Nominee Structures in Thailand: 51 Percent Only on Paper?
Thailand is taking decisive action against illegal company structures, sham shareholders and concealed land ownership. The joint inter-agency inspections are no passing campaign β they are here to stay. Violations carry severe criminal, financial and immigration consequences. Is your structure safe? With the "Sanet Health Test", we check for potential warning signs and options for action. ππππ π©ππ ππͺπ‘π‘ ππ‘π€π π₯π€π¨π© πππ§πβ¦
LEGALMANAGEMENT
Nominee Structures in Thailand: What Companies Should Check Now!
For years, some foreign investors relied on a Thai majority in the company register being enough. The company held 51 per cent Thai shares and ran businesses for which a foreign company would have needed a licence.
But who really owned the company? Who put up the capital, who called the shots and who pocketed the profits?
Now that the Department of Special Investigation has stepped in, the days when a Thai majority on paper could pass as adequate protection are over. The authorities are now scrutinising nominee structures in Thailand in a targeted and sustained way.
Their action is aimed at Thai sham shareholders and, above all, at the foreign investors who finance such arrangements and use them for their businesses or to acquire land.
"Everybody does it!" Why foreigners resorted to illegal nominee structures.
The Foreign Business Act in Thailand restricts foreign companies in areas such as retail and wholesale trade as well as many services. To get around these rules, or the restrictions on land acquisition in Thailand, some investors turned to companies with 51 percent Thai shareholding "on paper".
Law and accounting firms offered such set-ups, complete with Thai shareholders or directors, for a fee. In Phuket, the DSI investigators documented one such network linked to more than 60 companies.
βEverybody does itβ may have sounded reassuring to an investor. But that doesnβt make a shareholding lawful. What matters is whether the Thai shareholders have genuinely invested their own capital, exercised their own rights and shared in the companyβs financial success. Anyone who merely lends their name creates a considerable risk for everyone involved.
The authorities are digging deeper β and connecting the dots
The investigations donβt stop at the list of shareholders in the company register.
Several authorities can pool information on shareholdings, finances, land and the actual management of a company. The digital exchange of corporate data makes it easier for them to spot links and inconsistencies.
In investigations that sometimes come without warning, the authorities take a close look at the actual role of everyone involved. They examine documents and may question shareholders and managing directors in depth. Among other things, they want to establish.
Where did the money for the Thai shareholdersβ shares come from?
Did the Thai shareholders bear any real economic risk, and did they actually receive returns?
Who has the final say over directors, bank accounts and key business decisions?
Who runs the company day to day, and who reaps the financial rewards?
Do contracts, payment flows and day-to-day practice match the registered shareholding?
A single warning sign does not in itself prove an illegal nominee structure. Not every company with foreign minority shareholders is automatically under suspicion. What counts are the facts and the available evidence.
Whatβs at stake if a nominee structure is proven?
A nominee company in Thailand can expose those involved to the following risks:
Fines and imprisonment: Thai nominees and foreigners who conduct unauthorised business through them face up to three years in prison and fines of up to THB 1 million.
Personal liability of directors: Anyone who tolerates the violation or fails to take reasonable steps against it risks the same penalty.
Forced sale of land: Where land has been acquired illegally through nominees, its sale can be ordered within a period of 180 days to one year. Foreign buyers and nominees also face up to two years in prison.
End of business and deportation: Courts can order the unauthorised activity to be shut down and the companies to be dissolved. Foreign participants in a nominee structure also face deportation.
The "Sanet Health Test": Spot the risks before the authorities start asking questions
Sanet Legal and Accountancy reviews your company structure against an extensive catalogue of relevant risk indicators.
We examine the registered details as well as joint venture agreements, financing, control rights and actual management. The result is an overall assessment of your risk profile:
We mark critical findings as Red Flags and points requiring further clarification as Amber Flags.
Once the Health Test is complete, we work with you to determine which measures can eliminate the risks identified and whether the company structure or the ownership of the land can be lawfully restructured. This allows us to draw up a concrete plan for the way forward.
Use our contact form to book a free initial consultation.
Once we have all the required documents, you will usually receive your risk analysis within 14 days.
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