Shareholder agreements and nominee risk

It depends on the business activity. The Foreign Business Act B.E. 2542 restricts activities in Lists 1–3. If the activity is not listed, foreigners may hold up to 100%. For List 2 and 3 activities a foreign business licence or certificate from the Department of Business Development is required. Special channels also exist, including BOI promotion and the Thailand–US Treaty of Amity.

Section 36 of the Foreign Business Act penalises both the Thai national who assists by holding shares on behalf of a foreigner and the foreigner who uses that arrangement, with fines and imprisonment, and the court may order the shareholding or the business to cease. In practice the Department of Business Development examines the source of Thai shareholders' investment funds. Compliant alternatives are a foreign business licence, BOI promotion, or a transparent preference-share and voting structure.

At minimum six areas: quorum and matters requiring a special resolution; appointment and removal of directors; dividend policy and capital increases; transfer restrictions and pre-emption rights; deadlock resolution; and the dispute-resolution mechanism. Note that a shareholder agreement binds only its parties — to bind the company and third parties, the terms must be reflected in the articles of association registered with the Department of Business Development.

A limited company is a separate juristic person, but directors can be personally liable: acting outside the authority stated in the company affidavit; breaching duties under the Civil and Commercial Code provisions on agency and companies; liabilities that tax and labour statutes impose on the representative of a juristic person; and signing personal guarantees. Before accepting a directorship, confirm the signing authority and the scope of exposure.

Using Thai nominees to disguise foreign ownership breaches the Foreign Business Act and exposes both the foreign party and the assisting Thai nationals to fines and possible imprisonment, as well as forced closure of the business. Lawful alternatives include applying for a foreign business licence, relying on treaty rights or investment promotion, or restructuring the venture with a qualified adviser so the ownership and control arrangement can withstand scrutiny.