BANGKOK – The Lawyers Council of Thailand under Royal Patronage, in cooperation with the Thai-Chinese Journalists Association, organized a seminar entitled “Unveiling and Closing Loopholes in Nominee Structures: Dissecting Thai-Chinese Investment Laws.”
The aim of the seminar on May 24 was to address concerns and uncertainties regarding direct and indirect foreign investment affecting Thailand’s protected professions and small and medium-sized enterprises (SMEs).
Dr. Wichian Chubtaisong, President of the Lawyers Council, pointed out that even in the legal profession, which is protected in Thailand, considerable foreign investment has flowed into legal advice. This exploitation occurs due to loopholes in the Lawyers Act B.E. 2528, which does not extend to legal advisors, making it difficult for the Lawyers Council to take direct action against foreign legal advisors. Instead, government agencies must intervene.
Emeritus Professor Dr. Decha-udom Krairit, former President of the Council of Advocates, explained that nominee structures have been prevalent in all professions for over 50 years. Foreign investors often come to Thailand with minimal capital and use Thai nominees to hold 51 percent of the shares without actually investing, which is a common but difficult to detect practice.
These investors use various tactics to circumvent the law. For example, foreigners who want to get into the real estate business to sell to other foreigners circumvent the subdivision laws by dividing up Thai-owned land and selling it as individual plots for self-development. They also set up companies with foreign directors and business advisors, avoiding the term “legal advisor” due to the protected status of this profession, making them difficult for the authorities to prosecute.
M.L. Phuthong Thongyai, Deputy Director-General of the Department of Business Development, Ministry of Commerce, addressed the misconception that Chinese companies extensively use Thai nominees. In reality, most nominees come from Europe, Singapore, and Taiwan. The department has been consistently tackling this issue.
According to the law, Thais must hold 51 percent of the shares, while foreigners must hold 49 percent. Companies in which foreigners hold the full 49 percent are closely scrutinized as they carry the risk of exceeding the majority shareholding threshold.
Out of 17,000 such companies, 439 have been identified as potential candidates, mainly in the tourism sector. The department carries out overt and covert checks on a monthly basis and forwards suspicious cases to the DSI for further investigation.
Dr. Tharakorn Wutthisatirakul, Chairman of the BRI Institute for Economic and Educational Development Research, explained that foreign companies invest in Thailand because of its favorable geopolitical location. Investments that comply with BOI conditions are not a problem, but companies must generally comply with the 49/51 Joint Venture Act.
“In practice, only rarely are all laws followed. For example, companies that buy fruit from farmers for export can be considered nominees. Without legal changes, it is impossible to avoid the problem of nominees
Dr. Tharakorn referred to Singapore’s model of allowing 100 percent foreign investment, except in sensitive sectors. He suggested that Thailand could attract significant foreign capital by allowing more than 49 percent foreign ownership, which would reduce reliance on nominee structures.
The nominee problem exists worldwide, but some countries, such as Malaysia and Indonesia impose strict penalties, including imprisonment, to prevent such practices. In addition, the Thai government needs to improve education and train a skilled workforce to compete internationally and reduce the need to serve as nominees and exploit local resources.
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