The Real Risks of Thai Nominee Structures in Thailand: What Foreign Investors Must Know

The Real Risks of Thai Nominee Structures in Thailand: What Foreign Investors Must Know

Introduction

For foreign entrepreneurs establishing a business in Thailand, using Thai Nominee Structures Thailand can appear to be a convenient solution to meet shareholding requirements. Some advisers may suggest:

"Simply register 51% under a Thai person, but you still keep full control."

This approach is not only illegal under the Foreign Business Act B.E. 2542 (1999) but can result in severe penalties, including criminal prosecution, business closure, and deportation. This guide by GENTLE LAW IBL explains what nominee structures are, why they violate Thai law, and what legal alternatives you can consider.

What Are Thai Nominee Structures Thailand?

A nominee shareholder is a Thai national who holds company shares in name only on behalf of a foreign individual or entity. Typically, nominees:

• Do not invest their own funds

• Have no economic interest in profits or losses

• Follow instructions from the foreigner on all decisions

• Sign agreements without genuine control or consent

Under Section 36 of the Foreign Business Act, this arrangement is expressly prohibited.

Why Are Nominee Structures Illegal in Thailand?

Thai Nominee Structures Thailand are banned because they attempt to disguise foreign control of businesses operating in restricted sectors. The law defines foreign control based on:

• Shareholding exceeding 49%

• Voting rights disproportionate to shareholding

• Financial arrangements indicating actual foreign control

• Management power held by the foreign party

Any structure where a Thai holds shares but the foreigner retains real authority is a violation of the law.

Penalties for Using Thai Nominee Structures Thailand

If authorities determine that your company relies on illegal nominees, you face:

For the Company:

• Forced business closure

• Revocation of licenses and registrations

• Asset seizure under certain circumstances

For the Foreign Directors or Shareholders:

• Fines up to THB 1 million

• Imprisonment up to 3 years

• Deportation and blacklisting

For the Thai Nominees:

• Criminal prosecution for fraud and conspiracy

• Personal liability for damages

How Authorities Detect Thai Nominee Structures

Thai regulators are increasingly active in detecting nominee arrangements. Common red flags include:

• Thai shareholders with no verifiable financial capacity to invest

• Thai shareholders employed by or related to the foreigner

• Identical contact information for all Thai shareholders

• Voting or profit distribution that contradicts shareholding proportions

• Capital contributions made by foreigners on behalf of Thais

• Undisclosed agreements transferring control

Investigations may involve:

• Interviews with all shareholders and directors

• Audits of financial records and transactions

• Site visits to confirm genuine operations

Illegal Workarounds That Fail

Some promoters offer "legal cover" for nominee structures. Here is why they remain illegal:

Workaround	Why It Fails
Loan agreements from Thai to foreigner	Treated as evidence of fake ownership
Holding shares via Thai spouse	Still foreign shareholding if controlled
Silent partnerships or trusts	Not recognized under Thai company law
Side agreements transferring voting	Invalid under Thai Foreign Business Act

Legal Alternatives to Thai Nominee Structures Thailand

You do not need to break the law to operate your business effectively. Consider these legitimate options:

1. BOI Promotion

• Obtain full foreign ownership in eligible sectors

• Bypass Foreign Business Act restrictions

• Enjoy tax and visa incentives

2. U.S.–Thailand Treaty of Amity (U.S. Citizens Only)

• Allows 100% U.S. ownership

• Requires registration with the Department of Business Development and U.S. Commercial Service

3. Genuine Thai Partnership

• Partner with real Thai investors

• Use preference shares and shareholder agreements to maintain control

• Ensure all arrangements comply with Thai Civil and Commercial Code

4. International Holding Company

• Incorporate a holding company in Singapore or Hong Kong

• Structure ownership for compliance and tax efficiency

• Seek professional advice on cross-border corporate governance

Why Legality Matters

Businesses built on Thai Nominee Structures Thailand face serious risks:

• You cannot enforce contracts or ownership rights

• You cannot obtain reputable investors

• You cannot exit or sell legally

• You risk losing everything if authorities investigate

How GENTLE LAW IBL Can Help

GENTLE LAW IBL offers comprehensive support:

• Assessment of your ownership structure and compliance

• BOI and Treaty of Amity applications

• Drafting enforceable shareholder agreements

• Ongoing legal and regulatory support

Conclusion

Tempting shortcuts like Thai Nominee Structures Thailand expose your business to legal, financial, and operational disaster. If you are committed to building a sustainable, investable company in Thailand, do it right from the start.

Contact GENTLE LAW IBL today to schedule a confidential consultation with our legal team.

TAG : NON - B VISA