The Commerce Ministry have reported that 56 companies in Phuket have allegedly breached the Foreign Business Act (FBA) by using Thais acting as nominees to enable foreigners to hold a majority control.

 The use of “nominee” shareholders is expressly forbidden by the FBA.

Most of the suspected companies are owned by Russian interests, and are connected to food and beverage trading, and financial agencies.

Prior to the introduction of the act in 1999, it was common practice to utilize loan-pledge agreements as a method for non Thai minority shareholders to control majority Thai shareholders.  This entails the Thai shareholders borrowing funds from the foreigner and “pledging” the shares back as security. However, the FBA made this practice illegal. While enforcement of the Thai nominee prohibitions of the Foreign Business Act has been infrequent to date, this news serves as a clear warning say Thailand lawyers, that this is now something the authorities are taking seriously.

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The Foreign Business Act and Other Foreign Business Restrictions