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“Nominee (proxy shareholding)” risk analysis: key compliance points and legal boundaries for foreign shareholding in Thailand

in recent years, nominee arrangements have drawn increasing regulatory attention among foreign-invested companies in Thailand. although they may appear as shareholding structures, from a legal perspective they essentially involve circumventing foreign ownership restrictions and may lead to significant legal risks. for businesses operating in Thailand, understanding the compliance boundaries is critical

Legal definition of nominee (proxy shareholding)

Under the Thai legal framework, a nominee generally refers to:
a Thai individual holding shares or rights in name, while the actual control and economic benefits belong to a foreign investor

This practice is typically regarded as:
circumventing foreign ownership restrictions under the Foreign Business Act 1999 through nominee structures

and falls within a key area of regulatory scrutiny

ow to determine whether a structure constitutes a nominee arrangement

when determining whether an arrangement constitutes a nominee structure, regulators in Thailand do not rely solely on the registered shareholders, but also examine the “substance of control,” including:

source of investment funds (whether funded by foreign investors)
corporate control (such as appointment of directors and signing authority)
profit distribution mechanisms
existence of side agreements actual control over business operations and decision-making

If a situation arises where shares are held by Thai nationals but actual control rests with foreign investors, it is typically deemed to be a nominee arrangement

In practice, common nominee structures include:
shareholding nominee: Thai individuals hold shares without making actual capital contributions
loan-back arrangements: foreign investors provide funds while shares are held in the name of Thai individuals
control agreements: foreign parties hold a minority stake but retain actual control
director nominee: nominee directors hold positions in name only without real decision-making authority

Latest regulatory trend: Thailand continues to strengthen scrutiny of nominee arrangements

In the past two years, the Thai government has significantly strengthened its regulation of nominee arrangements, shifting from “form-based review” to “substance-based review,” mainly reflected in the following aspects:

Multi-agency joint enforcement with enhanced regulatory intensity
currently, multiple authorities including the Department of Business Development (DBD), the Revenue Department, and the Department of Special Investigation (DSI) have established joint investigation mechanisms. through data sharing and cross-checking, suspicious companies are subject to focused scrutiny
Regulatory focus shifting from “shareholding ratio” to “actual control”
the focus is no longer limited to the formal requirement of “51% Thai shareholding,” but extends to a deeper examination of:
source of funds
actual control
decision-making authority
profit allocation
even if the structure appears compliant on the surface, it may still be deemed illegal if it is determined to involve “nominee shareholding with actual foreign control”

Summary:
nominee (proxy shareholding) arrangements are considered high-risk legal practices in Thailand. once identified, they may lead not only to fines and criminal liabilities, but also trigger a series of consequences, including tax audits, visa issues, and risks to corporate qualifications.

for foreign-invested enterprises, it is advisable to avoid using nominee structures to circumvent legal restrictions. instead, companies should adopt compliant approaches—such as applying for a foreign business license or seeking BOI promotion—to ensure long-term compliance and stable business operations in Thailand

Recommendation

TMA recommendation:
In Thailand’s practical business environment, companies may adopt different shareholding structures based on their specific circumstances. for businesses involving foreign participation, it is recommended to pay close attention to compliance requirements and potential risks at the planning stage:
gain a clear understanding of the legal boundaries of shareholding structures under Thai law
ensure that shareholder contributions and benefit arrangements are reasonable and justifiable
maintain consistency between actual control and the shareholding structure
for businesses in regulated industries, assess whether relevant licenses are required (such as an FBL or BOI promotion)
ensure that documentation is complete and the structure is logically sound during the design process
under the current tightening regulatory environment, companies are advised to conduct proper compliance assessments and long-term planning before commencing operations, in order to enhance business stability and sustainability

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