The Deal You Think You Made Is Not the Deal the Registrar Sees

Two friends, one Thai and one foreign, agree to build a company together. They settle on 51 percent Thai and 49 percent foreign, sign the memorandum, and think the structuring conversation is finished. It is not. Most people think a nominee arrangement means a written or spoken side agreement, where the Thai shareholder openly holds shares for someone else. That version is obvious, and it is plainly illegal. What gets missed is the indirect version. Nothing is written down anywhere. No side agreement exists. But the Foreign Business Act has always tested substance over form, and Order 2/2569 gives the Registrar a direct way to test that substance before the company is even registered.

The Nominee Question Does Not Require an Agreement

We have reviewed structures where a Thai shareholder holds 51 percent of the company and appears correctly on every filing, and yet cannot show financial capacity, income, savings, or assets, consistent with having funded that stake independently. Nothing on the file is false. The memorandum is signed correctly. The shareholding is registered correctly. But the substance behind the number does not hold up, and that is exactly what a Registrar, or a bank reviewing the file two years later, will test. This is an indirect nominee arrangement. It does not require anyone to have said or written that the Thai shareholder holds the shares for the foreign partner. The absence of independent capacity behind the stake tells its own story.

We have also seen the reverse pattern. A Thai shareholder holds a clean 51 percent with a financial history that stands up on its own. But every contract, every bank mandate, and every operating decision runs through a foreign general manager who holds no shares at all. Ownership on paper says Thai company. Control in practice says something else. Either gap on its own, funding capacity or decision-making control, can support a nominee finding. Together, they make the finding straightforward.

Fix the Substance Before You Register the Percentage

Before you register, look at your own structure the way the Registrar now will. Ask three questions honestly. Can the Thai shareholder demonstrate independent financial capacity behind their stake. Does the Thai shareholder actually make the decisions that come with owning 51 percent. Does the economic benefit of the company flow to the Thai shareholder in proportion to their stake. If the honest answer to any of these points toward the foreign side as the real owner, the fix is not better documentation. It is a different structure, whether that is BOI promotion, a Foreign Business License, or a joint venture where the Thai partner’s ownership is real in substance and not only on the register.

If You Are Setting Up 100 Percent Foreign Owned, None of This Applies to You

Everything above concerns structures with a Thai shareholder, or a mix of Thai and foreign ownership. If your business will be 100 percent foreign owned from day one, Order 2/2569 has nothing to say to you. There is no Thai shareholder to certify, no nominee question to answer, no bank statement review to pass. Set this Order aside and move on.

Your real question sits earlier than this Order, and it is a different one: does your business actually need a Foreign Business License at all. The Foreign Business Act restricts a long list of service activities, but it does not restrict everything. Manufacturing and export businesses generally sit outside the restricted categories. Several trading, brokerage, and construction activities carry capital thresholds or conditions that let a fully foreign owned company operate without an FBL, depending on the specific activity. The mistake we see foreign investors make is assuming every business needs a license, or assuming none do, instead of checking their specific activity against the Foreign Business Act list. That is the conversation to have before you incorporate, not the substance conversation Order 2/2569 asks of Thai-foreign structures.

Call to Action

If you are structuring a joint venture with a Thai partner, review the substance of that arrangement, ownership, control, and funding capacity, before you sign the memorandum, not after the Registrar raises questions. If you are setting up 100 percent foreign owned, get your business activity checked against the Foreign Business Act before you assume you do, or do not, need a license. Contact Piyaporn, Corporate Legal Manager at Kreston Thailand, at piyaporn.p@kreston-thailand.com, and tell her which one you are.