Interview with Diego Sala, Director of Siam Trade Development: Thailand’s Nominee Shareholders Crackdown
Introduction
The Thai government is ramping up efforts to crack down on the use of nominee shareholders by foreign investors, as outlined in a recent Bangkok Post article (see source here:https://www.bangkokpost.com/business/general/2903148/state-crackdown-prepared-for-foreigners-using-thai-nominees). This practice, illegal under Thai law, has seen a worrying rise, particularly among certain sectors where foreign ownership restrictions apply. In response, comprehensive audits are being prepared to target recently established businesses, especially in logistics, fulfillment, and online distribution, aiming to enforce stricter compliance with the law.
Amidst increasing scrutiny from Thai authorities on the use of nominee shareholders, Diego Sala, Director of Siam Trade Development, shares his perspective on the legal landscape, risks, and solutions for foreign investors in Thailand.
Interviewer: Diego, what’s your take on this situation?
Diego Sala: We’ve reached an absurd point where Chinese consultancy agencies openly promote the use of nominee shareholders, which are strictly prohibited under Thai law. These so-called “consultants” are tarnishing the reputation of the entire sector and should be shut down immediately.
To be honest, some are taking it even further, as shown in the image above: offering to sell passports through a so-called creative agency. I’ve personally fallen victim to this kind of foolishness. Thai authorities recently uncovered a similar scheme operated in Thailand by Chinese agencies, which led to them halting the citizenship process for foreigners. Unfortunately, I’m among those affected by the suspension, together with many foreigners awaiting to obtain Thai citizenship.
At Siam Trade Development, we are increasingly approached by clients whose businesses are entirely illegal—some even 100% foreign-owned with non-compliant directors. Alarmingly, I’d estimate that 90% of these problematic cases originate from Chinese agencies.
Our trusted partners in China, particularly in Shenzhen and Haikou, tell us that their clients are confused and overwhelmed, bombarded daily with conflicting advice on how to operate in Thailand. Many of these shady agencies have no presence in Bangkok, and their operators lack basic knowledge of critical Thai institutions like the Department of Business Development (DBD) or the Food and Drug Administration (FDA). Yet, through social media, they present themselves as well-structured multinational firms, promising quick and hassle-free setups.
This includes illegal practices like sourcing nominee shareholders and operating unregistered warehouses. We’ve even seen cases where fake licenses were issued. It’s a chaotic situation that puts both clients and the broader business environment at significant risk.
Interviewer: Diego, can you explain the current situation regarding nominee shareholders in Thailand?
Diego Sala: The use of nominee shareholders in Thailand is a long-standing issue, but it has recently come under heightened scrutiny from authorities. Thai law prohibits foreign investors from using Thai nationals as mere “placeholders” to circumvent ownership restrictions in industries where foreigners are limited to minority stakes.
The Business Operations Act (B.E. 2542) explicitly forbids foreign investors from using nominee arrangements to control a company in restricted sectors. Yet, despite this, there are still instances, particularly in industries like real estate and logistics, where nominee shareholders are being used to maintain what is essentially foreign ownership.
A glaring example is in Phuket, where authorities uncovered multiple real estate companies operating with the same Thai shareholders. These cases exemplify the misuse of nominee structures and the authorities’ determination to crack down on illegal arrangements.
Interviewer: What are the risks for companies that rely on nominee shareholders?
Diego Sala: The risks are significant and multifaceted. First, companies found using nominee arrangements face severe penalties, including fines, the revocation of business licenses, and even criminal charges for the directors involved. Foreign nationals who rely on such arrangements could also face deportation or blacklisting from re-entering Thailand.
The situation becomes more precarious with the involvement of agencies offering blatantly illegal services. Unfortunately, in our sector of reference many of these agencies are based in China and aggressively advertise nominee arrangements as a quick and inexpensive way for Chinese clients to establish a business in Thailand. They completely disregard the long-term legal consequences for their clients, who often focus on the immediate cost savings and simplicity.
Interviewer: Why is this problem so prevalent?
Diego Sala: It’s a combination of factors. Some foreign investors prioritize immediate savings over compliance, especially when illegal options are advertised as straightforward solutions. The issue is exacerbated by agencies that openly promote nominee services without regard for Thai laws.
I often say, “They’re thinking only about today, not tomorrow.” These clients don’t realize that the costs of non-compliance—fines, business closure, or even imprisonment—far outweigh the upfront expense of legal compliance.
The authorities are aware of this issue, but enforcement has been inconsistent. Part of the challenge is that certain nationalities have developed a reputation for prioritizing minimal investment and effort, which leads them to take these shortcuts.
Interviewer: What are the authorities doing to address this problem?
Diego Sala: The Thai government has announced a more aggressive approach, including audits and investigations targeting recently established companies, particularly in sectors like logistics, fulfillment, and online distribution. The goal is to identify businesses using nominee structures and take corrective action.
While this initiative is necessary to uphold the integrity of Thailand’s business environment, it creates challenges for companies that have unknowingly relied on these arrangements. It’s a wake-up call for everyone: you can’t ignore compliance and expect to operate without consequences.
Interviewer: What’s your advice for foreign investors navigating these regulations?
Diego Sala: My advice is simple: use a professional and REAL local agency, with physical presence in Thailand and proven records of knowledge in this sector, then follow their advice. A professional advisor will guide you through the legal framework, ensuring that your business structure complies with Thai laws. Yes, it may cost more upfront, but it’s a small price to pay for peace of mind and long-term stability.
Compliance isn’t just about avoiding penalties—it’s about building a sustainable and legitimate business. Spend the extra Baht now to avoid losing your entire investment later.
Interviewer: For our readers who might not know, what exactly is a “nominee”?
Diego Sala: A nominee is essentially a person or entity that holds shares on behalf of someone else without having any real involvement or interest in the company. In the Thai context, this often means Thai nationals holding shares in a business to give the appearance of local majority ownership when, in reality, the control lies with foreign investors.
This arrangement is illegal under Thai law because it undermines the country’s efforts to regulate foreign investment and protect local industries. Anyone considering such an arrangement should reconsider—there are legal ways to establish a business in Thailand, and a reputable consultant can help you navigate the options.
Foreign investors must approach Thailand’s business environment with diligence and respect for local laws. As Diego Sala emphasizes, the path to success involves compliance, professionalism, and a commitment to operating within the legal framework. Avoid shortcuts, and remember: investing in legality is investing in your future.
Picture as courtesy of Bangkok Post
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