Nominee Crackdown Intensifies in Thailand - Are You At Risk?

Introduction

Since early 2024, Thai authorities have significantly intensified efforts to shut down nominee businesses. The coordinated crackdown - led by the Department of Business Development (DBD), Department of Special Investigation (DSI), and Economic Crime Suppression Division (ECD), with support multiple government agencies such as the Anti-Money Laundering Office (AMLO), Bangkok Metropolitan Administration (BMA), Immigration Bureau, Consumer Protection Board (OCPB), the Revenue Department, and Central Investigation Bureau (CIB) - aims to eliminate illegal nominee shareholding arrangements used to bypass Thai restrictions on foreign ownership.

Nominee structures have long been used to allow foreigners to hold land, operate restricted businesses, or import substandard goods. Many of these schemes under scrutiny are facilitated by “consultants” who place company shares in the names of family members, friends and staff such as office cleaners. Investigations found that a single staff member of one consulting company held shares in over 100 companies worth more than 100 million Baht.

Authorities estimate that these schemes have caused economic damages from exceeding 15.2 billion Baht (USD 468 million), particularly impacting Thai SMEs in Bangkok, Chiang Mai, Phuket, Surat Thani, and Chon Buri. Under the “CIB Nominee Sweep EP.3” operation alone, legal action has already been taken against 857 companies across tourism, real estate, e-commerce, logistics, hotels and resorts, construction, and agricultural sectors.

To strengthen enforcement, the DBD and AMLO have proposed amendments to the Anti-Money Laundering Act B.E. 2542 (1999), suggesting tougher penalties such as asset freezes and seizures for both Thai nominees and their foreign beneficiaries. The Thai Land Code is also being reviewed to increase fines and imprisonment terms for illegal landholding and to prohibit any compensation for the confiscated land.

Legal Background

Under the Foreign Business Act (FBA), a “foreigner” is defined as:

1) An individual who is not a Thai national;

2) A juristic person not registered in Thailand or offshore legal entities;

3) A Thai-registered juristic person with the following conditions:

1. 50% or more of its capital shares are held by persons under 1) or 2) or at least 50% of its total capital originates from persons under 1) or  2). 

2. A limited partnership or a registered ordinary partnership in which person under 1) acts as managing partner or manager; and 

4) A Thai-registered juristic person with 50% or more of its shares held by persons under 1), 2) or 3) or at least 50% of its total capital originates from persons under 1), 2) or 3). 

This means a Thai company must be at least 51% owned by Thai nationals, and the use of Thai nominees as figurehead shareholders for foreign investors is strictly prohibited. 

The FBA classifies restricted activities into three business lists: 

• List 1 Businesses, such as media outlets, rice farming, forestry, and land trading, are fully prohibited to foreigners. 

• List 2 Businesses, such as arms trading, domestic aviation, businesses affecting culture or natural resources, may obtain a foreign business licence (FBL) from the DBD and Cabinet approval. Anyhow, the company must be 40% Thai-owned, but it may be reduced to 25% with special consideration from the Minister of Commerce and the Cabinet. In addition, two-fifths of the board of directors must consist of Thai nationals.

•  List 3 Businesses are businesses that Thai nationals are not yet ready to compete, including “other service businesses” to broadly capture the service sector. Subject to lower approval standards than List 2, such businesses may obtain FBL from the DBD, with approval of the Foreign Business Committee.

Under Section 36 and 37 of the FBA, violations carry serious penalties:

• Imprisonment not exceeding 3 years, a fine of 100,000 Baht to 1,000,000 Baht, or both.

• Court-ordered dissolution of the company.

• Failure to compy with a court cessation order can lead to daily fines of 10,000 Baht to 50,000 Baht until the violation ceases.

Land Ownership and Tax Implications

Under the Thai Land Code, a Thai national who holds a land on behalf of a foreign may face up to two years of imprisonment and a fine of 20,000 Baht. Meanwhile, the foreigner must sell the land between 180 days and a year. Failing to do so will result in the Director General of the Department of Lands disposing it under Section 94.

 Under Thailand’s Civil and Commercial Code, a company can be set up with two or more persons who agree to unite for a common business purpose with a view to share profits. The Revenue Department, therefore, expects such companies to earn income  from its assets. Where company-owned residential land is occupied without a lease agreement authorities may assess backdated taxes with penalties based on estimated market rent. In contrast, if a lease agreement is presented, the company is deemed to be engaged in a land rental business, which falls under the scope of the FBA. 

Additional Restrictions 

Beyond the FBA, various sector-specific legislations either reinforce or relax restrictions against nominee ownership and foreign competition. It is important to take into account some of these industries to understand the required level of analysis required to navigate the complex regulatory environment and restrictions, avoid violations and secure legimate investment opportunities in Thailand.

Tourism Sector

• The Tourism Business and Tourist Guide Act B.E. 2551 (2008) prohibits nominee companies from applying for tourism operating licenses and restricts tour guide roles to Thai nationals only.

Hospitality and Lodging Sector

• Although hotels and resorts generally require Thai-majority ownership under the FBA and tourism laws, hotels are one of the business activities promoted by the Board of Investment (BOI). Foreign-majority ownership is feasible with approval from the BOI, and foreigners may also play management roles without the FBL. Meanwhile, under the Condominium Act, only a maximum of 49% of the total unit space or saleable floors within a condominium building can be owned by foreigner investors. In addition, both Thai and foreign investors renting out condominium units on a daily basis without a hotel permit (and FBL in the case of foreigner status) are violating  the Hotel Act and condominium regulations, though. 

Insurance Sector

• The Insurance Acts stipulates that any person who enters into an insurance contract or acts as an insurer must have licence to engage in a life or non-life insurance business. An application for such licence must be lodged the company promoter with the Ministry of Finance (MoF). However, since the insurance market is packed, the Office of Insurance Commission’s (OIC’s) policy is to not issue new insurance business license. Therefore, investors can only enter such market through merger and acquisition (M&A).

•  While I was handling a M&A transaction for an insurance company, there was a lot of confusion in how to navigate the ever-changing Thai insurance laws and policies.  In the past, a foreign investor may need to obtain a FBL or set up Thai-majority ownership structure to acquire a Thai insurance company; however, the Ministerial Regulation B.E. 2556 (2013) has excluded service businesses such as life and non-life insurance businesses from the FBA in order to enhance financial stability and attract foreign investment for insurance companies that need to improve their operations, promote their stability, maintain their competitiveness and attract required capital that domestic investors cannot offer. 

• In regard of the Thai insurance laws since 2008, the OIC can also approve up to 49% foreign shareholding (instead of the 25% threshold since 1992), and less than half of the total number of directors (instead of one-fourth) can be made up of foreigners. Meanwhile, the Minister of Finance (MoF) with the recommendation of the OIC can approve up to 100% foreign shareholding and foreign directors making up more than half of the total number of directors if the insurance company is facing difficulties in a way that can cause damage to the insured or the public. This approval standard is further relaxed since 2015 as approval can be granted to a foreign investor with a business plan that will strengthen stability for the insurance company or sector. 

• The 2015 and 2016 regulations outlining other criteria for granting approval require such foreign investor to be an experienced insurance company or individual with at least 10 years of relevant experience and to have enough Capital Adequacy Ratio (CAR). Anyhow, the documents and information required for each approval vary, so professional advice should be sought.

Key Takeaway for Investors

Once viewed as a “grey area”, nominee structures are now firmly in the enforcement spotlight. Having a Thai shareholder holding a single share to meet the two-shareholder rule isn’t a violation, but when Thai shareholders hold the majority shares in a business restricted under the FBA, it can trigger investigations. Even minority acquisitions in nominee-structured companies, particularly land-owning companies, expose foreign purchasers to liability. Buyers must therefore conduct thorough due diligence, and replacing any nominee shareholder with a legitimate shareholder should be a condition precedent to completion of the share transfer. With ongoing multi-agency coordination, asset seizures, and criminal prosecutions, reliance on nominee structures is increasingly risky and unsustainable. 

Furthermore, in the event of a nominee’s death, their heirs may legally claim company control. Nominees have also been known to demand substantial payments before approving dividend transfers or asset sales, creating severe operational and financial risks.

Complaint Alternatives for Foreign Investors

Foreign investors should pursue lawful ownership and control through the following options:

• Obtain a FBL under the FBA;

• Apply for Board of Investment (BOI) promotion, which allows up to 100% foreign ownership in certain sectors under the Investment Promotion Act;

• Obtain treaty protection:

  • The US-Thailand Treaty of Amity, which permits the majority of shares and directors to be U.S. citizens with a foreign business certificate (FBC), and

  • Other treaties such as the ASEAN Comprehensive Investment Agreement (ACIA) and the Japan-Thailand Economic Partnership Agreement (JTEPA) may exempt certain foreign nationals from FBL requirements.

• Obtain protection under Industrial Estate Authority of Thailand Act (IEAT), which offers companies operating in import/export, manufacturing, or specifically promoted sectors certain FBA exemptions and land ownership within industrial estates, or 

• Structure through joint venture: partnering with a genuine Thai investor who can contribute real capital, expertise or assets and ensuring a well-drafted shareholder agreement is in place to prevent future disputes. 

In terms of real estate, other legal alternatives include:

• Long-term lease (registration required for terms of 3 years up to 30 years);

• Usufructs, which grant the right to use and derive profit from the land;

• Superficies, which grant the right to own buildings on leased land; and

• Condominium Freehold, if purchased within the foreign threshold. 

Conclusion

Thailand’s intensified enforcement underscores its commitment to protecting local businesses and ensuring fair competition. For foreign investors, the message is clear: avoid nominee structures, ensure compliance, and seek legal guidance to leverage the various legal pathways available for entering the Thai market.

Disclaimer and Contact

This article is provided for general information only and does not constitute legal advice. While I strive to keep my legal insights accurate and practical, changes in law or other factors may affect your decisions. For tailored advice or assistance with FBL or BOI application, joint venture structuring, corporate acquisition, or compliance due diligence, please contact me at: osa.chaichit@gmail.com

By: Osaris Chaichit