Integrity Legal

Archive for November, 2014

12th November 2014

For many the idea of setting up a business in Thailand is desirable if for no other reason than the thought of waking up and going to work every morning in one of the most idyllic countries in the world. In the past, many foreign owned businesses in Thailand were structured in such a way that they avoided some of the more stringent provisions of the Thai Foreign Business Act. In most cases Thai nominee shareholders were used to own the majority of a Thai company thereby ensuring that the company was considered “Thai” for purposes of the Act. However, this practice became illegal pursuant to section 36 of the currently enforced version of the Foreign Business Act as quoted below:

“A Thai national or a juristic person, not being a foreigner under this Act, who assists in or aids and abets or participates in the operation of a foreigner’s business specified in the Lists annexed hereto where such foreigner is not permitted to operate that business or who operates the business jointly with a foreigner in the manner holding it out as the former’s sole business or who acts as a foreigner’s nominee in holding shares in a partnership or a limited company or any juristic person with a view to enabling the foreigner to operate the business in circumvention or violation of the provisions of this Act, or a foreigner who allows such act to be committed by a Thai national or a juristic person that is not a foreigner under this Act, shall be liable to imprisonment for a term not exceeding three years or to a fine of one hundred thousand Baht to one million Baht or to both, and the Court shall order the cessation of the assistance or the aiding and abetting or order the cessation of the joint operation of the business or order the cessation of shareholding or partnership, as the case maybe. In the case of violation of the order of the Court, the violator shall be liable to a fine at the daily rate of ten thousand Baht to fifty thousand Baht throughout the period of the violation.”

Notwithstanding the fact that the use of Thai nominees is illegal, the practice persists. This fact was recently noted in a Bangkok Post article on the topic. However, in some cases discerning whether a company is utilizing nominees or simply structuring itself in such a way so as to provide security to foreign shareholders can be difficult. Therefore, when structuring a company in Thailand it is often prudent to seek the advice of competent legal advisers to in order to ensure that one’s business practices comport with relevant laws and regulations.

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