Define Thai Shareholders
A Thai shareholder is an individual or another Thai company or juristic entity who owns one or more shares of the company. Thai shareholders may earn dividends and shareholders may have ordinary or preference shares. All shareholders in the company must have voting rights. Bearer shares (meaning shares in the company which are transferable by delivery of the share certificate) in a partly foreign owned company are not allowed in Thailand. Shares are registered in a person's or juristic entity's name and are transferred at the Department of Business Development and not by handing over the share certificates.
Shareholders must have a share certificate issued in their name by the limited company in Thailand.
The use of nominees is prohibited for foreigners under the Foreigner Business Act. Besides the requirements under the business registration rules and foreigner definition in section 4 of the Foreign Business Act 'nominee shareholder' is not defined under Thai law. It is a rather grey area. The main indication for a Thai nominee shareholder lies primarily in the source of the capital investment.
There is no restriction for Thai nationals to use nominee shareholders in a private limited company.
Besides the investigation of the Thai shareholders under Business Registration Rules it seems that Thailand currently does not want to enforce or implement a stricter difinition of nominee nor is it a policy to investigate existing partly foreign owned companies companies. Under a stricter interpretation the nominee definition would boil down to (2 is more or less based on comments made during the 2006 investigations in the Temasek shareholding structure and the Shin Corp takeover):
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The source of the capital. A company incorporated under Thai law could be deemed foreign by the foreign capital investment, even though the majority of the shares are held by Thai nationals (Section 4 FBA and Business Registration Rules). This investment requirement by the Thai partners/ shareholders is effectively a bar on the use of Thai nationals or holding companies as nominees. A loan agreement as the source of the money for the Thai partner/ shareholder's investment could be acceptable, however this must be a real loan agreement and the Thai partner/ shareholder must be able to provide proof of sufficient income to honor the loan agreement, and;
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Is there an intention to evade the law? If the partly foreign owned company investment structure includes joint ventures and loan agreements with Thai partner/ 'shareholders' (this could be holding vehicles) the whole company structure will be looked at; (a) how is management control structured, (b) is there a loan investment supplied or guaranteed by the foreigner, (c) unbalanced voting rights attached to shares held by the foreigner*, (d) and the flow of funds from dividends paid by the company to the shareholders.
As a general definition; a nominee, being either a natural person or corporation, who is registered as the holder of shares in a company but who does not actually invest in the company, nor has the financial means to pay up his shares, nor has a benificial ineterest in the company, nor has any form of participation in the company.
