Thailand Nominee Shareholders
afraid so, but it is nevertheless a widespread practice among foreigners
going into business in Thailand who form Thai majority companies.
What is a nominee shareholder?
A nominee shareholder is a shareholder in
name only; in actuality, nominee shareholders lack a real financial
stake or interest in the company. The practice of nominee
shareholders is illegal. The prohibition is found in the Foreign
Business Act, the Land Act and other laws. It is a criminal
offense. In 2006, a Circular Letter from the Department of
Land and a new regulation from the Department of Commercial Registration
have brought foreign companies with Thai nominee shareholders under
an increased amount of scrutiny.
Why register a Thai majority company?
Many foreigners choose to form a Thai
majority company, that is a company where more than 50% of the shareholders
are Thai, so that they are able to operate a business in a category
that is restricted to foreigners. The registration of a Thai majority
company generally requires less registered capital and less paperwork
than the registration of a foreign company. Until recently,
these companies were also under less scrutiny than foreign companies.
A Thai majority company can also buy land.
Q: How can a foreigner control a 51% Thai Majority Company?
In a Thai majority company, Thai shareholders
control more than 50% of the shares. In the recent past, the
ratio of shares held by Thais and foreigners was typically 51 to
49. After the passage of Commercial Regulation No. 107, a 61:39
Thai to foreign shareholders ratio is considered more prudent. At
any rate, a dual class of shares where the foreign minority shares
have greater voting rights can ensure that foreigners control a
Thai majority company.
Won't the equity in a Thai majority company be owned by the Thai
The equity will be owned by the Thai shareholders;
however, most of the income of a limited company is normally disbursed
through expenses, such as salaries, rent, etc. Equity and profit
usually are only dispersed if dividends are declared (which is not
necessarily required by law) or upon dissolution of the company.
Frequently, when companies dissolve, there is no equity to disburse.
Are deeds of transfer from the Thai shareholders to the foreign
The use of "nominee" shareholders
is expressly forbidden by the Foreign Business Act of 1999. This
is a criminal offense. Prior to the introduction of the revised
act of 1999 it was common to have loan-pledge agreements to Thai
shareholders. This entails the Thai shareholders borrowing
funds from the foreigner and “pledging” the shares back
as security. However, the Act of 1999 made this practice illegal.
In 2006, two new regulations were issued further clamping down on
the use of Thai nominees. While enforcement has been spotty, the
practice is risky particularly if you have engaged the use of professional
nominees whose name appears on multiple company registrations.
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