NOMINEE SHAREHOLDERS IN THAI BUSINESS

INTRODUCTION

In Thailand’s corporate world, the concept of Nominee Shareholders plays a vital role, particularly in cases where businesses seek to maintain confidentiality, protect their interests, or comply with regulatory requirements. Corporate nominee shareholders are widely used by local and international businesses, investors, and corporate structures to safeguard their interests and maintain smooth corporate governance.

UNDERSTANDING NOMINEE SHAREHOLDERS IN THAILAND

At its core, a Nominee Shareholder in Thailand is an individual or entity that holds shares in a company on behalf of another person or entity, typically the beneficial owner. The nominee shareholder appears as the official shareholder in the company’s records and other legal documentation, but the actual control of those shares, including decision-making rights and profits, remains with the beneficial owner.

KEY ASPECTS OF NOMINEE SHAREHOLDERS IN THAILAND

• A limited company in Thailand must have a minimum number of 3 shareholders at all times.
• Thai nationals operating a business under a company often use nominee shareholders to complete the number of 3 shareholders in the limited company.
• There is no general restriction for Thais that prohibits the use of nominee shareholders in a business.
• Bearer shares (shares owned by whoever holds the physical share certificate) are also prohibited.

NOMINEE SHAREHOLDING STRUCTURES

• Nominee shareholding structures in a Thai company are commonly used by foreigners to circumvent the licensing procedure and general restrictions under the Foreign Business Act or other laws prohibiting specific business categories for foreigners.
• In a nominee shareholding structure, the Thai shareholders are deemed to hold the shares on behalf of the foreigner, making the foreigner the actual owner of the shares.

INVESTIGATIONS AND PENALTIES

• The Department of Business Development (DBD) and the Department of Special Investigation (DSI) have been investigating companies suspected of using nominee shareholders to circumvent the Foreign Business Act.
• Penalties for breaching the nominee prohibition include three years’ imprisonment and a fine of THB 1 million.
• The court may also order the cessation of the nominee shareholding or other instances of aiding and abetting.

M&A IMPLICATIONS

• Foreign individuals or entities that acquire shares of Thai companies can inherit nominee shareholder risks if Thai shareholders hold more than 50% of the shares in the Thai target company.
• Even if the share transaction is limited to acquisition of a minority shareholding interest, the foreign acquiror can be liable for three years’ imprisonment and THB 1 million in penalties if the Thai shareholders are nominees and the foreign acquiror allows the nominee shareholding structure to continue after completion of the share transfer.

THAI NOMINEE SHAREHOLDER LAWS

Nominee shareholders in Thailand operate within a well-defined legal framework that mandates transparency, compliance, and fiduciary responsibilities.

1. Fiduciary Duty Nominee shareholders hold shares on behalf of the beneficial owner, and this relationship is governed by a fiduciary duty. The fiduciary relationship is typically formalized through a legal agreement between the nominee and the beneficial owner.
2. Anti-Money Laundering (AML) and Tax Compliance Nominee shareholders are obligated to comply with anti-money laundering regulations and tax laws. Thailand’s Revenue Code requires full disclosure of the beneficial owner’s identity in cases involving tax reporting, dividends, and capital gains.
3. Disclosure in Legal Proceedings In certain legal circumstances, Nominee Shareholders may be required to disclose the identity of the beneficial owner. Nominee shareholders may also be compelled to provide information to law enforcement or government agencies if there is a suspicion of illegal activities.
4. Responsibilities Under Corporate Law Under the Thai Civil and Commercial Code, Nominee Shareholders are subject to the same responsibilities as any other shareholder when it comes to corporate governance.

CONCLUSION

In conclusion, Nominee shareholders can be a valuable asset for businesses in Thailand, offering key advantages like enhanced confidentiality, simplified foreign ownership, and streamlined corporate governance. While nominee structures provide flexibility and confidentiality, they come with important legal responsibilities, including fiduciary duties, tax compliance, and transparency obligations under Thai law.