Companies in Phuket have faced investigation by the Department of Special Investigation, for using Thai nominees to hold a majority stake, writes The Nation.

So far, four companies have been found guilty.

Under the Thai Foreign Business Act of 1999, foreigners are not permitted to own more than a 49% stake of businesses in certain industries, such as tourism, media, property development and telecommunications.

To circumvent such a law, some foreigners use Thai nationals as nominee shareholders.

The Commerce Ministry’s Business Development Department, working alongside the DSI and the Tourism Ministry, believes it has uncovered four firms out of more than 80 suspects, that are involved in such illegal practice.

Director-general of the ministry’s Business Development Department, Pongpun Gearaviriyapun, said last week that the four Phuket-based companies in question include one real estate and three tourism firms.

If found guilty, the offenders (both foreign and Thai) could face a fine between Bt100,000 – Bt1 Million, and/or three years jail time.

As well as Phuket, the DSI has also been conducting investigations in Bangkok, Pattaya, Samui and Hua Hun, and have found over 10 new suspects.

For the full story, see The Nation.

For more information on owning a business in Thailand as a foreigner, and about nominee shareholders, watch this video from Bangkok-based law firm Chaninat and Leeds:

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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