Author | Saphira Wu Yinchen Liu
When entering the Thai market, foreign investors frequently encounter the systematic restrictions imposed by the Foreign Business Act B.E. 2542 (1999) (the “FBA”) on foreign participation in restricted industries and related business activities. Against this backdrop, nominee shareholding is often one of the first structural arrangements that foreign investors consider. In practice, some foreign investors — whether seeking to gain access to industries restricted under the FBA, to satisfy Thai local shareholding requirements in form, or to improve transactional efficiency — contemplate having Thai individuals or Thai entities hold shares on their behalf, while the foreign investor retains behind the scenes the actual capital contribution, profit distribution, and operational control arrangements. Such nominee arrangements, however, have consistently remained a focal point of legal and regulatory scrutiny in Thailand.
Drawing on Thailand’s current legal framework and two representative Supreme Court decisions as well as one regulatory example, this article focuses on the scenario of foreign investors entering the Thai market and examines three key questions:
l whether Thai law permits nominee shareholding by foreign investors;
l how Thai law defines and identifies such arrangements;
l what legal risks and consequences they may entail.
1. Does Thai Law Permit Nominee Shareholding by Foreign Investors?
Where foreign investors establish companies in Thailand for the purpose of investment and operations — particularly where entry into business sectors restricted under the FBA is involved — Thai law takes an overall negative stance toward the use of nominee arrangements to circumvent foreign ownership restrictions. This prohibition operates on two fronts: the FBA directly prohibits the relevant conduct, while the general rules on the validity of juristic acts under the Civil and Commercial Code undermine or negate the legal protection available to such arrangements at the contractual level.
To determine whether nominee shareholding by foreign investors is prohibited, one must first understand the scope of the term “foreigner” as used in the FBA. Under Section 4 of the FBA, “foreigner” encompasses not only non-Thai natural persons and juristic persons not registered in Thailand, but also juristic persons registered in Thailand whose capital shares or investment funds are held or contributed to the extent of one-half or more by foreign persons, as well as further-tier companies in which such entities hold shares or make contributions reaching the statutory threshold. This means that under the Thai legal framework, the determination of “foreigner” status does not stop at the surface level of the place of registration or the company’s name, but extends further into the shareholding and capital contribution structure.
Building on this foundation, the FBA establishes clear rules governing the lawful pathways through which foreigners may enter restricted businesses. Under Section 8, unless otherwise provided in Sections 6, 7, 10, and 12, foreigners are prohibited from engaging in businesses listed in the annexed Lists. Businesses listed in List One are in principle closed to foreign participation; those in List Two require the approval of the Minister of Commerce with the consent of the Cabinet; and those in List Three require the approval of the Director-General of the Department of Business Development with the consent of the Foreign Business Committee. In other words, foreign access to restricted businesses must in principle be achieved through permits, certificates, or statutory exemptions — not through nominee shareholding arrangements designed to circumvent the rules on market access.
Within this framework, Section 36 of the FBA imposes a more direct prohibition on nominee arrangements. It expressly provides that any Thai national or juristic person that does not qualify as a “foreigner” under the FBA commits an offense if, for the purpose of enabling a foreigner to circumvent or violate the FBA, such person assists, supports, or participates in the foreigner’s operation of a business listed in the Lists that the foreigner is not permitted to operate; or makes it appear that the business is operated solely by that Thai national or juristic person alone; or holds shares on behalf of a foreigner in a partnership, limited company, or other juristic person. A foreigner who permits a Thai national or non-foreign juristic person to engage in any of the foregoing conduct is likewise subject to this provision. With respect to nominee shareholding specifically, Section 36 explicitly brings within its prohibitive scope the act of a Thai person holding shares on behalf of a foreigner in order to help that foreigner circumvent the FBA.
The FBA’s stance toward such arrangements extends well beyond a mere finding of formal illegality. Under Section 36, a Thai national or non-foreign juristic person who engages in the prohibited conduct, as well as a foreigner who permits such conduct, is liable to imprisonment of not more than three years, a fine of between 100,000 and 1,000,000 baht, or both. The court is also required to order the cessation of the assistance, the joint operation, the nominee shareholding, or the relevant partnership. If the offender fails to comply with the court’s cessation order, a continuing fine of between 10,000 and 50,000 baht per day may be imposed. Furthermore, where the offender is a juristic person, Section 41 of the FBA provides that any director, partner, or authorized representative who participated in the offense or who failed to take reasonable measures to prevent it may also be liable to imprisonment of not more than three years, a fine of between 100,000 and 1,000,000 baht, or both. Under Thai law, therefore, nominee shareholding arrangements involving foreign investors not only risk losing contractual protection but may also directly trigger criminal liability and court-ordered cessation.
Finally, beyond the FBA’s own regulatory framework, the general rules on juridical acts under Thailand’s Civil and Commercial Code further affect the validity of nominee arrangements at the contractual level. Section 149 of the Code defines a juristic act as a voluntary and lawful act whose direct purpose is to establish, modify, transfer, preserve, or extinguish a relationship of rights and obligations. Section 150 further provides that a jurirtic act is void if its object is expressly prohibited by law, is objectively impossible, or is contrary to public order or good morals. Under this normative framework, if the core purpose of a nominee shareholding arrangement is for a Thai nominal shareholder to hold shares on behalf of a foreign investor in order to help that investor circumvent the foreign ownership restrictions established by the FBA, the agreement itself faces a significant risk of being declared void under Section 150 of the Civil and Commercial Code.
2. How Does Thai Law Identify Nominee Shareholding by Foreign Investors?
Thai law adopts a substance-over-form approach to identifying nominee shareholding arrangements involving foreign investors. Whether a particular arrangement constitutes a prohibited foreign nominee structure does not depend on whether the parties have signed a document titled “nominee agreement.” Instead, the inquiry focuses on the overall effect of the arrangement: whether the Thai entity registered as the shareholder or business operator is merely a nominal party; whether the actual capital contribution, control, and economic benefits remain in the hands of the foreign investor behind the scenes; and whether the arrangement is designed to circumvent or violate the FBA.
The FBA does not provide a standalone statutory definition of “nominee arrangement” or “nominee”. Instead, Section 36 delineates the regulatory scope by enumerating the types of prohibited conduct. Under that provision, the essence of a nominee structure is one in which a Thai national or a juristic person that does not qualify as a “foreigner” holds shares or operates a business in form, thereby enabling a foreign investor to gain access to restricted businesses listed in the Annexes. The Department of Business Development’s 2024 Annual Report adopts essentially the same framework in defining “nominee:” a Thai national or non-foreign juristic person who assists, supports, jointly operates, or holds shares on behalf of a foreigner in order to enable that foreigner to circumvent or violate the FBA.
Accordingly, nominee shareholding by foreign investors under Thai law can be distilled into two core elements. First, there exists a “nominee” who appears on the register in form only, and whose nominal shareholding is separated from the actual capital contribution, beneficial interest, and control. Second, the arrangement is designed to help the foreign investor circumvent the restrictions of the FBA and gain access to restricted business sectors.
The first element turns not on whether a Thai shareholder appears in the shareholder register, but on whether that Thai shareholder merely provides a local façade without genuinely bearing the capital contribution, operational risk, control, and economic rights commensurate with the nominal shareholding. Relevent case summaries indicate that, in determining whether a Thai person is merely a nominee for a foreign investor, courts examine five factors: the source of funds, actual management and control, profit distribution, whether the parties possess relevant business knowledge, and the relationship between the parties. This “five-factor test” reflects a substantive inquiry into whether the nominal shareholder is separated from the actual contributor of capital, the person exercising control, and the ultimate beneficiary.
The second element turns on whether the structure is designed to help the foreign investor circumvent or violate the FBA. Section 36 of the FBA is itself centered on this normative concern: what it prohibits are arrangements in which shares are held or businesses are operated under the name of a Thai person so as to enable a foreign investor to enter restricted business sectors that the foreigner would otherwise have no right to operate in.
The significance of this substance-based inquiry lies in its capacity to pierce through contractual and corporate governance arrangements that are independent of one another in form and to identify the nominee substance underlying them. In practice, nominee shareholding by foreign investors is rarely achieved through a single nominee agreement. Instead, it is typically accomplished through an entire suite of agreements and corporate governance tools working in concert. Viewed individually, these arrangements may not be unlawful. But if their combined effect is to leave the Thai shareholder holding shares in form only while the foreign investor retains actual control, economic benefits, and key decision-making authority, the first element is substantially satisfied. If, on top of this, the company’s business falls within the restricted sectors listed in the FBA annexed Lists, and the foreign investor has neither obtained the requisite permit nor qualified for any statutory exemption yet substantively operates the restricted business through the structure described above, the second element is also more likely to be recognized as established. Where both elements are present, the entire structure may be characterized as a nominee shareholding arrangement prohibited under Thai law, potentially triggering criminal liability and resulting in a court order to cease the assistance, joint operation, nominee shareholding, or related partnership.
3. What Legal Risks and Consequences May Nominee Shareholding by Foreign Investors Give Rise To?
Once an arrangement is found to constitute nominee shareholding by a foreign investor, the risks extend well beyond criminal liability. They may further escalate into contractual nullity, the irrecoverability of invested funds, and the denial of judicial relief for claims the foreign investor seeks to assert.
(1). Nominee Arrangements May Result in the Nullity of Relevant Transactions and the Irrecoverability of Payments Already Made
Supreme Court Decision No. 5457/2560 provides a paradigmatic illustration. In that case, the plaintiff and the first defendant entered into a “loan agreement” under which the first defendant ostensibly borrowed 19.5 million baht from the plaintiff, with the second defendant providing a guarantee. The defendants, however, argued that the loan agreement was merely a sham document and that the true transaction was the plaintiff’s acquisition of the first defendant’s entire business — structured as a loan in order to circumvent the FBA’s restrictions on foreign investors. The Supreme Court ultimately accepted this defense.
The court found that the loan agreement in question was in reality a disguised transaction concealing a business acquisition. The evidence showed that the plaintiff was aware that a Japanese national could not directly purchase all the shares of a Thai-registered company and had therefore completed the arrangement by having Thai persons hold shares on his behalf. Email correspondence further demonstrated that the parties had designed the transaction structure from the outset with the objective of circumventing Thai legal restrictions. Under the shareholding arrangement after restructure, the plaintiff and his child collectively held 49% of the shares, with the remaining 51% held by six Thai individuals. The court found, however, that these six Thai shareholders were merely nominal holders and that actual business control and the beneficial interest in the shares remained with the plaintiff. On this basis, the Supreme Court held that the arrangement was designed to circumvent the FBA through nominee shareholding by Thai persons and constituted a juristic act entered into for an unlawful purpose, rendering it void ab initio under Section 150 of the Civil and Commercial Code.
Of particular note, the court did not stop at declaring the contract void. Because the plaintiff had knowingly participated in and paid consideration for a transaction whose purpose was to circumvent the law, the court further applied Section 411 of the Civil and Commercial Code, holding that the payment constituted a performance made for the purpose of achieving an unlawful objective and was therefore irrecoverable. In other words, the foreign investor not only failed to achieve the intended control objective but also stood to lose the transaction consideration already paid, on the ground that it constituted an unlawful performance.
The risk exposed by this decision is stark: courts will not refrain from examining the true purpose of a transaction merely because the parties have used neutral contractual labels such as “loan” or “guarantee.” As long as the substance of the overall arrangement is found to be the preservation of business and share interests for a foreign investor through Thai nominal shareholders in order to circumvent the FBA, the entire transaction may be set aside, and the consideration already paid may lose any basis for restitution.
(2). Nominee Arrangements May Deprive Foreign Investors of Judicial Protection, Denying Relief Even for Rights They Seek to Assert
Supreme Court Decision No. 2252/2560 illustrates another equally severe consequence: where a foreign investor conducts restricted business through a Thai company or nominal shareholders, the court may refuse to recognize the investor’s standing as an injured party even if the investor subsequently claims to have been the victim of fraud or property damage — effectively stripping the investor of the right to bring suit.
In that case, the plaintiff was a BVI company and therefore a foreigner within the meaning of Section 4 of the FBA. The plaintiff and the defendant agreed to jointly invest in the purchase of land in Phuket for the development of residential and commercial projects. In form, the land was registered in the name of a Thai company, and the plaintiff held only 7,000 ordinary shares in the shareholder register, with a capital contribution of 700,000 baht. The court found, however, that the funds for the land acquisition and business operations had in substance originated from the plaintiff and had been channeled into the project through intermediaries. On this basis, the court concluded that the plaintiff was not merely a shareholder investing in anticipation of dividends, but was in fact the actual operator of the land trading business conducted in the name of the Thai company.
The Supreme Court went on to observe that land trading is a business listed in List One of the FBA — that is, a business that foreigners are not permitted to operate for special reasons. By participating in land trading through the arrangement described above, the plaintiff had engaged in a business prohibited by law for foreigners. Accordingly, even though the plaintiff alleged that the defendant had made false entries in corporate documents and shareholder meeting resolutions, thereby harming the plaintiff’s property interests, the Supreme Court held that such harm arose from the plaintiff’s engagement in a legally prohibited business. The plaintiff therefore did not qualify as an "injured party" within the meaning of the Criminal Procedure Code and lacked standing to bring suit. The Supreme Court ultimately set aside those portions of the lower court’s judgment that were adverse to the defendant and dismissed the plaintiff’s case.
This decision demonstrates that where the underlying transaction is itself unlawful, that illegality may operate in reverse to sever the foreign investor’s standing to assert rights as an “injured party” — even where the investor has genuinely encountered corporate governance disputes, suffered harm to shareholder interests, or experienced the misappropriation of assets, the court may decline to provide relief.
(3). Nominee Shareholding by Foreign Investors Also Faces the Practical Risk of Proactive Regulatory Screening
Beyond the risks that it may be exposed by litigation, nominee shareholding by foreign investors also faces the practical risk of being proactively identified and addressed by the competent authorities at the administrative enforcement level. The Department of Business Development’s 2024 Annual Report reveals that in 2024, the authorities investigated 498 entities across four industry categories — tourism and related businesses, land and real estate transactions, hotels and resorts, and transportation and logistics — in connection with the use of nominee structures to circumvent the FBA. Of these, 390 showed no suspicious indications of nominee arrangements; 72 failed to provide explanations or submit documents in response to official notices; 6 were identified as exhibiting suspicious characteristics; and 30 could not be contacted or had no registered address. This demonstrates that unlawful nominee arrangements are not merely a latent risk that surfaces incidentally in isolated disputes, but rather a live issue that the regulatory authorities have continuously and proactively incorporated into their priority inspection programs. Once a nominee structure is identified as falling within the scope of Section 36 of the FBA during such an inspection, the entities involved may face a cascade of further legal consequences.
Conclusion
In summary, Thai law takes a clear prohibitive stance toward nominee shareholding by foreign investors. On the one hand, the FBA — through its look-through approach to determining “foreigner” status, its restrictions on access to businesses listed in the Lists, and Section 36’s prohibition on nominee shareholding, operation under borrowed names, and related assistance — expressly forecloses the pathway by which foreign investors might enter restricted businesses through Thai nominal shareholders. On the other hand, Section 150 of the Civil and Commercial Code, which renders void juristic acts with an unlawful object, exposes such arrangements to the risk of losing legal protection at the contractual level. In identifying nominee shareholding by foreign investors, Thai law does not confine itself to the labels on documents but looks instead to the overall effect of the transactional and corporate structure — who is the true contributor of capital, the person exercising control, and the ultimate beneficiary, and whether the structure serves the purpose of circumventing the FBA. Once an arrangement is found to constitute unlawful nominee shareholding, the consequences may manifest as contractual nullity, the irrecoverability of consideration paid, the denial of standing to bring suit, and — under proactive regulatory screening — criminal liability.
Note: This article represents only the views of the authors and is intended for informational and educational purposes only. It does not constitute formal legal opinions or advice of GENLaw. Readers shall not rely on the contents of this article as a basis for any decision or course of action.
Sources:
Foreign Business Act B.E. 2542 (1999) (Kingdom of Thailand).
Civil and Commercial Code (Kingdom of Thailand).
Department of Business Development, Ministry of Commerce (Kingdom of Thailand), Annual Report 2024: Foreign Business under the Foreign Business Act B.E. 2542 (1999).
Supreme Court of Thailand, Decision No. 5457/2560.
Supreme Court of Thailand, Decision No. 2252/2560.
ThaiLawOnline, “What Is the Five-Factor Nominee Test Under the Foreign Business Act? (Decision 6529/2545),” case summary.
Harald Hinterer, “Legal Loopholes and Uncertainties of Nominee Structures under Foreign Business Law of Thailand: Comparative Analysis with Austrian Investment Law,” Chulalongkorn University Theses and Dissertations (Chula ETD), No. 74869, 2024, DOI: 10.58837/CHULA.IS.2024.394.
Supasit Saypan, “Legal Problems Concerning Nominee Arrangement in Relation to Foreign Business under Thai Laws,” LL.M. Thesis, Business Laws (English Program), Faculty of Law, Thammasat University, 2019, DOI: 10.14457/TU.the.2019.17.
