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Legal Risks of Nominee in Thai Corporate Entities
The forerunner of circumvention, the commonplace vehicle employed by renowned foreign MNCs and lesser SMEs all the same is the joint venture with local partner to form a corporate entity and to the effect of, the ‘naturalization’ of an otherwise statutorily-deemed “Alien” / “Foreigner” to become a Thai entity.
Risks of severe legal ramifications & repercussions, albeit observably dormant risks are inherent in such ‘naturalization’. Some of these risks, without limitation, are set out below, with the overarching legal insinuation that these structures effectively allow the otherwise foreign entities to avoid the attraction of most foreign business restrictions (use of such structures to hold land is also dealt with briefly below) particularly the Thai Foreign / Alien Business Act (“FBA“), and essentially – a circumvention of the law.
1. Nominee Shareholding & Circumvention of the Law
Section 36 of the Foreign / Alien Business Act B.E. 2542 (A.D. 1999):
“A Thai national or juristic person that assists a foreigner in avoiding the Foreign Business Act by means of holding shares as a nominee or being a nominal owner of the company, shall [including the foreigner so allowing the Thai nationals or juristic persons to commit this offence] be liable for a fine of THB100,000 to THB1,000,000 and/or imprisonment of up to 3 years.”
Vis-à-vis, liabilities & stipulated possible penalties for circumvention of the FBA is shouldered by the Thai nominees, the actual foreign entity(ies) utilizing the Thai nominees and responsible authorized directors, directors & senior management of the same and includes:
Fine of THB100,000 – THB1,000,000;
Imprisonment of up to 3 years; and/or
Termination or dissolution of business and / or the Thai private limited company.
via Circumvention of Thailand’s Restrictions on Foreign Investment
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