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April 28, 2025

Nominee Trap: Legal Risks and Licensing under Thailand’s Foreign Business Act

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While Thailand’s Foreign Business Act B.E. 2542 (1999) (FBA) has been in place for over two decades, the issue of nominee arrangements remains a hot topic—especially as authorities continue to crack down on businesses that use Thai nationals to hold shares in violation of foreign ownership restrictions under the FBA.

The FBA was enacted to limit foreign parties (which includes foreign individuals, offshore legal entities, and foreign majority-owned companies in Thailand) ability to conduct certain business activities in Thailand without authorization. This legal restriction has led many business operators to use nominees to operate their businesses.

Similar to many other countries, nominee arrangements are illegal in Thailand. The FBA expressly prohibits foreigners from using Thai nationals to hold shares on their behalf in a way that enables them to own and operate reserved businesses under the law. Engaging in such arrangements (including conducting a business without the necessary license under the FBA) can result in severe penalties, including imprisonment, fines, and the forced dissolution of the business. The authorities, particularly the Ministry of Commerce and the Department of Special Investigation, continue to actively pursue cases involving suspected nominees.

The FBA categorizes businesses into three lists, each outlining different levels of restrictions on foreign ownership and participation:

  • List 1: Foreign business operators are strictly prohibited from engaging in any of the business activities on list 1, such as media outlets (newspapers, radio, and television), rice farming, forestry, extraction of Thai medicinal herbs, and land trading.
  • List 2: Foreign business operators must obtain a foreign business license (FBL) from the Department of Business Development (DBD) and secure approval from the Thai cabinet to engage in a business activity on list 2. In addition, the company must be at least 40% Thai-owned (this may be reduced to 25% with special approval from the Minister of Commerce and the Cabinet), and at least two-fifths of the board of directors must be Thai nationals. This list covers business activities related to national security, such as arms trading and domestic aviation; businesses impacting arts, culture, traditions, and handicrafts; and businesses affecting natural resources or the environment.
  • List 3: Foreign business operators wishing to engage in business activities on list 3 must obtain an FBL (albeit with lower approval requirements than for businesses under list 2) from the DBD, with approval from the interagency Foreign Business Committee. List 3 covers business activities in which Thai nationals are deemed not yet ready to compete with foreign businesses. The list also includes “other service businesses”—effectively a catch-all provision that extends the scope of restricted activities and captures a wide range of service operations.

An FBL is not the only lawful and sustainable option for foreign businesses to pursue business operations in Thailand. The available options also include obtaining protection under specific treaties, such as the Treaty of Amity and Economic Relations between the United States and Thailand, or permission under the Investment Promotion Act, the Industrial Estate Authority of Thailand Act, or other laws. While these routes may seem complex at first, they offer a secure option that can underpin long-term growth in business operations.

Given the recent increased focus on nominee arrangements, it is important for foreign business operators to carefully consider the business structures and ensure proper licensing and compliance with foreign ownership restrictions. By complying with the law and taking proper advantage of the various legal pathways available, foreign businesses can help give newly established Thailand operations a firm grounding for success.

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