Foreigners Setting Up a Company in Thailand: Real Limits and Workable Routes
The Foreign Business Act B.E. 2542 (1999) does not bar foreigners from doing business in Thailand. It defines who counts as a foreigner, sorts activities into three schedules, and sets out who may grant permission for each. This article works through the statutory half-of-capital threshold, the three schedules, the minimum capital rule in Foreign Business Act, Section 14, and the legitimate routes available: a Foreign Business Licence, BOI promotion, and treaty-based entry. It also explains, on the text of Foreign Business Act, Section 36 and on decided authority, why nominee shareholding is the one shortcut capable of costing an investor both the company and the money put into it.
The single fact that makes a Thai-registered company a foreigner in the eyes of Thai law is not the nationality of its directors, not the language of its board meetings, and not where its customers are. It is one number: the proportion of capital held by persons without Thai nationality. And the dividing line is not the fifty-one percent that investors so often quote. It is the statutory phrase half or more.
An investor who understands this before incorporation can match the structure to the business, lose less time, and avoid retrofitting the shareholding later, when a bank or a major counterparty starts asking to see the file. An investor who gets it wrong on day one usually does not find out until something goes wrong. At that point the exposure is not merely a fine: the Act empowers the court to order the shareholding unwound or the business closed, and decided authority holds that money paid under an arrangement designed to circumvent the Act cannot be recovered.
This article sets out how the Foreign Business Act B.E. 2542 (1999) defines a foreigner, what separates Schedule One from Schedules Two and Three, what minimum capital is required, which routes into the market are lawful, and why nominee shareholding is the one structure I advise against without qualification. Not because it is technically awkward, but because it is a criminal offence carrying imprisonment for the Thai participant and the foreign investor alike.
Who Counts as a Foreigner (It Is Not Only About Passports)
Most people assume foreigner means a person holding a foreign passport. That is only part of it. The Act extends the definition to juristic persons, and it does so through several layers. A company incorporated in Thailand, bearing a Thai name and run by Thai directors, is still a foreigner under the Act if half or more of its capital is held by non-Thais.
Section 4. In this Act, foreigner means: (1) a natural person without Thai nationality; (2) a juristic person not registered in Thailand; (3) a juristic person registered in Thailand having the following characteristics: (a) a juristic person half or more of whose capital shares are held by persons under (1) or (2), or in which persons under (1) or (2) have invested a value amounting to half or more of its total capital; (b) a limited partnership or registered ordinary partnership whose managing partner or manager is a person under (1); (4) a juristic person registered in Thailand half or more of whose capital shares are held by persons under (1), (2) or (3), or in which persons under (1), (2) or (3) have invested a value amounting to half or more of its total capital. For the purposes of this definition, shares of a limited company represented by bearer share certificates shall be deemed shares held by foreigners, unless otherwise prescribed by ministerial regulation.
The provision worth pausing on is paragraph (4), which defeats layering. If a Thai company is itself a foreigner under paragraph (3), and that company then holds half or more of another Thai company, the subsidiary is a foreigner as well. In practice this means that stacking two or three tiers of holding entities to dilute the foreign percentage does not work on the text of the Act.
Because the statute says half or more, a foreign holding of exactly fifty percent already makes the company a foreigner. It does not need to exceed fifty. Forty-nine percent is therefore a figure that falls out of the statutory language rather than a convention someone invented, and that is why the 49/51 structure became the market default.
The share register is not the end of the analysis. Foreign Business Act, Section 4 speaks both of capital shares held and of investment amounting in value to half or more of the total capital. These are different tests: the first looks at the register, the second at the money actually contributed. In litigated cases it is usually the second that is examined.
Why the Act Sorts Business into Three Schedules
The Act does not prohibit foreigners from all business. It sorts activities into three schedules by sensitivity and assigns a different approving authority to each. An activity that appears in none of the schedules may be carried on by a foreigner without a licence under this Act, a point that is frequently overlooked.
Section 8. Subject to Sections 6, 7, 10 and 12: (1) a foreigner is prohibited from operating the businesses not permitted to foreigners for special reasons as prescribed in Schedule One; (2) a foreigner is prohibited from operating businesses relating to national safety or security, businesses affecting arts and culture, traditional customs and native handicrafts, or businesses affecting natural resources or the environment, as prescribed in Schedule Two, save where permission is granted by the Minister with the approval of the Council of Ministers; (3) a foreigner is prohibited from operating businesses in which Thai nationals are not yet ready to compete with foreigners, as prescribed in Schedule Three, save where permission is granted by the Director-General with the approval of the Committee.
Read plainly, Foreign Business Act, Section 8 tells us that Schedule One has no gate at all, Schedule Two opens only at Cabinet level, and Schedule Three opens at the level of the Director-General of the Department of Business Development with the Committee's concurrence. The seniority of the approving authority is itself the best indicator of how difficult each schedule is in practice.
Schedule One: The Closed Door
Schedule One is the group prohibited by Foreign Business Act, Section 8(1) with no licensing exception. The activities listed are tied to land, natural resources, media, and matters the State treats as reserved to Thai nationals.
Schedules to the Foreign Business Act B.E. 2542 (1999). Schedule One: businesses not permitted to foreigners for special reasons. (1) Newspaper publishing, radio broadcasting or television station operation. (2) Rice farming, field crop farming or horticulture. (3) Livestock raising. (4) Forestry and timber processing from natural forests. (5) Fishing, confined to catching aquatic animals in Thai waters and in Thailand's exclusive economic zone. (6) Extraction of Thai medicinal herbs. (7) Trading in and auctioning of Thai antiques or objects of national historical value. (8) Making or casting Buddha images and making monks' alms bowls. (9) Trading in land.
The entry that causes the most trouble in practice is (9), trading in land, because investors entering real estate projects tend to treat it purely as a land law question. It sits squarely in Schedule One of this Act as well. In Supreme Court Decision No. 2252/2560 the Court held that although the share register showed the foreign party holding less than half, where the capital genuinely belonging to the foreign party exceeded half, that company and the foreign party were to be treated as carrying on the business of trading in land under Schedule One.
Schedule Two: Open, but Only at Cabinet Level
Schedule Two is permitted in principle but gated very high, since the approving authority is the Minister acting with Cabinet approval. In practice it is not a route a mid-sized business can walk within ordinary commercial timeframes.
Schedule Two: businesses relating to national safety or security, or affecting arts and culture, traditional customs, native handicrafts, or natural resources and the environment. Group 1, businesses relating to national safety or security: (1) production, distribution and maintenance of (a) firearms, ammunition, gunpowder and explosives; (b) components of firearms, ammunition and explosives; (c) armaments, ships, aircraft or military vehicles; (d) equipment or components of all types of war materiel. (2) Domestic land, water or air transport, including domestic aviation. Group 2, businesses affecting arts and culture, traditional customs and native handicrafts: (1) trading in antiques or art objects that are Thai works of art or handicraft; (2) production of carved wooden furnishings; (3) silkworm rearing, production of Thai silk yarn, Thai silk weaving or Thai silk pattern printing; (4) production of Thai musical instruments; (5) production of goldware, silverware, nielloware, bronzeware or lacquerware; (6) production of bowls or earthenware that are Thai arts and culture. Group 3, businesses affecting natural resources or the environment: (1) production of sugar from sugar cane; (2) salt farming, including rock salt farming; (3) rock salt mining; (4) mining, including rock blasting or crushing; (5) timber processing for the production of furniture and utensils.
Group 1, item (2), domestic transport, is the entry that most often catches investors by surprise. Logistics propositions that appeal to foreign investors frequently contain a domestic carriage element, and once that element is present the application is no longer one that can be dealt with at departmental level.
Schedule Three: Where Most Businesses Actually Get Caught
Schedule Three has the broadest effect on inbound investment because it sweeps in almost the whole service sector, ending with a deliberately wide catch-all: other service businesses. The consequence is that a service business named nowhere in the list still falls within Schedule Three unless a ministerial regulation exempts it.
Schedule Three: businesses in which Thai nationals are not yet ready to compete with foreigners. (1) Rice milling and production of flour from rice and field crops. (2) Fishery, confined to aquaculture. (3) Forestry from plantation forests. (4) Production of plywood, veneer board, chipboard or hardboard. (5) Production of lime. (6) Accounting services. (7) Legal services. (8) Architectural services. (9) Engineering services. (10) Construction, except (a) construction of public utility or transport infrastructure requiring special tools, machinery, technology or construction expertise, with foreign minimum capital of five hundred million baht or more, and (b) other categories of construction prescribed by ministerial regulation. (11) Brokerage or agency, except (a) brokerage or agency for trading in securities or services relating to futures trading in agricultural commodities, financial instruments or securities; (b) brokerage or agency for trading or procuring goods or services necessary to the production or service provision of enterprises within the same group; (c) brokerage or agency for trading, purchasing, distributing or seeking markets, domestic and foreign, for the sale of goods manufactured domestically or imported, being in the nature of international business, with foreign minimum capital of one hundred million baht or more; and (d) other categories of brokerage or agency prescribed by ministerial regulation. (12) Auctioning, except (a) auctioning in the nature of international bidding, other than the auctioning of antiques, artefacts or art objects that are Thai works of art, handicraft or antiquities, or objects of national historical value, and (b) other categories of auctioning prescribed by ministerial regulation. (13) Domestic trade in indigenous agricultural products or produce not yet prohibited by law, except futures trading in agricultural commodities on the Agricultural Futures Exchange of Thailand without delivery or receipt of the commodities within the country. (14) Retail sale of all categories of goods with total minimum capital of less than one hundred million baht, or with minimum capital per outlet of less than twenty million baht. (15) Wholesale of all categories of goods with minimum capital per outlet of less than one hundred million baht. (16) Advertising business. (17) Hotel business, except hotel management services. (18) Tour operation. (19) Sale of food or beverages. (20) Plant breeding, propagation or improvement. (21) Other service businesses, except service businesses prescribed by ministerial regulation.
Items (14) and (15) deserve a slow reading. They provide that retail and wholesale trade escape Schedule Three once capital reaches the stated thresholds. This is the clearest illustration that the Act restricts by size of capital as well as by category of activity: the same business at one hundred million baht of capital and at ten million baht occupies an entirely different legal position.
Items (11)(b) and (c) matter equally, exempting intra-group brokerage or agency and international trading with capital of one hundred million baht or more. A structure designed from the outset to sit inside such an exception saves considerably more time and risk than licensing after the fact.
How Far the 49/51 Thai-Majority Company Really Works
A structure in which the foreign party holds forty-nine percent and Thai parties hold fifty-one percent is entirely lawful, provided the Thai side are genuine shareholders: their own money at risk, their own votes, their own dividends. On that footing the company is not a foreigner under Section 4 and needs no licence under this Act at all.
The difficulty is never the percentage. It is the reality behind the percentage. Two situations look identical on the company certificate and sit on opposite sides of a criminal line. In the first, there is a Thai partner with real capital and a real commercial role, which is simply a joint venture. In the second, the foreign party funds everything, finds Thai individuals to appear on the share register, and takes back powers of attorney, undated share transfer forms or loan agreements in order to control those shares.
The Line That Must Not Be Crossed: Foreign Business Act, Section 36 and Nominee Arrangements
For an investor this is the most consequential provision in the Act, because it criminalises both sides rather than the foreign party alone. A Thai person who assists, supports, participates in the business, or holds shares on behalf of a foreigner commits the offence, and so does the foreigner who consents to that being done.
Section 36. Any person of Thai nationality or juristic person that is not a foreigner under this Act who assists in, supports or participates in the business of a foreigner where that business is prescribed in the Schedules to this Act and the foreigner has not been permitted to operate it; or who participates in the business of a foreigner while holding it out as being that person's own business alone; or who holds shares on behalf of a foreigner in a partnership, limited company or any juristic person so as to enable the foreigner to operate a business in evasion or contravention of this Act; together with the foreigner who consents to such acts being done by a person of Thai nationality or by a juristic person that is not a foreigner under this Act, shall be liable to imprisonment for a term not exceeding three years, or to a fine of from one hundred thousand baht to one million baht, or to both; and the court shall order the cessation of the assistance or support, or the cessation of the joint operation of the business, or the cessation of the shareholding or partnership, as the case may be. Failure to comply with the court's order shall render the offender liable to a fine of from ten thousand baht to fifty thousand baht per day throughout the period of non-compliance.
Three layers deserve attention. The first is the criminal penalty: up to three years' imprisonment, or a fine of one hundred thousand to one million baht, or both. The second is the court order to cease the shareholding or the joint operation, which dismantles the structure the investor built. The third is the daily fine of ten thousand to fifty thousand baht for as long as the order remains unperformed. It is the third layer that removes waiting it out as an option.
The Foreign Party's Own Exposure under Foreign Business Act, Section 37
Where a foreigner operates a scheduled business without permission, the offence lies under Foreign Business Act, Section 37, which carries the same range of penalties as Section 36 and likewise empowers the court to order the business closed or the shareholding ended.
Section 37. Any foreigner who operates a business in contravention of Section 6, Section 7 or Section 8 shall be liable to imprisonment for a term not exceeding three years, or to a fine of from one hundred thousand baht to one million baht, or to both; and the court shall order the cessation of the business, the winding-up of the undertaking, or the cessation of the shareholding or partnership, as the case may be. Failure to comply with the court's order shall render the offender liable to a fine of from ten thousand baht to fifty thousand baht per day throughout the period of non-compliance.
In Supreme Court Decision No. 3618/2566 the court of first instance convicted one group of defendants under Foreign Business Act, Section 8(3) and Section 37 and another group under Section 36 in the same proceedings, which mirrors the architecture of the Act precisely: the foreign side charged with unlicensed operation, the nominee side charged with support or holding shares on another's behalf. Supreme Court Decision No. 2949/2563 is another example, where charges under Foreign Business Act, Sections 4, 8, 36 and 37 were brought alongside money laundering and document offences.
The Cost Beyond the Fine: Void Agreements and Money That Cannot Be Recovered
If one point from this article is to be remembered, let it be this one. The heaviest consequence of a nominee structure is not the criminal penalty but the civil result. An arrangement made to circumvent this Act has an object expressly prohibited by law and is therefore void, and money paid under it constitutes performance in contravention of a legal prohibition, which cannot be reclaimed.
Section 150. An act whose object is expressly prohibited by law, or is impossible, or is contrary to public order or good morals, is void.
Section 411. A person who has performed an act for the discharge of an obligation in contravention of a legal prohibition or of good morals may not reclaim the property so transferred.
Supreme Court Decision No. 5457/2560 is the most directly instructive authority. There the foreign party sued to recover money, characterising it as a loan. The facts established that the loan was a concealed act masking an agreement to purchase the business, made with the object of circumventing the law regulating foreign business operation by having Thai nationals appear on the register as shareholders in name only. The Court held that the agreement was void under Section 150 of the Civil and Commercial Code, and that the money said to have been lent, being in truth payment under the purchase agreement, was performance in contravention of a legal prohibition and could not be reclaimed under Civil and Commercial Code, Section 411.
The consequence is blunt. A foreign investor who funded everything and placed the shares in Thai names may end up with neither the shares nor the money: the shares stand in another person's name, and the very agreement intended to recover them is void. This is a shortcut priced at the whole company.
The Courts Look at the Real Money, Not Only the Register
Many investors assume that once the register reads 49/51 the matter is settled. Supreme Court Decision No. 2252/2560 shows otherwise. There the foreign party held less than half according to the share register, but the capital genuinely in the company was more than half the foreign party's own, which did not correspond to the registered capital. The Court accordingly treated the company and the foreign party as carrying on the business of trading in land under Schedule One.
The downstream result deserves mention. Because the foreign party was carrying on a prohibited business, the Court held it was not an injured person in law in respect of the offences charged, those offences being consequential upon the prohibited business itself. An unlawful structure therefore also erodes the investor's ability to turn to the courts when it is the investor who has been cheated.
Lawful Route One: The Foreign Business Licence
For Schedule Three activities the most direct route is an application to the Director-General of the Department of Business Development, decided with the Committee's concurrence. The advantage is that the company may be wholly foreign-owned with no reliance on Thai shareholders. The constraints are timing and discretion.
Foreign Business Act, Section 17 sets the timeframe: a Schedule Three application is to be decided within sixty days of filing, and the licence issued within fifteen days of the Director-General's permission. The criteria against which the application is weighed appear in Foreign Business Act, Section 5.
Section 5. In granting permission to a foreigner to operate a business under this Act, regard shall be had to the advantages and disadvantages in respect of national safety and security, the economic and social development of the country, public order or good morals, the arts, culture and traditions of the nation, the conservation of natural resources, energy and environmental protection, consumer protection, the size of the undertaking, employment, the transfer of technology, and research and development.
Foreign Business Act, Section 5 makes employment, technology transfer, and research and development express factors. An application that can show how many Thai staff the business will employ, what know-how it brings, and that it is not simply competing with small domestic operators, therefore presents itself considerably better than one that states only an intention to trade.
It is also worth knowing in advance that a licence comes with conditions, the framework for which is set by ministerial regulations issued under Foreign Business Act, Section 18.
Section 18. The Minister, on the recommendation of the Committee, has power to issue ministerial regulations prescribing any of the following conditions with which a licensed foreigner must comply: (1) the ratio of capital to loans to be used in the permitted business; (2) the number of foreign directors required to be domiciled or resident in the Kingdom; (3) the amount of minimum capital to be maintained within the country and the period of maintenance; (4) technology or assets; (5) other necessary conditions.
Lawful Route Two: Investment Promotion and Industrial Estates
For activities that qualify for investment promotion this is often the cleanest route, because it replaces the licensing process under this Act with a notification to the Director-General for a certificate, following which the Act is disapplied for as long as the promotion subsists.
Section 12. Where the business of a foreigner which has been granted investment promotion under the law on investment promotion, or which has been granted written permission to operate an industry or to trade for export under the law on the Industrial Estate Authority of Thailand or under other law, is a business under Schedule Two or Schedule Three to this Act, that foreigner shall notify the Director-General in order to obtain a certificate. Once the Director-General or an authorised competent official has verified the investment promotion certificate or the written permission, the Director-General shall issue the certificate without delay and in any event within thirty days of receipt of notification of the grant of the promotion certificate or permission, as the case may be. In such case that foreigner shall be exempt from the application of this Act, save for Sections 21, 22, 39, 40 and 42, throughout the period during which the business enjoys investment promotion or permission to operate the industry or to trade for export, as the case may be. The issue of a certificate under the first paragraph shall be in accordance with the rules and procedures prescribed by the Director-General.
Note the words throughout the period during which the business enjoys investment promotion. The exemption attaches to promoted status, not permanently to the company. If the privileges lapse or are revoked, the company's position must be reassessed under this Act. That is a matter to plan for at the outset rather than as the expiry date approaches.
Lawful Route Three: Treaty Rights, Including the Treaty of Amity
The Act makes room for foreigners operating under a treaty to which Thailand is a party or by which Thailand is bound, exempting them from several of its central provisions. In practice this is the statutory basis for what the market calls a Treaty of Amity company.
Section 10. The provisions of Sections 5, 8, 15, 17 and 18 do not apply to a foreigner operating a business under the Schedules to this Act with temporary permission from the Government of the Kingdom of Thailand. A foreigner operating a business under the Schedules to this Act pursuant to a treaty to which Thailand is a party or by which Thailand is bound shall be exempt from the application of the provisions specified in the first paragraph, and the matter shall be governed by the provisions and conditions of that treaty, which may include the grant of reciprocal rights to Thai nationals and Thai enterprises to operate businesses in the country of nationality of that foreigner.
Critically, the Foreign Business Act, Section 10 exemption is not unconditional: the text provides that the matter shall be governed by the provisions and conditions of that treaty. The scope of the right is therefore fixed by the treaty rather than by the Act, and sectors the treaty itself reserves remain closed.
Procedurally, a party relying on treaty rights must obtain a certificate under Foreign Business Act, Section 11, which requires the certificate to state the conditions prescribed by the Government or set out in the treaty.
Section 11. A foreigner under Section 10 who wishes to operate a business under the Schedules to this Act shall notify the Director-General in accordance with the rules and procedures prescribed by ministerial regulation in order to obtain a certificate, and the Director-General shall issue the certificate to that foreigner without delay and in any event within thirty days of receipt of the foreigner's written notification. Where the Director-General is of the view that the notification does not comply with the rules and procedures prescribed by ministerial regulation, or that the case does not fall within Section 10, the Director-General shall so inform the foreigner without delay and in any event within thirty days of receipt of the written notification. The certificate shall also state the conditions prescribed by the Government or set out in the treaty.
Minimum Capital That Must Actually Be There: Foreign Business Act, Section 14
Minimum capital is a point on which investors are often given an incomplete figure, because the Act sets two tiers: a general tier, and a higher tier for businesses requiring permission under the Schedules.
Section 14. The minimum capital used by a foreigner to commence business in Thailand must be not less than the amount prescribed by ministerial regulation, and in any event not less than two million baht. Where the business referred to in the first paragraph is one requiring permission under the Schedules to this Act, the minimum capital prescribed by ministerial regulation for each such business must be not less than three million baht. A ministerial regulation issued under this Section may also prescribe the period within which the minimum capital must be brought or remitted into Thailand. This Section does not apply where a foreigner applies money or property derived from income from a business already commenced in Thailand to the starting of another business, or to subscribing for shares or investing in another undertaking or juristic person.
The final two sentences carry real practical weight. One confirms that a ministerial regulation may fix the period for bringing the capital in, which means minimum capital is not a figure on a certificate but money that must actually arrive on time. The other exempts the reinvestment of profits from an existing Thai business, an exception that established operations should know about.
The Representative Office: No Competition, but No Sales Either
For a foreign company not yet ready to establish a full local entity, a representative office is an option with a clearly bounded role: liaison, information gathering, quality inspection of goods, and reporting back to head office, without earning revenue from trade in Thailand and without taking orders or negotiating prices on head office's behalf.
That limitation is both the strength and the weakness. The strength is that a non-trading footprint keeps the structure far simpler. The weakness is that if the business needs to invoice customers in Thailand or receive payment from them, a representative office cannot serve at all, and using it for revenue-generating activity is simply operating a business that requires permission without having obtained it.
The Five Routes Side by Side
The table below is organised around the three questions investors ask most often: how much equity may be foreign-held, who grants permission, and whether the vehicle may earn revenue in Thailand.
| Route | Foreign holding | Approving authority or legal basis | Revenue in Thailand | Best suited to |
|---|---|---|---|---|
| Thai-majority company | Below half of capital | No licence under this Act, provided the Thai shareholders are genuine owners | Yes | Ventures with a Thai partner contributing real capital and a real commercial role |
| Foreign Business Licence | Up to one hundred percent | Director-General with the Committee's concurrence for Schedule Three, under Sections 8(3) and 17 | Yes | Service businesses that do not qualify for promotion and have no Thai partner |
| Schedule Two | Up to one hundred percent | Minister with Cabinet approval, under Section 8(2) | Yes | Large projects able to absorb a policy-level timeframe |
| Investment promotion | Up to one hundred percent | Promotion certificate, then a certificate under Section 12 | Yes | Manufacturing, technology and other promotable activities |
| Treaty rights | As the treaty permits | Section 10 paragraph two, with a certificate under Section 11 | Yes, within the treaty's scope | Investors holding a qualifying nationality under the treaty |
| Representative office | An office of the foreign juristic person | Depends on Schedule Three item (21) and the ministerial regulations in force | No | Market study, liaison and quality inspection ahead of a real investment |
Three Questions to Answer Before Incorporating
First, which schedule does the business fall into, and does all of it fall there or only part of it? This matters because real businesses are mixed. A company selling goods with an after-sales service arm may find that the two parts occupy different legal positions, and drafting the corporate objects to cover everything in advance can trigger a licensing requirement for activities not yet carried on.
Second, whose money is genuinely funding the company? I ask this before discussing structure at all, because if the answer is that the funds come entirely from the foreign side, the appropriate structure changes immediately. Giving Thai parties a majority in that situation requires genuine investment on their part, not merely names on a register.
Third, does the business need to invoice and collect from customers in Thailand? If so, a representative office is out, and where the activity is a Schedule Three service the choice narrows to a genuine Thai partner, a licence, or investment promotion. Those three differ materially in cost, in timing, and in how much flexibility they leave for the future.
Practical Points That Are Routinely Overlooked
First, a later change in shareholding can change the company's status. A company that starts as Thai-majority and then transfers shares such that the foreign holding reaches half becomes a foreigner under Foreign Business Act, Section 4 at once, and if its activity is scheduled, it becomes an unlicensed operator on the same day.
Second, internal documents allocating power between shareholders, such as a shareholders' agreement, powers of attorney or voting arrangements, must be consistent with the ownership presented to the authorities. If those documents show that the Thai shareholders hold no decision-making power and bear no economic risk, they characterise themselves.
Third, the investment funds should leave a verifiable trail, covering the inward remittance and each party's payment for its shares. In contested cases what proves decisive is rarely the later explanation but the path the money took at the outset.
Frequently asked questions
Is a forty-nine percent holding automatically safe?
A forty-nine percent holding keeps the company outside the Foreign Business Act, Section 4 definition of a foreigner only where the Thai shareholders genuinely own those shares. Section 4 addresses both shares held on the register and investment amounting in value to half or more of total capital, and in Supreme Court Decision No. 2252/2560 the Court held that although the register showed the foreign party below half, where the capital genuinely belonging to it exceeded half the company was treated as operating a Schedule One business. What provides safety is real ownership, not the figure.
If Thai nominees hold the shares under carefully drafted agreements, does the foreign investor really retain control?
Legally, no, and the outcome may be worse than having no agreement at all. An arrangement made to circumvent the law regulating foreign business operation has an object expressly prohibited by law and is void under Section 150 of the Civil and Commercial Code. In Supreme Court Decision No. 5457/2560 the Court held that money paid under such an arrangement was performance in contravention of a legal prohibition and could not be reclaimed under Civil and Commercial Code, Section 411. Both parties are in addition criminally liable under Foreign Business Act, Section 36.
My business is a service not named in Schedule Three. Does that mean I may simply proceed?
The final item of Schedule Three needs to be read first. Item (21) provides for other service businesses, except service businesses prescribed by ministerial regulation. A service not named therefore still falls within Schedule Three unless a ministerial regulation exempts it. The correct question is not whether the activity is named in the Schedule, but whether a ministerial regulation exempts it, and that list is capable of change, so the version in force at the time of filing should be checked.
Is the minimum capital two million baht or three million baht?
Foreign Business Act, Section 14 sets two tiers. Generally, the minimum capital must be not less than the amount prescribed by ministerial regulation and in any event not less than two million baht. Where the activity requires permission under the Schedules, the amount prescribed by ministerial regulation for each such business must be not less than three million baht. The section also allows a ministerial regulation to fix the period within which the capital must be brought into Thailand, so the applicable regulation must be checked alongside the Act rather than relying on the figures in the Act alone.
In summary
We have moved from the Foreign Business Act, Section 4 definition of a foreigner, resting on the half-or-more threshold, through the architecture of Section 8, which divides activities into a closed Schedule One, a Cabinet-level Schedule Two, and a Schedule Three that captures almost the whole service sector; through the minimum capital rule in Foreign Business Act, Section 14; through the lawful routes of a Foreign Business Licence, investment promotion under Section 12, and treaty rights under Foreign Business Act, Sections 10 and 11; through the bounded role of the representative office; and, most importantly, through Section 36, which reaches both the Thai nominee and the consenting foreigner, together with the civil consequences under Sections 150 and 411 of the Civil and Commercial Code that render the arrangement void and the money unrecoverable.
An investor who understands this can match the route to the business on day one, know what capital to prepare and which authority to approach, and avoid spending months on a structure that will have to be dismantled. One closing thought. Setting up a company in Thailand as a foreigner is not decided by how many percent of the shares are held, but by who genuinely owns them. A percentage can be solved by structuring. Ownership that is not real cannot be solved by any document at all.
What to do next
- List the activities the business will actually perform, then compare each one against Schedules One, Two and Three item by item rather than in the aggregate.
- Check whether any Schedule Three exception applies, such as the capital thresholds for retail and wholesale or the intra-group brokerage exception. Designing into an exception at the outset is easier than licensing afterwards.
- If a Thai-majority structure is used, confirm that the Thai side invests its own money, votes its own shares and bears its own risk, and retain evidence of payment for those shares.
- Assess eligibility for investment promotion or treaty rights before committing to a licence application, since those routes may be quicker and leave more flexibility on shareholding.
- Check the ministerial regulations in force at the time of filing, both on minimum capital and on the list of exempted service businesses, as these are capable of change.
- Where a structure is already in place and its position is uncertain, gather the complete shareholding documents and money trail before seeking an opinion, as an assessment made without the actual documents is usually inaccurate.
If this is happening to you
If you are in this situation, or you are unsure whether the evidence you hold is enough, you are welcome to ask. We can look at what your documents and messages establish as a matter of law, and what options lie ahead.
What to gather before seeking advice
- A line-by-line description of every activity the business will actually carry on: which goods are sold, which services are provided, whether installation or maintenance is involved. Different activities may fall under different schedules.
- The intended shareholding chart, including every offshore tier of parent companies and shareholders, since the definition in Foreign Business Act, Section 4(4) looks through layered holdings.
- The source of funds and the plan for remitting them into Thailand, with the relevant bank documentation, because the Foreign Business Act, Section 14 minimum capital may carry a prescribed remittance deadline.
- Every draft shareholders' agreement, power of attorney or voting arrangement already in existence or contemplated, so that consistency with the ownership to be presented to the authorities can be checked.
- The nationality of the investors and of any investing entities, to assess whether treaty rights under Foreign Business Act, Section 10 paragraph two are available.
- Information on employment, technology transfer and any research and development plans, these being factors to which Foreign Business Act, Section 5 directs regard when permission is considered.
- Any existing investment promotion certificate or written permission under the industrial estate legislation, these being the basis for a certificate under Foreign Business Act, Section 12.
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This article is general information, not advice on any specific case. A small change in facts can change the entire legal outcome, and the law may be amended, so please consult an attorney before acting.