Living in Thailand offers an exciting and rewarding lifestyle, attracting entrepreneurs and global businesses from around the world eager to start businesses in one of Southeast Asia’s most dynamic economies. However, for foreign investors, navigating the country’s regulatory framework—particularly around ownership restrictions—can be challenging. One of the most critical legal pitfalls to avoid is engaging in nominee shareholding arrangements.
In recent years, Thailand has seen a growing focus on the use of nominee shareholding structures. Key regulatory bodies including the Department of Business Development (DBD), the Department of Special Investigation (DSI), the Anti-Money Laundering Office (AMLO), and Economic Crime Suppression Division, are now working closely to investigate and crack down on these sham ownership arrangements.
As of 2025, the numbers speak volumes: Thai authorities have undertaken over 29,000 legal cases and prosecuting 852 companies for nominee-related offenses, involving estimated damages of over THB 15.1 billion. DBD has also announced a targeted investigation plan for 2025, focusing on 46,918 registered entities across six high-risk industries: tourism, real estate, e-commerce and logistics, hotels and resorts, agriculture-related enterprises, and construction.[1]
Amid Thailand’s crackdown on nominee shareholding, several government agencies now play an active and coordinated role in identifying, investigating, and prosecuting foreign-owned businesses that violate the law. The key government authorities involved in combatting the nominee arrangements are Department of Business Development (DBD), Department of Special Investigation (DSI), and Economic Crime Suppression Division (ECD).
Recently, the DBD and AMLO have jointly proposed amendments to the Anti-Money Laundering Act B.E. 2542 (1999) to combat nominee structures at the financial level. Under the proposed revisions, the use of or participation in nominee arrangements would be classified as a predicate offense to money laundering. If enacted, this would allow the government to seize or freeze assets held by both the Thai nominees and their foreign beneficiaries. The public consultation period for this draft concluded on 25 April 2025.
What is a “Nominee” Shareholder, and Why Is It Illegal?
A nominee refers to a Thai individual or entity holding shares on behalf of a foreign investor, solely to enable the latter to own and operate reserved businesses under Thai law.
In a nominee arrangement, the Thai partner is a passive figurehead, while the foreigner retains actual control, benefits, and decision-making power in the business. Such structures are often used to circumvent Thailand’s restrictions on foreign investment – for example, forming a Thai-majority company on paper so that a foreigner can operate a business in a sector otherwise off-limits to foreign ownership. Nominee arrangements might also be used to hold land through a Thai company, evading land ownership prohibitions on foreigners.
Using Thai nominees to operate business in Thailand is explicitly illegal. The Foreign Business Act B.E. 2542 (1999) (FBA) prohibits the nominee arrangement to operate restricted business in Thailand. Likewise, the Thai Land Code forbids foreigners from owning land (with very limited exceptions) and penalizes any attempt to use Thai proxies to hold land titles. In the tourism industry, Tourism Business and Tourist Guide Act B.E. 2551 (2008) prohibits a nominee shareholding company from applying for a tourism business license. Failure to comply with the regulations may result in authorities withdrawing the license and if the operator continues to operate tourism business without a license, the operator may face criminal penalties.
Red Flags in Nominee Investigations
When investigating potential nominee shareholding arrangements, Thai authorities assess both documentary evidence and circumstantial factors to determine whether a company is engaged in nominee structure. The following indicators are commonly reviewed:
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- Corporate Documents and Financial Records
Authorities mostly focus on shareholder lists, company affidavits, share certificates, and bank statements for inconsistencies, unexplained capital flows, or irregular payment structures.
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- Unusual shareholding ratios
A frequent red flag is where foreign investors hold just under 49% and the remaining 51% is spread among Thais with low profiles.
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- High-Risk Business Industry
According to DBD’s 2025 direction, six high-risk[2] business categories have been identified as high-risk industry for nominee arrangement, which are tourism, real estate, e-commerce and logistics, hotel and resort operations, agriculture, and construction.
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- Lack of Economic Substance Among Thai Shareholders
Indicators include the absence of real capital contributions, no record of dividend income, profit participation, or risk-bearing, suggesting the Thai shareholder is a figurehead.
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- Absence of Participation in Management or Decisions
If Thai shareholders or directors do not participate in business decisions and defer entirely to foreign principals—who exercise control over banking, contracts, and operations—this might suggest a nominee structure.
Early Warning Signs of a Nominee Investigation
How can you tell if your company is under the shadow of a nominee shareholding investigation? While some inquiries start covertly, there are typical early warning signs that enforcement agencies are scrutinizing your business. Here are some signals to watch for:
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- Receipt of formal Notices or Summons from Authorities:This is the most obvious sign. They may ask for shareholder documents, financial statements, or explanations of your ownership structure. Any direct contact from regulators about nominees or foreign ownership issues should be taken seriously and responded to promptly—with legal counsel’s guidance.
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- Unexpected Inspections or Interviews:Stay vigilant if officials show up for surprise inspections at your business premises or request interviews with your Thai shareholders and directors. Investigators might visit to verify who is actually in charge of the day-to-day operation. They may also call in Thai partners for questioning to determine if those partners understand the business and have a real financial stake. If your nominal Thai shareholders appear uninformed or underfunded, authorities could suspect a nominee setup.
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- Whistleblower Tips or Local Complaints:Many investigations are triggered by whistleblowers—a disgruntled ex-employee, a business competitor, or even neighbors might report that a supposedly Thai-owned company is covertly foreign-run. If you catch wind of complaints or unusual questions being asked about your ownership, it could prelude an official probe.
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- Bank or Tax Authority Inquiries:In some cases, questions from banks or tax authorities about financial transactions between Thai and foreign shareholders, or lack of dividends to Thai owners, may suggest the matter has been flagged for investigation.If you notice any of these signs, do not ignore them or assume it is “routine.” Proactively consulting a qualified legal professional and taking a truthful approach with the authorities could be an effective way to prevent further complications.
Before the storm hits, how to mitigate the risk?
The best way to survive a nominee investigation is to ensure there is never a reason to initiate one. Foreign investors planning a venture in Thailand’s restricted sectors should take proactive steps to structure their businesses legally and sustainably from the outset. Since each business structure is subject to case-by-case analysis to determine the most appropriate approach, it is crucial to engage experienced Thai legal counsel early in the strategic planning process to identify potential regulatory risks and ensure your business structure complies with applicable laws to minimize the likelihood of future legal issues and support long-term operational stability. Some sample approaches that may be considered include:
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- Assessing eligibility under the Board of Investment of Thailand (BOI) or Industrial Estate Authority of Thailand (IEAT):The BOI offers investment promotion incentives that can exempt certain businesses from foreign ownership limits. If your project qualifies (e.g. in tech, manufacturing, certain services), a BOI promotion allows 100% foreign ownership along with other incentives. Similarly, obtaining permission from the IEAT to operate a restricted business can exempt the requirement to obtain the FBL. These measures help eliminate the temptation to use nominees.
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- Assessing eligibility under treaty or bilateral agreementsThe requirement for an FBL may be waived for a foreign national from a country that has a special treaty or bilateral agreement with the Thai government, such as the ASEAN Comprehensive Investment Agreement (ACIA), the Treaty of Amity and Economic Relations between Thailand and the United States of America (US Treaty), the Japan-Thailand Economic Partnership Agreement (JTEPA).
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- Assessing the requirement of a Foreign Business License (FBL):For restricted activities under the FBA, applying for a Foreign Business License is another route. While approval is discretionary, an FBL legally authorizes a foreign-majority company to run a specific business in Thailand. If granted, it legitimizes your operations and removes the need for any Thai front shareholding. Importantly, certain business activities have been exempted from FBL requirements through Ministerial Regulations. In addition, specific businesses may qualify for an exemption based on prescribed criteria, for example, wholesale and retail businesses with a minimum of THB 100 million capital may operate without obtaining an FBL. Additionally, businesses operating within specific zones in Thailand, for instance, the Eastern Economic Corridor (EEC) may be eligible for foreign land ownership and expanded business rights under specific regulatory conditions.
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- Partner with Genuine Thai Shareholders:If you decide to take on Thai shareholders who are genuine business partners contributing real capital, assets, or expertise to the business, the company structure should accurately reflect each party’s actual contributions and include fair profit-sharing aligned with ownership stakes. Conduct thorough due diligence on prospective Thai partners and ensure a clear “prenup” – a mutual agreed written arrangement – is in place to mitigate the risk of future conflicts and support long-term operational stability.
About Kudun and Partner
At Kudun & Partners, our highly regarded Dispute Resolution team regularly advises clients on regulatory investigations, including matters involving nominee shareholding structures. Drawing on extensive experience in Thailand’s evolving enforcement landscape, we take a responsive and solutions-focused approach, helping businesses understand their legal position and navigate inquiries from the authorities with clarity and confidence.
For more information, please reach out to the authors; Kongwat Akaramanee (kongwat.a@kap.co.th) or Ninpim Nawavatcharin (ninpim.n@kap.co.th). Alternatively, visit www.kap.co.th to find out more about our practice
This article was first published in Malaysian Thai Chambers of Commerce newsletter. Read the published article here
