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The biggest obstacle to setting up a foreign company in Thailand is the restrictions imposed by the Foreign Business Act (FBA) and the Civil and Commercial Code. Under the FBA, if a company’s majority of shares are held by foreigners then it becomes subject to various restrictions. Among which, is the requirement for obtaining a foreign business license. This is usually a lengthy and a burdensome process. There are ways to overcome those obstacles.

One of the methods for overcoming the FBA restrictions is to have Thai nationals holding majority of shares in the company. In this case, the company is no longer considered foreign and thus is no more subject to the FBA restrictions. Usually this is done by foreigners obtaining a work permit issued under a Thai company which gives them ability to operate the business via a Thai limited company. Under the FBA, aliens are allowed to possess majority voting rights in a Thai limited company through weighted voting rights and preference shares. This makes private limited company the most popular form of business entity among foreigners.

There are also alternative methods for overcoming FBA regulations. For instance, it is a common practice among foreign investors to invest in an existing Thai company. In this case, one has to specify the procedures, duties and authority of directors in order to prove that the company is indeed mostly managed by Thais.

Some foreign investors want to further simplify the process and use Thai nominee shareholders to circumvent restrictions through Thai limited companies. It is important to remember that the use of nominees by foreigners is illegal, under any circumstances, and is now facing a crackdown on this method. This is because Thai shareholders have to actually hold majority of the shares and not just be shareholders on behalf of foreigners. In order to resolve the above mentioned illegal practice regulations require, in certain situations, Thai shareholders to provide evidence showing the source of their funding used to hold shares. This is including bank statements plus other documents.

One important thing to keep in mind is that, one should be cautious when using services from accounting and law offices in the tourist areas like Samui, Pattaya and Phuket. They usually have ways of going around the regulations and set up foreign companies as 100% Thai owned. In practice, one could go with that at the beginning, however, the company is never protected from the future checks and if there are violations of the Foreign Business Act and or the Civil and Commercial Code, the foreigner becomes subject to severe penalties.

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