The Foreign Investment Regulation Review: Thailand


Although Thailand has relied heavily on foreign direct investment during the past few decades,2 and despite the government's several attempts over the past few years to attract foreign direct investment into the country, it has never been an easy task for foreign individuals and corporations to legally operate in Thailand as there are numerous Thai laws that either outright prohibit, or to a certain extent restrict, foreign parties from engaging in various businesses in Thailand, the most notable of which is the overarching Foreign Business Act 1999 (FBA).

The FBA generally prohibits and restricts foreigners from operating in more than 40 categories of businesses in Thailand unless such foreigners have successfully obtained a foreign business licence from the government, which is not easy to obtain in practice, or unless they are otherwise exempted from such restrictions under the FBA.3

The term foreigners under the FBA is defined to include not only non-Thai individuals and legal entities established under the law of another country, but also locally incorporated entities having 50 per cent or more of their total issued shares owned by other foreigners.4 These are commonly referred to as majority foreign-owned companies, although the term technically includes locally incorporated joint ventures that are equally owned by Thai and foreign shareholders. By definition, subsidiaries in Thailand of all foreign companies are considered foreigners under the FBA and hence are subject to the restrictions and requirements thereunder.

Therefore, foreign corporations seeking to expand their business operations into Thailand should thoroughly consider, among other Thai laws, the FBA and its implications before establishing a subsidiary in Thailand or acquiring a majority stake in any existing Thai businesses.

The FBA divides prohibited and restricted business activities into three different annexes titled List One, List Two and List Three, respectively. Generally speaking, foreigners may not engage in any business activity under List One.5 Conceptually, foreigners may engage in business activities under List Two if they receive an approval from the Thai cabinet of ministers. However, as a matter of practice, for the past 20 years or so of the FBA, such cabinet's approval is practically unavailable. Finally, for foreigners to operate any business activity under List Three, an approval (in the form of a foreign business licence) is required from the Foreign Business Commission, a body of senior government officials headed by the permanent-secretary of commerce.6

There are several exemptions to the broad restrictions imposed on foreigners under the FBA, such as by:

  1. obtaining an approval from Thailand's Board of Investment (BOI) or the Industrial Estate Authority of Thailand (IEAT);7
  2. having the minimum required capitalisation for certain businesses;8
  3. applying for protection under certain treaties between Thailand and a handful of countries;9 or
  4. being generally exempted through the issuance of ministerial regulations.10

However, such exemptions come with limitations. For example, the BOI only grants an approval to applicants for eligible businesses based on the BOI's investment promotion policies at that time, and a BOI approval only covers a particular project (usually a business line or process) of the applicant that is approved by the BOI. As such, if a foreigner has more than one project in Thailand and only one of them is approved by the BOI, the foreigner would still be subject to restrictions under the FBA with respect to its other activities that are not approved by the BOI. As another example, protection under the Treaty of Amity and Economic Relations Between The Kingdom of Thailand and The United States of America only applies to qualified American companies and nationals. Other foreigners may not seek protection (i.e., exemption from the FBA) under the aforesaid Treaty.

Even when a particular business of a foreigner is not prohibited or restricted under the FBA, the foreigner operating such non-restricted business in Thailand is still subject to certain requirements under the FBA, such as the minimum capital requirement, which requires foreigners to bring into Thailand within a certain period a minimum amount of capital in connection with their contemplated business operations.11

Apart from the FBA, there are many other industry-specific laws that also regulate foreign direct investment in Thailand in parallel, such as the Financial Institution Business Act 2008, the Insurance Act 1992, the Telecommunications Business Act 2001, the Broadcasting and Television Business Act 2008, the Land Transport Act 1979, the Air Navigation Act 1954, the Private Schools Act 2007, the Tourism Business and Guides Act 2008, the Job Placement and Job Seekers' Protection Act 1985, and the Agricultural Land Leases Act 1981.

Some laws have their own unique (stricter) definition of foreigners, which are subject to regulation. For example, the Agricultural Land Leases Act 1981 (as amended in 2016) defines foreigners as companies that are established under Thai law but that have 25 per cent or more of their shares owned by other foreigners, or where 25 per cent or more of their shareholders are foreigners.12

Other laws limit foreign direct investment thresholds in companies that are qualified to obtain a certain business licence from the relevant regulator under such laws by using a different shareholding threshold and other tests. For example, to apply for a tourism business licence under the Tourism Business and Guides Act 2008, at least 51 per cent of the total issued shares in the applicant companies must be held directly by Thai nationals, at least 50 per cent of the board of directors of the applicant companies must be Thai nationals, and authorised directors of the applicant companies must also be Thai nationals.13

In addition to the above, the Land Code (effective since 1954) generally prohibits foreigners from owning land in Thailand, with very limited exceptions. Generally speaking, foreigners may only own land plots located within authorised industrial estates14 or land plots specially approved by the BOI for use in BOI-promoted investment projects.15 The same foreign land ownership prohibition also applies to locally-incorporated companies having more than 49 per cent of their shares owned by foreigners or having more than 50 per cent of their shareholders being foreigners.16

In light of the foregoing, a joint venture company that is partially owned by foreign shareholders may be considered or treated as a foreigner under one law but not another law. For example, for a locally incorporated company that has 50.01 per cent of its total issued shares owned by Thai nationals and the remaining 49.99 per cent of its shares owned by foreigners, this company would be considered a Thai company (not a foreigner) under the FBA; however, at the same time, the same company cannot own any land in Thailand because it would still be treated as a foreigner under the Land Code.

To legally avoid being captured at all by the broad scope of application and complicated implications of the FBA and other Thai laws that regulate foreign direct investment, many foreign companies decide to form joint ventures with Thai parties, and let the Thai parties own a majority of the shares in the joint venture companies. Nevertheless, the foreign parties could, to a certain extent, retain control over such joint venture companies through contractual arrangements and other legal mechanisms.

Many foreigners, however, instead try to avoid the application of the FBA by using Thai nominees to hold shares in local companies on their behalf, which practice is illegal and could subject both the Thais and foreigners involved in such arrangements to severe penalties under the FBA, including a maximum imprisonment term of three years or a fine of up to 1 million baht, or both.17

Finally, it should also be noted that foreign nationals working in Thailand (whether for foreign subsidiaries, majority Thai-owned companies or otherwise) are also required to obtain work permits from the Department of Employment of the Thai Ministry of Labour under the Thai work permit law.18 The number of work permits that a company may obtain for its foreign employees depends on several factors, including its registered and paid-up capital. As a general rule, 2 million baht of capital is required for every work permit quota. Therefore, this factor also needs to be taken into account when considering establishing a subsidiary in Thailand, entering into a joint venture in Thailand or acquiring a majority stake in a Thai company, as it may affect the capital structure of the local company.

Year in review

The main problem with the FBA has always been the way it is interpreted by the Department of Business Development (DBD) of the Thai Ministry of Commerce, a government agency responsible for the overall compliance with and licensing and enforcement of the FBA. There are many controversies around interpretations of the law by the DBD, as many of them are counterintuitive or sometimes even unreasonable.

For example, pursuant to the DBD's current interpretation, the last item of restricted businesses under List Three – other service business – covers almost everything including activities that would not generally be considered services in an ordinary sense, such as property rental, cash pooling arrangements between affiliated entities, issuance of a corporate guarantee in favour of an affiliated entity, original equipment manufacturer (OEM) manufacturing, etc.

From time to time, and usually in response to formal written enquiries from private parties, the DBD publishes its opinions and interpretations of the FBA on its website in an attempt to clarify various issues and questions arising out of the FBA. These interpretations are colloquially referred to as DBD rulings.

DBD rulings are not in themselves laws. Thai courts – which have the ultimate authority to interpret the FBA and to punish those who have violated the FBA – are not legally bound by these rulings and they may interpret the law differently. However, because no one has ever officially challenged them in Thai courts, most of the DBD's controversial interpretations of the FBA, as expressed in DBD rulings, remain to this day. In addition, in the absence of Thai court precedents on the subject matter, as a matter of practice, DBD rulings are generally observed by multinational corporations doing businesses in Thailand in order to practically avoid having regulatory issues with the DBD, and the potential business disruption, costly litigation and criminal liabilities that may accompany a non-compliance investigation by the DBD and other government agencies.

The following are selected rulings issued by the DBD from September 2020 to August 2021:

In 2019, the Ministry of Commerce issued Ministerial Regulations No. 4, generally exempting the provision of three services between related entities (as specifically defined in the Regulations) from obtaining a foreign business licence. The three services are:

  1. domestic lending;
  2. rental of office spaces together with utilities; and
  3. advisory services concerning management, marketing, human resources and information technologies.

The DBD later clarified in a November 2020 ruling that item (b) does not include the rental of warehouses (meaning that a foreigner wishing to lease its warehouse in Thailand to a subsidiary still needs to obtain a foreign business licence from the Foreign Business Commission). The DBD also clarified in the same ruling that item (c) does not include the provision of any actual support or back-office services to related entities (i.e., only the provision of advice on one or more of the four specific areas is legally exempted).

Pursuant to another November 2020 ruling, a foreigner selling imported goods to customers in Thailand may not separately charge the customers any freight costs, customs processing fees or any expenses relating to the importation of the goods in addition to the goods prices unless the foreigner has obtained from the Foreign Business Commission a foreign business licence for the provision of relevant services to customers. (The foreigner in question may already have a foreign business licence to engage in retail or wholesale trade of imported goods or it may have been exempted from obtaining the said licence based on the minimum capitalisation exemption. However, pursuant to this ruling, the foreigner still needs to obtain another licence if it wishes to charge the customers any other costs and expenses for handling imported goods because the DBD considered such activities to be separate from the retailing or wholesaling of imported goods.)

A foreign company registered in Thailand wished to sell its account receivables in Thailand to an affiliated company outside of Thailand and wished to act as a collection agent for the offshore affiliated company in respect of the sold account receivables. The DBD issued a ruling in December 2020 that acting as a collection agent in this scenario is considered a restricted business activity under the FBA, and that the first foreign company (the seller of the account receivables) must obtain a foreign business licence before it can legally act as such collection agent. (This part of the ruling is not surprising to us, as the DBD has been consistently taking this position for many years.) However, the DBD further ruled that the offshore affiliated company buying local account receivables from Thailand (and hence being entitled to receive payments from debtors in Thailand) is also considered as doing a restricted business in Thailand and must also obtain a foreign business licence. (This latter part of the ruling is highly controversial and against the prevailing general practices in Thailand because many offshore financial institutions have been regularly purchasing discounted account receivables from Thailand for many years without any regulatory issue.)

An offshore financial institution wished to issue a standby letter of credit in favour of a commercial bank in Thailand (lender), on the request of a Thai borrower. The DBD issued a ruling in February 2021 that the offshore financial institution would be considered as operating in Thailand and must obtain a foreign business licence before issuing such letter of credit to the Thai bank, even though the offshore financial institution may not have any presence in Thailand and the issuance of the letter of credit would take place completely outside of Thailand. (This ruling is also highly controversial and against the prevailing general practices.)

Pursuant to a March 2021 ruling, a foreign company licensed to provide equipment maintenance services in Thailand may not temporarily lend to its customers any equipment for use during the period when the customers' equipment is taken by the foreign company for maintenance (and charge the customers the 'depreciation value' of the lent equipment) without a separate foreign business licence for lending such equipment.

An offshore foreign company sent its employees to Thailand for a specific business reason. Certain hotel and travelling expenses of the employees were advanced by another foreign company registered in Thailand that was an affiliate of the offshore company sending its employees to Thailand. Pursuant to a June 2021 ruling, a local company may not seek reimbursement of the advanced expenses from an offshore affiliated company (even at cost and without any profit) unless it has successfully obtained a foreign business licence from the Foreign Business Commission.

A foreigner licensed to operate a fitness centre in Thailand wished to provide fitness training services to customers outside of its usual fitness centre and to provide on-demand live streaming of training courses (presumably in light of the government's order to temporarily close all fitness centres during the pandemic). The DBD issued a ruling in August 2021 that the aforesaid activities are beyond the foreigner's existing foreign business licence and that additional licences must be obtained for these.

Apart from the foregoing latest rulings issued by the DBD in connection with the FBA, a few other government agencies responsible for other laws have also recently been noted for taking a more aggressive stance with respect to foreign companies doing business outside of Thailand but targeting customers in Thailand, which is arguably beyond their jurisdiction.

For example, in July 2021, the Thai Securities and Exchange Commission (SEC) accused a major cryptocurrency trading platform based outside of Thailand of illegally operating a crypto exchange 'in Thailand' without an approval from the SEC. In essence, the SEC argued that, by creating a Thai-language website intentionally targeting customers in Thailand, the offshore trading platform is considered by the SEC as operating the exchange in Thailand even though it may not have any local physical presence in the country.19

As another example, the National Broadcasting and Telecommunication Commission (NBTC) issued a public statement in February 2021 condemning a global satellite internet provider for its solicitation of customers specifically in Thailand, using Thai-language marketing materials. The NBTC argued that the company cannot legally provide internet services to customers in Thailand without first obtaining a proper internet service provider licence from the NBTC, despite the fact that the company does not have any physical presence in Thailand and the internet services are to be provided from satellites orbiting the globe.20

It is still unclear whether the SEC and the NBTC actually have legal jurisdiction over the offshore business operators in question as there has not yet been any court precedent on the matters. Nevertheless, the outcomes of these cases may change the legal landscape of Thailand in the future.

Foreign investment regime

i Policy

Section 5 of the FBA sets forth the main principles for allowing foreigners to operate restricted businesses in Thailand as follows:

In granting permission to foreigners for the operation of businesses under this Act, regard shall be had to advantageous and disadvantageous effects on national safety and security, economic and social development of the country, public order or good morals, national values in arts, culture, traditions and customs, natural resources conservation, energy, environmental preservation, consumer protection, sizes of undertakings, employment, technology transfer and research and development.

Generally speaking, the government is rather reluctant to allow foreigners to operate restricted businesses in competition with Thai businesses (and the scope of restricted businesses is interpreted very expansively). Although it is stated in the 2020 annual report of the Foreign Business Commission that the Commission's goal is to create a balance between foreign investment promotion and Thai business protection,21 in reality, protectionism still plays a very critical role in determining whether a foreign business licence would be granted to any particular applicant.

In practice, the Foreign Business Commission would issue a foreign business licence to an applicant only if the Commission believes that the overall Thai economy would somehow benefit from the proposed business of the applicant (for example, the applicant's business requires high investment in Thailand, uses advanced technologies with potential technology transfers or would create a large number of local employment opportunities) or the applicant's business has very limited impacts on other Thai businesses (for example, the applicant's business relates to inter-group company transactions).

ii Laws and regulations

The FBA is the main law that prohibits or restricts foreigners (a term that is defined to include foreign nationals, foreign legal entities, and majority foreign-owned, locally-incorporated entities) from operating a vast majority of businesses in Thailand including farming, animal husbandry, fishery, domestic transportation, mining, construction, domestic trading of goods, agency and brokerage services, hospitality, tourism, restaurants and most other services.

The government agency directly responsible for the overall compliance, licensing and enforcement of the FBA is the Department of Business Development (DBD) of the Ministry of Commerce.

The Department of Special Investigation (DSI) of the Ministry of Justice also has the authority to investigate potential violations of the FBA that are criminal offences. The DSI is generally responsible for investigating complex criminal matters or criminal matters that have or could have severe impacts on the general public. In connection with the FBA's enforcement, the DSI is usually involved in investigations of the purported use of illegal Thai nominees by foreigners to circumvent foreign direct investment regulation under the FBA. The DSI works closely with the DBD on such investigations.

A violation of the FBA, such as operating a restricted business without a foreign business licence or using a Thai nominee to own shares in a local company to circumvent restrictions, could result in the imposition of severe penalties against the offender, including a monetary fine from 100,000 baht to 1million baht, a maximum imprisonment term of three years, or both. In cases where the offender is a company, its directors and executives who are responsible for the violation of the FBA by the said company are also subject to the same penalties. Furthermore, offenders would be ordered by a Thai court to cease their business operations in Thailand that are in violation of the FBA; a failure to comply with such court orders would subject the offender to an additional fine from 10,000 baht to 50,000 baht per day throughout the period of the violation.

iii Scope

Any transaction that results in a foreigner holding 50 per cent or more of the shares in a company in Thailand may subject the company to foreign direct investment regulation under the FBA.

However, depending on the circumstances, the threshold that could trigger the foreign direct investment regulation may be lower in certain sectors, such as agriculture and broadcasting, or if the local company owns land in Thailand.

Thai laws generally apply within the geographical territory of Thailand and do not have extraterritorial jurisdiction. However, a few government agencies including the DBD, the SEC and the NBTC have recently tried to apply Thai laws to business operators outside of Thailand that actively reach out to customers in Thailand. Nevertheless, there has not yet been any reported court case that confirms or denies the jurisdiction of such government agencies in such scenarios.

iv Voluntary screening

It is possible for foreigners to seek clarifications from the DBD and other government agencies about whether their proposed business in Thailand is subject to any foreign direct investment regulation under Thai laws. However, each government agency would only respond to such enquiries from the limited perspective of a particular law that is directly applicable to it.

For example, a foreigner may ask the DBD to confirm whether its proposed business is subject to regulation under the FBA. However, the DBD would not confirm whether or not the proposed business is regulated by any other government agencies under any other sector-specific laws that may also be applicable to the business in question. In other words, the foreigner must by itself, or with assistance from its local counsel, identify the relevant agencies and separately reach out to each of them to receive a complete answer from all relevant government agencies.

It should also be noted that government agencies are usually slow in responding to such enquiries. It is not unusual for enquirers, whether Thai or foreign, to have to wait at least a few months for any written response from the relevant agency and, in many cases, after a few months of waiting, the response received might not be useful as it sometimes does not actually answer the question asked.

The language barrier is another factor that should also be considered. In Thailand, the only official language is Thai. All laws and regulations are only officially published in the Thai language. English translations are never considered 'official translations' even though they may be made available by relevant government agencies. Many laws and regulations do not even have any unofficial English translation.

In light of the foregoing, it is a very common and prudent practice for foreign companies seeking to expand their business operations into Thailand to engage qualified local legal counsel to guide them through foreign direct investment regulation in Thailand, and to provide necessary assistance in dealing with government agencies, to ensure full compliance with applicable Thai laws.

v Procedures

To apply for a foreign business licence, an application and all required supporting documents, including detailed descriptions of the proposed business, financial forecasts and technology transfer plans (if applicable), must be submitted to the Foreign Business Commission through the DBD. The DBD may accept or reject a foreign business licence application based on several reasons and its internal policies.

If an application is accepted by the DBD, it would be passed on to the Foreign Business Commission for its formal consideration. The Commission only meets once a month or less frequently, so applicants must wait until the Commission convenes a meeting. It is also possible that, if there are many pending applications at a particular moment, some applications may be postponed for consideration at the following meeting.

The law states that the Commission has a time frame of 60 days from the date of receipt of an application to consider the application.22 However, in reality, this may not always be the case.

If the application is approved by the Commission, the applicant would be required to pay a one-time licensing fee of between 20,000 baht and 250,000 baht depending on the registered capital of the applicant, before a foreign business licence is officially granted. Foreign business licences are valid for an indefinite period until they are revoked by the Commission or voluntarily cancelled by the licence holders.23

Foreign business licences usually come with some conditions (as shall be determined by the Foreign Business Commission as it sees appropriate) including, at the minimum, the following standard licensing conditions:24

  1. the licence holder must maintain a minimum registered capital of a certain sum;
  2. the licence holder may not borrow more than seven times the amount of its capital; and
  3. the licence holder must appoint at least one individual residing in Thailand as the person legally responsible for the licensed business operations.

By contrast, if the application is rejected by the Commission, the applicant may conceptually appeal against the Commission's decision to the Minister of Commerce within 30 days.25

Practically, the overall process of obtaining a foreign business licence (including the time required for discussions between foreigners and their local counsel and the time required to prepare the application and gather all supporting documents and information) usually takes around six months or more.

Alternatively, if a foreigner is qualified for an exemption under the FBA with an approval from the BOI or the IEAT or qualified for protection under a certain treaty between Thailand and another country, the foreigner would instead need to apply for a foreign business certificate from the DBD.26 The process of obtaining a foreign business certificate is much easier and quicker than obtaining a foreign business licence as it does not involve the exercise of any discretion by the DBD: that is, if all documents are complete and correct, the DBD must issue a foreign business certificate to the applicant. The legal time frame for the DBD to process a foreign business certificate application is 30 days.27 There is a certificate issuance fee of 20,000 baht payable by the applicant. Foreign business certificates are valid for an indefinite period as long as the holder still maintains the underlying privilege based on which the foreign business certificate is issued (i.e., the BOI or IEAT's approval or treaty protection, as applicable).

vi Prohibition and mitigation

It has been reported that in 2020, 270 foreign business licence applications were submitted to the Foreign Business Commission for its consideration, and 252 of these applications (around 93 per cent of the submitted applications) were eventually approved.28 In reality, however, that were many other uncounted applications that could not even reach the Commission as they were rejected by the DBD, acting as the gatekeeper for the Commission, sometimes based on unwritten policies.

Sector-specific requirements

i Prohibited sectors

All business activities included in List One of the FBA are absolutely prohibited for foreigners.29 These include most basic agricultural activities such as:

  1. farming, plantation or crop growing;
  2. animal husbandry; and
  3. fishery, only in respect of the catching of aquatic animals in Thai waters and exclusive economic zones of Thailand.

Other prohibited sectors under List One of the FBA are as follows:

  1. newspaper business, operating a radio broadcasting station or operating a television broadcasting station;
  2. forestry and processing of timber from natural forests;
  3. extraction of Thai herbs;
  4. trading and auction sales of antique objects of Thailand or objects of historical value of the country;
  5. making or casting of Buddha images and monk alms bowls; and
  6. land trading.

Conceptually, foreigners may engage in business activities included in List Two of the FBA, with an approval from the Cabinet of Ministers. However, such approval is practically not available as a matter of policy. Therefore, all activities listed in List Two are also practically prohibited for foreigners.

Examples of business activities under List Two are as follows:

  1. domestic transport, whether by land, water or air;
  2. production, distribution and maintenance of firearms and military equipment;
  3. production of sugar from sugar cane;
  4. production of salt;
  5. mining; and
  6. timber processing for the production of furniture and utensils.

For the full list of all prohibited business activities, see an unofficial English translation of the FBA.30

ii Restricted sectors

List Three of the FBA includes 21 categories of restricted business activities, examples of which are as follows:

  1. fishery, only in respect of hatching and raising aquatic animals;
  2. production of plywood, veneer wood, chipboards or hardboards;
  3. accounting services;
  4. legal services;
  5. architectural services;
  6. engineering services;
  7. construction (with some exceptions);
  8. brokerage and agency services (with some exceptions);
  9. domestic trade of agricultural products or produce;
  10. retail of any goods (with an exception under the minimum capitalisation rules);
  11. wholesale of any goods (with an exception under the minimum capitalisation rules);
  12. advertising business;
  13. hotels, except for hotel management;
  14. sales of food and beverages; and
  15. other service businesses (except as prescribed in ministerial regulations).

Foreigners who wish to operate any of these businesses must obtain a foreign business licence from the Foreign Business Commission, which may or may not be eventually granted depending on the circumstances and ever-changing policies of the government.

The most problematic restricted business category is the catch-all item for 'other service businesses' under List Three (21). Over the years, this particular item has been interpreted by the DBD extremely expansively to cover so many activities that may not, in an ordinary sense, be considered as services. It even covers some administrative and ancillary services provided without charges between parties within the same group of companies, for example property rental, cash pooling arrangements, issuance of a corporate guarantee and OEM manufacturing. Most of the latest DBD rulings discussed in Section II are considered by the DBD as restricted activities under this particular item.

Manufacturing is the only sector that is not heavily restricted under the FBA. However, this does not mean that foreigners may freely engage in any manufacturing business in Thailand because manufacturing of some products is still restricted. For example, firearms, military equipment, goldware and silverware are restricted under List Two. Meanwhile, manufacturing of, inter alia, plywood and veneer wood is restricted under List Three. In addition, OEM manufacturing (i.e., manufacturing of goods based on customers' specifications or formulas) is considered a service, and so it is restricted under List Three (21).

There are also other industry-specific laws that require business operators to obtain a licence from the relevant regulator, and to qualify for a licence application, the applicant company must a have a certain minimum Thai shareholding threshold (and sometimes minimum Thai individuals on the board of directors or other qualifications) as specified under such laws. For example, to obtain a commercial land transport licence under the Land Transport Act 1979, applicant companies must have at least 51 per cent of their shares held by Thai shareholders. In addition, at least 50 per cent of the members of the board of directors of the applicant companies must be Thai nationals.31 As such, foreigners may only be minority shareholders in companies engaging in such businesses.

Typical transactional structures

The most common form of legal entity for operating businesses in Thailand is a private limited company under the Civil and Commercial Code (CCC). The CCC itself does not require any minimum capital or contain requirements on the nationality or residency of directors. The CCC only requires that private limited companies have a minimum of three shareholders, one director and a registered address in Thailand.

However, company legal structures could be affected by requirements under special laws that regulate foreign direct investment, including the FBA. For example, if a private limited company established under the CCC is considered a foreigner under the FBA and it wishes to obtain a foreign business licence, it would need to have, at the very least, minimum capital of 3 million baht, and it must have at least one director (of any national) residing in Thailand and legally responsible for the licensed business operations. Other industry-specific laws may impose additional requirements, such as a minimum number of Thai directors in the board of directors, and requirements on the nationality of the authorised signatory directors.

To ensure that they will not be disqualified from obtaining and maintaining key licences required to operate their core businesses, some companies may have a maximum limit of foreign shareholding threshold written in their articles of association, corresponding to the threshold prescribed in the relevant law under which the key licences are obtained.

The general process of purchasing shares in Thai companies does not differ between Thai and foreign purchasers. However, foreigners interested in purchasing shares in a Thai company must be mindful of the consequences of the target company becoming a 'foreigner' under the FBA, the Land Code, and other industry-specific laws as a result of the acquisition.

It is quite common for foreigners to form an incorporated joint venture with Thai parties by structuring a joint venture company in such a way that it is majority-owned by the Thai parties, so that the company is not considered a foreigner, and hence will not be subject to various restrictions under the FBA and other laws. It is generally possible for foreigners in such circumstances to maintain control over the joint venture company (to a certain degree) through various mechanisms, such as by inserting into a joint venture agreement veto rights or consent requirements in connection with important board and shareholder matters. The most important issue for foreigners to always keep in mind, however, is that the Thai shareholders in their joint venture company must be genuine shareholders who invest their own money and hold shares in the company for their own interest and benefits. They cannot be mere nominee shareholders of the foreign parties holding shares on the foreigners' behalf because the use of Thai nominee shareholders to circumvent foreign direct investment regulation is illegal under the FBA, with severe penalties, including a maximum imprisonment term of three years, a fine of up to 1 million baht, or both, being imposable on both the foreign parties and the Thai nominees.32

Other strategic considerations

Merger control is new territory under Thai law as it only started to be implemented in late 2018 pursuant to the Trade Competition Act 2017 and regulations issued thereunder.

Mergers and acquisitions of businesses in Thailand that have a significant share in a particular market and, under the current regulations, a minimum turnover of 1 billion baht in the previous year, may require a pre-merger approval from the Trade Competition Commission or a post-merger notification to the Commission, depending on the circumstances.33

There are no special rules applicable to foreign acquirers at present. However, the consequences of a target business becoming a foreigner under various Thai laws as a result of an acquisition should always be carefully considered.


It is mentioned in the 2020 annual report of the Foreign Business Commission that further relaxations on restricted services under the FBA are being considered.34 Such services include:

  1. administrative management;
  2. human resource management and IT management for affiliated companies;
  3. insurance brokerage;
  4. petroleum drilling services;
  5. distribution centres using technology systems;
  6. domestic transportation;
  7. software development; and
  8. digital services.

However, it is still unclear at this stage whether such relaxation will eventually come into effect.

In contrast, it should be noted that there have been attempts by a few regulators including the SEC, the NBTC and the DBD to apply Thai laws to offshore companies that are operating outside of Thailand but are targeting or transacting with customers in Thailand (as already discussed in Section II).


1 Wayu Suthisarnsuntorn is a partner at Pisut & Partners.

3 FBA, Section 8.

4 FBA, Section 4.

5An unofficial English translation of the FBA, including the three annexes of prohibited and restricted business activities, can be found on the following website:[1].pdf. Note that only the official Thai version of the FBA has legal effects: the English translation is provided here just for the convenience of readers. We do not in any way confirm the accuracy of the aforesaid English translation.

6 FBA, Section 23.

7 FBA, Section 12.

8 This exemption is available for a few categories of businesses only, i.e., agency or brokerage for international trade, domestic retail of goods, and domestic wholesale of goods under List Three (11), (14) and (15), respectively.

9 FBA, Sections 10 and 11. Currently, there are only five treaties in this regard, i.e., the Treaty of Amity and Economic Relations Between The Kingdom of Thailand and The United States of America; the Japan–Thailand Economic Partnership Agreement; the Thailand–Australia Free Trade Agreement; the ASEAN Comprehensive Investment Agreement; and the ASEAN Framework Agreement on Services.

10 Four ministerial regulations have been issued to date, exempting 12 categories of business activities, notably securities, banking and insurance businesses, and limited businesses between related parties.

11 FBA Section 14.

12 Agricultural Land Leases Act 1981, Section 5/2.

13 Tourism Business and Guides Act 2008, Section 17.

14 Industrial Estate Authority of Thailand Act 1979, Section 44.

15 Investment Promotion Act 1977, Section 27.

16 Land Code, Sections 97 and 98.

17 FBA Section 36.

18 Emergency Decree on Foreigners' Working Management 2017, Section 8.

21 2020 Annual Report of the Foreign Business Commission, page 15:

22 FBA, Section 17.

23 FBA, Section 21.

24 FBA, Section 18 and ministerial regulations dated 17 May 1973.

25 FBA, Sections 17 and 20.

26 A foreign business certificate is required to be obtained when a foreigner is qualified for an exemption with an approval from the BOI or IEAT or under a certain treaty. However, if a foreigner is otherwise exempted from restrictions under the minimum capitalisation rules or under relevant ministerial regulations, a foreign business certificate is not required to be obtained and the foreigner may engage in such exempted business immediately from the date when it is fully qualified for the applicable exemption.

27 FBA, Section 12.

28 2020 Annual Report of the Foreign Business Commission, page 22.

29 FBA, Section 8(1).

30 See[1].pdf. Note that only the official Thai version of the FBA has legal effects. The English translation is provided here just for convenience of readers. We do not in any way confirm the accuracy of the aforesaid English translation.

31 Land Transport Act 1979, Section 24(3).

32 FBA Section 36.

33 Trade Competition Act 2017, Section 51.

34 2020 Annual Report of the Foreign Business Commission, page 40:

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