may qualify for specific rights or exemptions under applicable treaties or other legislation. These routes are not universally available and may be subject to nationality, ownership, activity, certification, or other conditions.
The investor should confirm the relevant legal basis and obtain any required certificate or permission before relying on an exemption.
6.4 Genuine Thai–Foreign Joint Venture
A joint venture between Thai and foreign investors may be lawful where the Thai investors genuinely invest and participate in the company and the business complies with the applicable foreign ownership and licensing rules.
A genuine joint venture should reflect the parties’ actual capital contributions, rights, responsibilities, and commercial arrangements. Thai participation must not be merely nominal or designed to conceal a prohibited foreign business operation.
The structure should be assessed in light of the business activity and any relevant sector-specific restrictions before incorporation or investment.
7. What Existing Companies Should Do
Companies that are concerned about their current shareholding arrangements should review the position before making further corporate changes or submitting declarations to the authorities.
The review should begin by identifying the company’s actual business activities and determining whether the FBA or other legislation restricts foreign participation in those activities. The company should then examine the source of funds used to acquire shares, evidence of capital payment, shareholder rights, relevant agreements, and the extent to which the registered structure reflects the parties’ genuine investment arrangements.
If the review identifies potential non-compliance, the company should obtain advice on the appropriate corrective measures. Depending on the circumstances, these may involve restructuring the shareholding, applying for an available licence or certificate, assessing eligibility for BOI promotion, or discontinuing activities that cannot lawfully be conducted.
Any corrective action must itself comply with Thai law. A transfer of shares, change of directors, or amendment to the company’s registration should not be treated as a substitute for resolving the underlying legal issue. Where a filing requires a confirmation of genuine investment, the declaration should be made only after the relevant facts and supporting documents have been verified.
Conclusion
Nominee shareholding is not simply a matter of how shares are recorded in a Thai company’s register. Where Thai nationals hold shares on behalf of foreign investors to circumvent restrictions under the Foreign Business Act, the arrangement can expose both sides to criminal liability and court orders requiring the prohibited conduct or shareholding to cease.
The commercial consequences can extend to operational disruption, shareholder disputes, transaction delays, and uncertainty over the rights associated with the shares. Enhanced DBD scrutiny and additional documentation requirements introduced in 2026 further underline the importance of maintaining a genuine and supportable ownership structure.
Foreign investors should therefore determine the legal requirements applicable to their intended business before selecting a corporate structure. Where foreign participation is restricted, the appropriate approach is to assess available licences, investment promotion privileges, treaty rights, or genuine joint-venture arrangements rather than rely on nominal Thai shareholding.
This article provides general information on Thai law and is not a substitute for legal advice based on the facts of a particular investment or corporate structure. The applicable legislation, DBD orders, and licensing requirements should be verified before taking action.
