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08 Feb

Although the generalities regarding Thailand’s foreign business laws are well-known to both Thai and foreign businesspeople alike, several misconceptions tend to persist. Therefore, it is helpful to review some of the basics regarding the Foreign Business Act.

Q: Is it necessary for a company registered in Thailand to have a majority Thai shareholder (i.e. 51% Thai, 49% foreign)?

A: No. However, if a company registered in Thailand shall have foreigners holding at least 50% of the shares in the company, then the company shall have the status as a “foreigner” and will be restricted from engaging in certain listed business activities annexed to the Foreign Business Act of 1999 or it will have to apply for permission before being allowed to engage in those business activities.

Q: What is the definition of a “foreigner”?

A: A “foreigner” within the definition of the Foreign Business Act is considered to be any of the following:

  1. A natural person who does not have Thai nationality
  2. A juristic person registered in a foreign country
  3. A juristic person registered in Thailand that has a person under (1) or (2) holding shares or investing capital in the amount of least 50% or a partnership in which the managing partner or the manager is a person who does not have Thai nationality
  4. A juristic person registered in Thailand that has a person under (1),(2), (3) holding shares or investing capital in the amount of at least 50%.

Q: Is a company or partnership with a foreign director or managing partner considered to be a “foreigner”?

A company with a foreign director does not have the status of being a foreigner, if the majority of the shares are held by Thai nationals. However, a limited partner or a registered ordinary partnership with a foreign managing partner shall have the status of being a foreigner regardless of the fact that Thai nationals have invested at least 50% of the capital.

Q: How many categories of businesses are restricted under the Foreign Business Act of 1999 and who has authority to grant permission to foreigners to operate business in a restricted category?

  • Category 1: This category consists of businesses that are absolutely restricted from foreign participation. No permission shall be granted for businesses in this category.
  • Category 2: This category consists of businesses related to safety or national security, or which have an effect related to the arts and culture, customs, local handicrafts, and natural resources and the environment. A foreigner must receive permission from the Minister of Commerce by authorization from the Cabinet.
  • Category 3: This category consists of businesses in which Thai nationals are not ready to compete with foreigners. A foreigner must receive permission from the Director-General of the Department of Business Development, with agreement from the Foreign Business Committee.

Foreign business laws in Thailand are complex. International investors interested in Thailand are advised to consult with competent legal counsel.

 

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