Introduction
Thailand’s dynamic business landscape has attracted numerous foreign investors. However, navigating the legal and regulatory requirements can be challenging, especially regarding Foreign company ownership.
Due to the restrictions of the Foreign Business Act, foreign-owned businesses are not permitted to engage in a wide variety of activities. Investors often seek to use nominee shareholders as a workaround but this is illegal under the Foreign Business Act.
Key Points
- Control of a Limited Company is possible with minority shares.
- BOI Promotions allow for 100% foreign ownership and other incentives.
- A Foreign Business Licence is required for restricted activities but is challenging to obtain.
- Wise Partner Selection: Vet local partners or consider Thai private equity firms for support.
How to Structure a Limited Company with Thai Partners
The distinction between a Thai and a foreign company hinges on ownership rather than control in Thailand. Foreign investors can maintain control of a company while holding a minority share (e.g., 49%) through preference shares and a shareholder agreement defining voting and dividend rights.
Nevertheless, it’s vital to recognize that this structure may not entirely negate the interests of Thai shareholders.
What is a Board of Investment (BOI) Promotion?
When considering investment opportunities in Thailand, one of the most attractive options is seeking a BOI promotion. The BOI promotes and incentivizes foreign investment by offering qualifying businesses a range of benefits and privileges. These incentives often include 100% foreign ownership, potential tax exemptions, ease of application for visas and work permits and other favorable conditions that make it an appealing choice.
A BOI promotion aims to boost specific industries strategically important to the Thai economy. It encourages foreign investors to participate in these sectors by providing various benefits and streamlined administrative processes.
By opting for BOI promotion, investors can avoid the need for nominee shareholders and ensure complete control and 100% ownership of the shares in their business.
What is a Foreign Business Licence?
In some cases, businesses may engage in activities restricted by the Foreign Business Act, and obtaining a Foreign Business License becomes necessary. While this option allows foreign-owned companies to operate in otherwise off-limited sectors, it can be a challenging and lengthy process.
Getting a Foreign Business License in Thailand can be difficult, and applications are not guaranteed approval. Investors should be prepared to demonstrate the economic benefits or the technology transfer their business will bring to Thailand and provide detailed information about their operations.
Can I use Local Partners?
Another alternative to nominee shareholders in Thailand is to select local partners carefully. If you decide to collaborate with a Thai entity or individual, it’s crucial to vet them thoroughly. Ensure that your potential partners have a genuine interest in the venture, possess the expertise required for your business, and have the financial capacity to be true partners.
One effective way to identify reliable local partners is to explore partnerships with Thai private equity firms. These firms often have extensive knowledge of the local business landscape and can provide valuable insights and support to foreign companies looking to expand in Thailand. Collaborating with reputable private equity firms can help you establish a strong local presence and navigate the complexities of doing business in the country.
Our Thoughts
Proper utilization of a local partner can ease market entry into Thailand and help companies navigate the complexities and restrictions of the Foreign Business Act.
Investors looking to enter the Thai market should always check their eligibility for a BOI promotion. The BOI offers investors significant advantages such as 100% foreign ownership, easier visa and work permit applications, reduced requirements for hiring foreign skilled workers, and the removal of the restrictions of the Foreign Business Act.
Before making any decisions, it’s advisable to consult with legal and business experts familiar with the Thai regulatory environment to ensure a smooth and successful investment journey.
