The Bangkok Post reports that: “[t]wenty-two firms operating in five tourism provinces – Phuket, Surat Thani, Krabi, Prachup Khiri Khan and Chon Buri – have been alleged to use nominees for their foreign shareholders” according to the Thai Ministry of Commerce. The article says:
Deputy Commerce Minister Nattawut Saikuar said these wrongdoers will face fines ranging from 100,000 baht to 1 million baht and a jail term of not more than three years under the Foreign Business Act, or both.
“They are being given time to correct the shareholding structure or face a daily fine of 10,000 to 50,000 baht,” he said.
The article does not describe how they were using nominees illegally and this is significant since there is considerable debate and uncertainty about what constitutes illegal nominee shareholding under the Foreign Business Act, B.E. 2542 (FBA). Indeed, the provision of the FBA that is said to contain the prohibition on nominee shareholding – Section 36 – does not even contain the word “nominee”.
In broad terms, FBA Section 36 provides that a Thai national who “assists, supports or participates” in a business subject to restriction under the FBA “by showing that the business is solely owned [by that Thai national] or holds shares for an alien [e.g., foreign majority owned company]…so as to enable an alien to operate a business in evasion or violation [of the FBA]” commits a crime. In other words, the term “illegal nominee shareholding” is a form of shorthand used to describe the prohibitions set out in FBA Section 36.
But since the FBA only prohibits foreign majority ownership of the shares of Thai companies engaged in certain businesses and does not and never has prohibited foreign control of companies subject to the FBA (see here), it is not clear what sort of activities actually constitute “illegal nominee shareholding” in violation of the FBA (unless a Thai party, for example, signs a document saying that it is merely holding shares in a company on behalf of a foreigner). Complicating matters further, the FBA applies to a wide range of business activities, including “services”, broadly defined. For more information on Thai law prohibitions on foreign ownership of businesses, click here.
Last Updated: 6 February 2013