Are you considering setting up a company in Thailand in the name of someone whom you have met only a few times in a bid to get started quickly? Watch out before doing as that may backfire. Under the Foreign Business Act, 1999, a nominee shareholder is defined as the following;
“1. A nominee shareholder, being either a natural person or juristic person, who is registered as the holder of shares in the partly foreign-owned company, but who does not actually invest in the company, nor has the financial means to pay up his shares, nor has a beneficial interest in the company, nor has any form of control in the company.
- Is there an intention to evade the law? Indicators would be:
- how is management control in the company structured,
- is there a loan investment supplied or guaranteed by the foreigner (did the Thai shareholder actually invest in the company),
- unbalanced voting rights attached to shares held by the foreigner giving him absolute control,
- and the flow of funds from dividends paid by the company to the shareholders.”
However, under the Foreign Business Act 1999, and Thailand’s Land Act, this type of shareholder is illegal. Any suspected use of nominee shareholders by expats should be immediately reported to the police as under The Foreign Business Act 1999 such practice is strictly prohibited.
In fact, section 36 states that if a Thai national or a juristic person found assisting a expat in order to avoid the FBA by holding shares a nominee or even being a nominal owner shall be fined with 100,000 to 1,000,000 Baht or can be imprisoned up to three years.
On the contrary, a foreigner is allowed to take a control on a company as a minority shareholder and is allowed to be the managing director of the company. In relation to this, a foreigner can choose to form a majority company in Thailand, wherein the Thai partners are expected to have a 51% stake in the company, and the foreign associate to have 49% share.
