May I ask the shareholders of companies registered in Thailand to hold shares on their behalf?

Author:Thailand MDR Accounting Law Firm Date:2020-03-16

Thai law has certain conditions for foreign investment. To register a Thai limited joint venture company, there must be Thai shareholders in the equity structure, and at least 51% of the shares. Therefore, many foreign investors will invite Thai citizens to participate in the shareholding as nominal shareholders. So in daily legal practice, is the shareholding of nominal shareholders legal? How to prevent the risks? MDR accounting law firm analyzes it from many aspects to provide some reference for investors.

Most of the foreign investors are small and medium-sized enterprises, and they are not qualified to apply for wholly foreign-funded boi companies. Since most of BOI companies are large factory enterprises, the registered capital required is higher, and the project must meet the category specified by the boi to apply. The registered Thai joint venture is more suitable for the public.

Can nominal shareholders be trusted

The foreign business law has strict regulations on nominal shareholders, and it is forbidden to break through the restrictions on foreign investment by nominal shareholders. If there is evidence that there is any breach of prohibition, both foreigners and Thai citizens will be punished or fined. Therefore, the registered joint venture company, foreigners and Thai people are jointly responsible, constrained and seek safe and reliable Thai partners, and there will be no breach of contract by Thai shareholders.

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Signing of equity transfer agreement

In Thailand, after the company is registered, the law allows the transfer of shares to other shareholders or third parties. Then, at the beginning of registration, it is necessary to plan to find reliable Thai shareholders in advance, and MDR accounting law farm suggests to find more than 3 Thai shareholders, so as to share 51% of the shares equally.

We can assist in drafting the equity transfer agreement of Thai language and let Thai shareholders sign it in advance. We can submit the change of the shareholders to the Ministry of commerce development at any time. The share transfer agreement will take effect immediately. It is worth noting that, in any case, the share ratio between Thai shareholders and foreign shareholders shall be kept at 51% to 49% at all times.

The preferred shares are selected to enjoy the maximum control of the company

In a registered company, the company is permitted by voting to issue preferred shares in the civil and Commercial Code Law, and the priority effect of such shares will not be changed once it is issued. MDR accounting law farm can be entrusted to draft the articles of association, designate one as the preferred stock and enjoy the sole right to sign, increase the rights and interests of its shares, and all affairs of the company shall have the priority of speaking first, dividend and asset bankruptcy liquidation, with a small risk.

However, this method needs to be handled by experienced firms, as it may touch the relevant restrictions in the foreign commercial law.

Shareholder holding on behalf of shareholders has certain risks, but how to prevent risks and minimize the possibility of occurrence is the key to overseas investment. In the long term, Thailand market is very valuable to explore. At present, its economic trend is developing rapidly. Now it is the golden period of foreign investment. Only those who seize the opportunity can stand on the stable track in overseas market faster.

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