Imagine the absolute peace of mind that comes from knowing the company you built in Thailand is secure, protected, and under your 100% legal control. This is the foundation upon which every successful international venture is built—a structure of certainty and safety.
However, in an attempt to navigate Thailand’s foreign ownership laws, many investors inadvertently walk into the single most dangerous legal trap in the country: the use of “nominee” shareholders. This seemingly simple shortcut is a path fraught with risk, capable of jeopardizing your entire investment.
This comprehensive guide will expose the severe, business-ending risks of a nominee structure. More importantly, it will illuminate the proper, government-sanctioned legal pathways to achieving legitimate corporate control and long-term security for your enterprise in Thailand.
What is a Nominee Shareholder? (The “Tempting Shortcut”)
A nominee shareholder is a Thai national who holds shares on behalf of a foreign investor “in name only.” This individual typically has no real financial stake, makes no actual investment, exercises no decision-making power, and has no genuine interest in the company’s profits or losses.
The Motive: The sole reason for using a nominee structure is to circumvent the ownership restrictions of Thailand’s Foreign Business Act (FBA), B.E. 2542 (1999)
. The FBA generally limits foreign ownership in most Thai companies to a maximum of 49%, creating a significant hurdle for investors who require majority control to protect their technology, strategy, and capital. A nominee structure creates the illusion of a majority Thai-owned company on paper, while the foreign investor secretly maintains control.
4 Severe Risks: Why Using a Nominee is a Bet You Can’t Afford to Lose
While it may seem like a clever workaround, using a nominee is a high-stakes gamble with devastating potential consequences. The Thai government has become increasingly stringent in investigating and prosecuting these arrangements.
1. Severe Legal Penalties
The Foreign Business Act is explicit about the illegality of nominee arrangements. If discovered, both parties face severe penalties:
- The Foreign Investor (True Owner): Faces imprisonment of up to three years and/or a fine ranging from 100,000 to 1,000,000 THB.
- The Thai Nominee: Faces the same penalties for aiding or abetting the circumvention of the FBA.
2. Loss of Control & Betrayal
This is the most direct and immediate business risk. The Sobering Truth: According to all legal documents—the shareholder register, the minutes of meeting—your nominee is the legitimate 51% majority owner of your company. They have the legal power to:
- Sell or transfer the company’s shares without your consent.
- Liquidate company assets.
- Appoint new directors and remove you from your position.
- Take full control of the company’s bank accounts.
While you may have a side-contract, enforcing it is extremely difficult and would require admitting your own violation of the FBA in court. You are placing the entirety of your investment at the mercy of another person’s integrity.
3. Court-Ordered Dissolution of Your Company
If an investigation by the Department of Business Development (DBD) or another authority proves the existence of a nominee structure, the legal consequences can be catastrophic. A Thai court can issue an order to
dissolve the company entirely. This means a complete and total loss of your investment, with no recourse.
4. Inability to Secure Financing or Sell the Business
Thai banks and credible financial institutions conduct thorough due diligence. They are highly skilled at identifying suspicious shareholder structures. A company found to be using nominees will be deemed too high-risk, making it virtually impossible to secure business loans, credit facilities, or any form of institutional financing. Furthermore, selling your business in the future becomes impossible, as no legitimate buyer will acquire a company with such a flawed and illegal foundation.
The Legal Pathways: 2 Primary Ways to Achieve 100% Legal Control
Fortunately, Thai law provides clear, legitimate, and powerful pathways for foreign investors to achieve 100% ownership and control.
Pathway 1: BOI Promotion – The Best Route
Promotion by the Thailand Board of Investment (BOI) is the cleanest and most effective method for securing 100% foreign ownership. A BOI promotion acts as a powerful “expressway,” providing a direct
exemption from the 49% ownership restriction imposed by the Foreign Business Act. For eligible business activities, particularly in technology, manufacturing, and other strategic sectors, the BOI is the preferred and most secure route.
(Learn more in our Complete Guide to BOI Promotion)
Pathway 2: The Foreign Business License (FBL)
For businesses in industries not promoted by the BOI, it is possible to apply for a Foreign Business License (FBL) from the Department of Business Development. The FBL, if granted, also allows for majority or 100% foreign ownership. However, it’s important to note that the application process for an FBL is significantly more complex, time-consuming, and has a higher degree of uncertainty than a BOI application, making expert legal guidance absolutely essential.
Advanced Strategy: What About a Joint Venture?
In situations where a genuine Thai partner is strategically necessary for a 51-49 joint venture, it is still possible to structure the company to protect the foreign minority shareholder’s control over key decisions. This is not a nominee arrangement but a legitimate legal structuring using tools such as:
- Preferred Shares (หุ้นบุริมสิทธิ): The company’s articles of association can be drafted to create different classes of shares. While the Thai partner holds 51% of the total shares, the foreign partner can hold preferred shares that carry enhanced voting rights (e.g., 10 votes per share) on critical matters like the appointment of directors, the sale of assets, or changes to the company’s constitution. This ensures that the foreign investor maintains effective control while fully complying with the FBA.
Conclusion: Build Your House on a Foundation of Rock, Not Sand
Protecting your investment begins with a correct and compliant corporate structure. The seemingly easy shortcut of using a nominee is akin to building your business on a foundation of sand, vulnerable to legal storms and the risk of total collapse at any moment.
The key takeaway is that secure, legal pathways to achieving your desired level of control have always been available. Navigating these pathways successfully requires expert guidance to ensure your foundation is solid, secure, and built to last.