Thailand’s appeal as a regional hub for foreign investment is well established. With its strategic geographic position, relatively low labour costs, improving infrastructure, and investor-friendly government incentives, the country continues to attract multinational corporations and entrepreneurs alike. However, not all is straightforward in the Kingdom’s legal framework for foreign ownership. One particularly murky area lies in the practice of using “nominee shareholders,” a workaround that, while not explicitly legal, has become widespread. For foreign investors unaware of the risks, this practice can have serious legal and financial consequences.
This article explores the legal status of nominee shareholders in Thailand, why they are used, the enforcement risks they pose, and what investors can do to ensure compliance. It also draws on expert commentary and official government stances to shed light on this delicate issue.
Table of Contents
- Understanding nominee shareholder
- The risks for foreign investors
- Government crackdown and regulatory trends
- Operating with peace of mind in Thailand
- Our advice for foreign investors
- Conclusion
Understanding nominee shareholder
What is a nominee shareholder?
A “nominee shareholder” refers to an individual or legal entity that holds shares in a company on behalf of another person, usually the beneficial owner. In Thailand, this practice is most often used by foreign investors seeking to circumvent the restrictions imposed by the country’s foreign ownership laws, primarily the Foreign Business Act (FBA) B.E. 2542 (1999).
Under the FBA, foreign nationals are prohibited from owning more than 49% of shares in certain types of Thai companies engaged in “restricted businesses,” including sectors like retail, agriculture, and certain types of services. As a workaround, some foreign investors structure companies where 51% of the shares are held by Thai nationals, who serve merely as passive “nominees”, while the foreign party retains full beneficial control, often through informal side agreements. Though such arrangements may seem harmless, the legal landscape tells a different story.
The legal framework: What the law says
Thailand’s laws are clear in their intent, if not always in their enforcement. Section 36 of the FBA explicitly prohibits the use of nominees to hold shares on behalf of foreigners. The law defines this as any arrangement where a Thai national holds shares “in name only” without having any actual control, risk, or benefit from those shares. Violating this provision carries criminal penalties, including imprisonment for up to three years and/or fines of up to THB 1 million.
In addition to the FBA, Thailand’s Commercial and Civil Code also mandates that shareholders must act in good faith and have a genuine financial stake in the company. Agreements designed to mask the true ownership of shares are considered void under Thai law. The challenge, however, lies in enforcement. While the law exists on paper, enforcement has historically been inconsistent. This ambiguity has allowed the nominee system to persist in the shadows for years, especially among small- to mid-sized enterprises.
Why the practice persists
Despite the clear legal prohibitions, nominee structures remain popular. There are several reasons for this:
- Complexity and Cost of Alternatives: Legally structuring a business to allow foreign majority ownership under the FBA requires significant time, legal fees, and government scrutiny. Investors must either apply for a Foreign Business License (FBL) or seek promotion under the Board of Investment (BOI) or the Industrial Estate Authority of Thailand (IEAT). These routes are often bureaucratic and time-consuming.
- Lack of Awareness: Many foreign entrepreneurs, particularly small investors or digital nomads, are unaware of the legal implications. They may be advised—sometimes even by local professionals—to use nominee shareholders as a standard operating procedure.
- Inadequate Enforcement: Thai authorities have historically prioritized large-scale violations or politically sensitive cases. This uneven application of the law has created a perception that nominee arrangements are a “low risk” shortcut.
- Cultural and Business Practices: In a business environment where informal agreements and personal relationships play a large role, nominee structures are often viewed more as a grey area than an outright illegality.
The risks for foreign investors
While some may view nominee shareholding as a practical solution, it is fraught with legal and commercial risk.
Criminal prosecution and company dissolution
Should the authorities determine that a Thai shareholder is acting as a nominee, the company can face serious consequences, including revocation of its business license and forced dissolution. The foreign investor, as the ultimate beneficiary, may face criminal charges, deportation, or blacklisting from future Thai business activities.
A notorious example occurred in 2006, when the Military Coup Council instructed the Ministry of Commerce to investigate over 5,000 foreign-controlled companies suspected of using nominee shareholders. Several companies were shut down, and prosecutions followed. Though the political climate has since evolved, the precedent remains.
Lack of legal protection
Since nominee agreements are not recognized under Thai law, the foreign investor has no legal recourse if the nominee decides to act independently, seize control, or sell their shares. Even if a private side agreement exists, it is unlikely to be enforceable in Thai courts.
This risk is not merely theoretical. Legal practitioners report frequent cases of disputes between foreign investors and their nominees, especially in situations involving profits, company direction, or personal disputes.
Ineligibility for government support
Businesses with nominee structures may find themselves disqualified from certain government incentives, grants, or BOI promotions if the authorities discover the true ownership structure.
Reputational risk
For larger companies or startups seeking international funding, using nominee structures can present reputational risks. Due diligence by investors, partners, or auditors could flag these arrangements as compliance red flags, damaging the company’s valuation and credibility.
Government crackdown and regulatory trends
In recent years, Thailand has stepped up its scrutiny of nominee structures, driven in part by pressure from international organizations such as the OECD, the Financial Action Task Force (FATF), and transparency-focused trade partners.
In 2022, the Thai government began implementing stricter requirements on Ultimate Beneficial Ownership (UBO) disclosure under the Anti-Money Laundering Act (AMLA). The aim is to ensure that companies provide transparent data on who ultimately controls or benefits from their operations.
Moreover, in 2023, the Department of Business Development (DBD) issued new guidelines for company registration, requiring applicants to declare whether their Thai shareholders are acting as nominees. This, combined with greater cooperation between the DBD and the Revenue Department, suggests a tightening regulatory environment.
The 2025 crackdown: What authorities have done so far
- Since early 2025, Thailand’s Department of Business Development (DBD), Department of Special Investigation (DSI), Anti Money Laundering Office (AMLO), Economic Crime Suppression Division (ECD), Royal Thai Police, Ministry of Commerce, as well as provincial governors have launched coordinated investigations using AI driven data analysis task force to scrap, search and flag suspicious corporate structures within their respective databases.
- Over 29,000 cases have been initiated and 852 companies prosecuted for nominee-related offences, uncovering damages above THB 15.1 billion.
- DBD targeted 46,918 registered entities across six high-risk sectors — tourism, real estate, ecommerce/logistics, hotels/resorts, agriculture, and construction.
- In an intensified push in Phuket, a Criminal Court prosecuted and fined 23 individuals and entities for nominee land and tourism operations in July 2025 — each fined THB 200,000 with suspended two-year sentences, probation, and business dissolution.
- A major sweep in May 2025 targeted 46,000 firms suspected of nominee holding or importing substandard goods; 857 cases were prosecuted, accounting for THB 15.3 billion in alleged losses.
- Preventive Measures & Public Warnings: Media campaigns in both Thai and English to explain the legal risks for acting or using nominees in their business; emphasized by high-profile prosecutions.
- Legal Tools with Teeth: Nominee arrangements tied to money laundering will enable asset freezes, adding penalty severity beyond FBA provisions.
- Regulatory Review: In parallel, the Cabinet has endorsed limited relaxation of the FBA — raising foreign equity caps in select sectors and streamlining the FBL. Still, these liberalization steps hinge on stricter compliance mechanisms to minimize reliance on nominee structure.
- Unenforceable Protections: Contracts granting control to foreign parties outside formal share registries are null — courts often rule such side agreements void when nominee structures are exposed.
- Threat to Real Estate Assets Illegal land titles via nominee arrangements, especially in tourist areas, are now being reclaimed, with land confiscations possible
Operating with peace of mind in Thailand
If you choose to include Thai shareholders who contribute genuine value, whether in the form of capital, assets, or expertise, your company’s structure should transparently reflect each party’s actual input. Ownership stakes should align with real contributions, and profit-sharing should be equitable. It’s essential to conduct careful due diligence on any prospective Thai partners and establish a clear, written agreement—akin to a business “prenup”, to outline roles, expectations, and dispute resolution mechanisms. This helps prevent future misunderstandings and fosters long-term operational stability.
Other alternatives to start your business in Thailand includes:
Exploring eligibility under the BOI and IEAT
Foreign investors should first assess whether their business qualifies for promotion under the Board of Investment (BOI) or permission from the Industrial Estate Authority of Thailand (IEAT). BOI promotion offers a legal path to 100% foreign ownership, along with other benefits such as tax incentives, visa and work permit facilitation, and exemption from foreign equity restrictions. Eligible sectors typically include technology, manufacturing, and select service industries. Likewise, businesses approved by the IEAT to operate within designated industrial zones may be allowed to engage in restricted activities without needing a Foreign Business License (FBL). These options provide legitimate alternatives to nominee structures by allowing full foreign ownership where permitted.
Leveraging international treaties and agreements
Foreign nationals from countries with specific treaties or trade agreements with Thailand may also qualify for exemptions from FBL requirements. Notable examples include the ASEAN Comprehensive Investment Agreement (ACIA), the Treaty of Amity and Economic Relations between Thailand and the United States (commonly known as the US Treaty of Amity), and the Japan–Thailand Economic Partnership Agreement (JTEPA). These arrangements often grant broader rights to invest and operate businesses in Thailand without requiring Thai majority ownership, depending on the nature of the activity and the nationality of the investor.
The Foreign Business License (FBL)
For businesses engaged in activities restricted under the Foreign Business Act (FBA), obtaining a Foreign Business License remains a viable legal pathway. While approval is discretionary and requires justification, typically showing economic benefit to Thailand, an FBL allows a foreign-majority company to legally operate within otherwise restricted sectors. Crucially, companies with an FBL are not required to involve Thai shareholders merely for compliance.
In addition, Ministerial Regulations have exempted certain business categories from FBL requirements altogether. For instance, wholesale and retail businesses with paid-up capital of at least THB 100 million may operate without an FBL. Similarly, companies established in strategic zones such as the Eastern Economic Corridor (EEC) may benefit from enhanced investment privileges, including foreign land ownership and expanded business rights under tailored regulatory frameworks.
Our advice for foreign investors
Given the increased crackdown since the beginning of the year 2025, more audits are expected to be conducted within the database of the different authorities, together with a joint force of the other departments (DBD, DSI, AMLO).
Foreign investors are strongly advised to avoid nominee arrangements and to seek professional legal counsel when setting up in Thailand.
- All shareholder agreements reflect genuine economic substance.
- The Thai shareholders are financially capable of holding and managing their shareholding.
- All capital contributions are traceable and reflect actual transfers.
- Compliance with UBO reporting obligations is strictly maintained.
Legal practitioners also recommend regular audits of shareholding structures and caution against using “template” company setups offered by unregulated agents or brokers.
Conclusion
The use of nominee shareholders in Thailand may appear to be a convenient shortcut, but it is one laden with legal, financial, and reputational landmines. For foreign investors, particularly those seeking sustainable and scalable operations, the risks far outweigh the benefits. Thailand remains a welcoming destination for international business, but navigating its legal terrain requires clarity, compliance, and often, patience.
As regulatory scrutiny increases and the country aligns itself with global transparency standards, the nominee era may soon come to a close. Until then, the onus remains on investors to ensure that their corporate structures not only comply with local laws but also uphold international best practices.
Investing in Thailand, what are the next steps?
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