Nominee Shareholding to Hold Land — Foreign Business Act Section 36 Prosecutions

Facts

A foreign individual incorporated a Thai limited company in which Thai nominee shareholders held 51% of the shares on paper, while the foreigner held 49% but contributed effectively all the capital and made all management decisions. The company purchased land. Investigation revealed that the Thai shareholders had paid nothing for their shares, exercised no voting rights, signed only one document at incorporation, and had no other connection to the business. The Thai shareholders, the foreigner, and (where applicable) the company directors were prosecuted under the Foreign Business Act Section 36.

Legal Issue

Whether a Thai shareholder who holds shares on behalf of a foreigner — without true capital contribution or beneficial ownership — commits an offence under Section 36 of the Foreign Business Act, and whether the foreigner is also liable.

Holding

Reasoning

Section 36 FBA criminalises Thai persons who hold shares as nominees for foreigners in order to allow the foreigner to operate a Section 8 restricted business or to circumvent foreign-ownership limits. The court looks at substance over form: source of funds, voting behaviour, dividend treatment, employment status of the Thai shareholders, and whether any commercial relationship exists outside the nominee arrangement. Penalties include imprisonment up to 3 years, fines up to THB 1 million, and daily fines until the violation is rectified.

Significance

This line confirms that 'using Thai friends to hold 51%' is criminally prosecutable, not merely commercially risky. Land Office and DBD share-funding scrutiny has intensified since the late 2010s.

Practical Takeaway

Cited Statutes

• Foreign Business Act B.E. 2542 (1999), Sections 4, 8, 36
• Land Code B.E. 2497 (1954), Section 96 bis (company landholding caps)
• Civil and Commercial Code, Section 1098 (share subscription must be paid)