Thai FBA Warning: Nominee Shareholders Face Criminal Charges

Foreign investors operating in Thailand face a markedly tougher enforcement climate. Authorities are actively pursuing cases where Thai individuals or entities hold shares on paper for foreign owners to sidestep the Foreign Business Act B.E. 2542 (FBA). These “nominee” structures now draw swift investigation, criminal charges and orders to unwind the arrangement. This concise briefing explains what counts as a nominee, the legal risks under Sections 36–38, how investigations are built, the red flags that trigger scrutiny, how courts analyse these cases, and practical steps to design a compliant structure from the outset—without resorting to nominees.

Why this matters in September 2025 ?

Across 2024–2025 Thailand has tightened supervision of foreign participation in restricted sectors. The policy intent is straight-forward: welcoming investment while insisting on transparency and lawful control. Multiple agencies—principally the Department of Business Development (DBD), the Department of Special Investigation (DSI) and financial-intelligence units—are coordinating inspections and data-matching to find concealed foreign control. The trend lines are clear:

• Proactive audits in tourism, hospitality, real estate/land-adjacent activity, logistics/e-commerce and construction.
• Case consolidation: investigators move beyond company registries to follow the money, governance and beneficial ownership.
• Remedial orders with teeth: courts increasingly pair criminal penalties with orders to cease the business or restructure, backed by daily fines until compliance.

The message for founders, corporate counsel and boards: if the economic reality shows foreign control in a restricted activity, a Thai name on the share register will not save you.

What counts as a “nominee” under the FBA ?

A nominee shareholder is a Thai person or company who holds shares for the benefit and at the direction of a foreigner, without genuine capital at risk, independent decision-making, or a proportionate share of profits. Typical features include:

• The foreign party provides the funds for the Thai’s shares (often through back-to-back transfers or “loans” with no real repayment behaviour).
• The foreign party calls the shots—approves budgets, signs contracts, hires and fires—while the Thai “majority” is passive.
• Profit flows (dividends or disguised fees) accrue predominantly to the foreign side.

Under Thai law that is not legitimate “structuring”; it is a prohibited evasion of foreign-ownership controls.

The law in brief: Sections 36–38 FBA

Section 36 — Nominee and aiding offences

• Makes it a crime for a Thai person or non-foreign juristic person to assist, support or act in a restricted business for a foreigner who lacks permission.
• Catches both sides of the arrangement: the Thai nominee and the foreign beneficiary.
• Sanctions: up to 3 years’ imprisonment, ฿100,000–฿1,000,000 fine, and court orders to stop the assistance/structure. Non-compliance triggers daily fines (฿10,000–฿50,000) until fixed.

Section 37 — Unlicensed foreign operation

• Targets foreigners directly conducting a restricted business without the required licence or exemption.
• Sanctions: up to 3 years’ imprisonment, ฿100,000–฿1,000,000 fine, and cessation orders with daily fines if ignored.

Section 38 — Capital/condition breaches

• Covers failures to meet minimum capital rules or licence conditions.
• Sanctions: ฿100,000–฿1,000,000 fine plus daily fines until rectified (no custodial term specified here).

Bottom line: Nominee structures routinely expose both the foreign principal and Thai stand-ins to criminal liability and business-ending court orders.

How investigations are built (and why more are sticking) ?

Enforcement today is evidence-driven, not form-driven. Investigators typically triangulate four streams:

      1. Funding trail — Do Thai shareholders have verifiable, independent sources for their share subscriptions? Are there circular flows from a foreigner’s account to the Thai and back to the company? Are “loans” priced and repaid as real debt?

      2. Control signals — Who authorises payments, signs contracts and sets policy? Email trails, board minutes, mandates and procurement approvals reveal who really runs the business.

      3. Benefit flow — Are profits distributed to Thais in line with their equity, or do they leak back to the foreign side via management/royalty/consulting fees with poor commercial rationale?

      4. Consistency across filings — Do DBD records, tax returns, payroll data, immigration/work-permit files and UBO/AML disclosures tell the same story?

The more these vectors align around foreign control without authorisation, the harder a nominee defence becomes.

Red flags investigators look for

• Thin-means majority: individuals with limited economic means shown as 51% owners of multi-million-baht companies.
• Back-to-back funding: Thai share payments trace to foreign wires, interest-free “loans”, or no documentary repayment.
• Paper dominance: Thais absent from management; no board participation; cannot explain operations; POAs granting blanket control to foreigners.
• Profit asymmetry: Thais never receive dividends; profits consistently re-characterised as foreign “service fees”.
• Pre-signed share transfers/side letters: documents that pre-agree future hand-backs or surrender of voting—classic nominee hallmarks.
• Serial nominees: the same Thai names recur across numerous foreign-linked entities (often at one address).
• Timing games: sudden share reshuffles just before licence applications or inspections.

If you recognise your structure here, assume you are investigation-ready.

Courts: substance over form (how judgments are trending)

Thai courts routinely pierce the veil where the economic reality contradicts the paper:

• Funding > form: Even when foreigners hold <50% on the register, courts have treated a company as foreign-controlled if the foreign party bankrolled the majority of capital and exercised decisive control. Transactions in restricted fields (e.g., land-adjacent commerce) have been nullified on that basis.
• Sham contracts rejected: “Loan” or “service” agreements used to disguise nominee funding or transfer of control are treated as simulated acts and void. Parties cannot enforce private contracts that defeat the FBA’s purpose—often leaving the foreign payor without civil remedies.
• Daily fines enforced: Where trial courts omitted ongoing fines tied to cessation orders, appellate courts have added them and back-dated accrual until the company actually wound up or divested.
• Asset consequences: In property contexts, nominee arrangements have led to forfeiture or forced sale, reaffirming that beneficial foreign landholding via a Thai front is untenable.

Takeaway: If the facts show foreign money, foreign control and foreign benefit in a restricted business, courts will treat the enterprise as foreign in substance and apply the FBA accordingly.

Compliance-by-design: a 6-pillar framework

Design your structure so that it withstands scrutiny:

      1. Capital provenance
Require bank-verifiable Thai funding for Thai equity (savings, asset sales, domestic loans on market terms). Avoid circular flows. Archive proof at the share certificate level.

      2. Proportionate benefits
Align dividends and director remuneration with shareholding. If using service/royalty fees, document arm’s-length pricing, scope and deliverables. Periodically benchmark.

      3. Governance substance
Ensure Thai directors attend, vote and sign on matters within their remit. Create a decision rights matrix that reflects reality; avoid blanket powers of attorney that gut Thai oversight.

      4. Contract hygiene
Purge side letters, pre-signed transfers and “gentlemen’s agreements” that contradict filings. Your public record and private documents must tell one story.

      5. UBO & AML alignment
Maintain accurate ultimate beneficial owner disclosures and source-of-funds files. If foreign influence is material, consider whether licensing (not nominees) is the honest fix.

      6. Evidence readiness
Operate as if audited tomorrow: close files with board packs, bank proofs, fee justifications and policy notes. A clean dossier can change enforcement posture from hostile to pragmatic.

Lawful pathways that avoid nominees altogether

• Foreign Business Licence (FBL)
  A case-by-case permission for restricted List 2/3 activities where you demonstrate benefit to Thailand (capital, Thai employment, technology). Outcome: foreign-majority control is legal and explicit.
• BOI promotion
  If your project fits priority sectors, BOI can permit 100% foreign ownership for promoted activities and streamline work-permits, sometimes with land-use benefits. The trade-off is criteria and compliance; it is worth it.
• Treaty relief
  Certain investors (e.g., under the US–Thai Treaty of Amity) may own wholly across broad sectors (with carved-out exceptions). Verify eligibility and comply with treaty procedures.
• Special regimes & zones
  Industrial estates/EEC and sectoral regimes can relax foreign ownership and facilitate operations in defined geographies or industries.
• Genuine Thai joint ventures
  When a Thai majority is mandated, make it real: Thai partners contribute capital and capability, share profits and sit in governance. Draft shareholder agreements that allocate rights lawfully—no secret hand-backs.
• Select an open activity
  Many activities are unrestricted and may be owned 100% from day one. Map your business model to the lists before you incorporate.

Conclusion

Thailand’s enforcement climate in 2025 sends a clear signal: nominee shareholder arrangements are no longer tolerated. The Foreign Business Act, backed by active investigations from DBD and DSI, treats such structures as deliberate evasions—punishable with imprisonment, heavy fines and ongoing daily penalties. Courts now look past paper shareholding to the economic reality of funding, control and benefit, and they will pierce the veil when foreigners secretly dominate a restricted business.

For investors and companies, the risks outweigh any short-term convenience. Attempting to hide behind Thai nominees can lead not only to criminal records but also dissolution of the enterprise and potential forfeiture of assets. The safer, smarter route is to pursue lawful ownership pathways—whether through a Foreign Business Licence, BOI promotion, treaty privileges, or carefully structured genuine joint ventures.

Compliance must be embedded from day one. That means proving Thai shareholders’ real capital contributions, ensuring governance participation, distributing profits fairly, and keeping transparent records. By adopting compliance-by-design, investors can secure their operations and build trust with regulators, partners and clients alike.

In short, foreign businesses in Thailand have a choice: operate legally and sustainably, or risk everything through nominee shortcuts.