Legal Update: April 2026
Administrative Enforcement
Thailand has significantly intensified enforcement against nominee structures. New DBD regulations effective January and April 2026 introduced mandatory 3-month bank statements at company formation and a written Investment Confirmation Letter for specific amendments involving foreign signing authority. These changes directly affect several of the structures discussed in this article.
Full Analysis:
Regulatory Outlook
The DBD is conducting a formal evaluation of the Foreign Business Act, targeting the control mechanisms described in this guide — including preference shares, cross-shareholding, and signatory-based control. The proposed “Actual Control” test would treat a company as foreign if a foreigner exercises effective decision-making authority, regardless of nominal shareholding. If adopted, this would fundamentally shift the risk profile of every structure in this article.
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The Core Problem: 49% but Who Controls?
Thailand’s Foreign Business Act (FBA) restricts foreign ownership across a wide range of sectors. A company incorporated in Thailand is classified as “foreign” if 50% or more of its shares are held by foreigners — and foreign companies face either outright prohibition or mandatory licensing for many business activities.
The regulatory background — including the FBA’s three restricted lists, the Foreign Business License process, BOI promotions, IEAT zones, and international treaties — is covered in our main guide:
This article addresses a specific, practical challenge that arises once you have decided on a Thai-majority structure: you hold 49%. Your Thai partner holds 51%. How do you retain effective control of the business without building an arrangement that violates Section 36 of the FBA?
That question sits at the intersection of corporate law, contract law, and criminal enforcement. The answer depends on which structures are used, how they are documented, and — increasingly — how they hold up under the 2026 regulatory framework.
Thai-Majority Companies: The Default Path
For foreign investors who cannot qualify for BOI promotion, an FBL, or a treaty exemption, forming a Thai-majority company — with Thai shareholders holding at least 51% — is the most accessible pathway to operating in restricted sectors. These companies fall outside the FBA’s foreign-classification threshold and can conduct restricted activities without a Foreign Business License.
The structure is legal and widely used. As of 2026, Thai-majority structures also carry new documentary requirements at both formation and amendment stages (see the Legal Update above).
The operational challenge has always been the same: Thai shareholders hold majority ownership, which means they hold majority voting rights under the default rules of Thai company law. Structuring around this — legally — is what the rest of this article is about.
Nominee Risks and Legal Penalties
A nominee arrangement exists when a Thai national holds shares in a company without genuine financial involvement or independent decision-making authority — purely to give the appearance of Thai majority ownership while the foreign investor retains actual control. These arrangements violate Section 36 of the FBA, which prohibits aiding or participating in restricted business operations on behalf of foreigners.
Penalties under Sections 36 and 37 of the FBA:
- Fines of THB 100,000–1,000,000
- Up to three years imprisonment — for both the Thai nominee and the foreign beneficiary
- Court-ordered company dissolution
Both parties are exposed. A Thai partner who holds shares without genuine economic participation and who has signed away voting rights or dividend entitlements through side agreements carries direct criminal exposure under the FBA. So does the foreign investor who structured the arrangement.
Enforcement Environment in 2026
Enforcement against nominee structures has been on a sustained upward trajectory for three years. The DBD and DSI have conducted multiple nationwide inspection campaigns across sectors particularly prone to nominee misuse — tourism, real estate, logistics, hospitality, and e-commerce — resulting in prosecutions, company dissolutions, and criminal convictions of both Thai nominees and foreign principals.
From January 2026, enforcement moved to a new level. Rather than relying solely on retrospective inspections, the DBD introduced systematic verification at the point of every registration and amendment filing: bank statements, automatic database checks against the AMLO watchlist and State Welfare Card database, and — from April 2026 — written declarations carrying criminal liability embedded into the standard filing process.
This is the most significant overhaul of company registration rules in over a decade. Structures that previously operated below the enforcement radar now face verification at every qualifying amendment filing.
Where the company holds land, a second enforcement track applies on top of this one. The Land Department runs its own recurring checks, and a confirmed finding brings disposal orders rather than a registration refusal — see nominee enforcement against landholding companies.
How Authorities Identify Nominee Practices
The DSI and DBD evaluate companies against the following criteria:
Unusual shareholding patterns. Thai shareholders lack active participation or financial contribution proportionate to their stake.
Foreign-sourced funding. Thai shareholders’ capital originated from the foreign investor. From January 2026, Thai shareholders in qualifying structures must submit three months of personal bank statements proving capital came from their own accounts.
Disproportionate control. Foreigners have undue influence over management decisions, board composition, or day-to-day operations.
Irregular financial transactions. Loans or dividend flows lack commercial justification — for example, a Thai shareholder who received a loan from the foreign investor used to subscribe for shares.
Board composition. Predominantly foreign boards with minimal genuine Thai oversight.
Strategies for Maintaining Control: 2026 Risk Overview
There are legitimate, legally recognised mechanisms for a foreign minority shareholder to retain effective control in a Thai-majority company. The key distinction from nominee arrangements: these methods work through documented, transparent corporate and contractual structures — not through concealment.
The 2026 enforcement framework has sharpened the difference between structures built on genuine Thai participation and those designed to replicate nominee control under a different label. The table below gives a current risk summary:
| Method | Legal Basis | 2026 Risk Level | Best Suited For |
|---|---|---|---|
| Preference shares | Sec. 1108 CCC | Low–Medium (watch regulatory outlook) | New formations; long-term investors |
| Thai Holding | Sec. 1096 ff. CCC | Low–Medium (with proper capitalisation) | Multi-entity structures |
| Cross-shareholding | Sec. 1096 ff. CCC | Medium | Multi-entity structures; tax advice required |
| Loan + share pledge | Sec. 1108 + contract law | Medium–High (depends on pledge terms) | Supplementary security only |
| Blank share transfer | Contract law | High | Not recommended |
Preference Shares
The most structurally sound method for retaining effective control. The legal basis is Section 1108 of the Civil and Commercial Code (CCC).
A Thai company may issue two classes of shares — ordinary shares and preference shares — with different voting rights and dividend entitlements as defined in the Articles of Association.
Standard Scheme
Thai shareholders hold 51% of capital in preference shares with reduced voting rights — for example, 10 preference shares counting as 1 vote. Foreign shareholders hold 49% in ordinary shares with full voting rights (1 share = 1 vote). At a 51/49 split with a 10:1 preference share ratio, the foreign investor commands approximately 83% of total votes despite holding only 49% of equity.
Dividend entitlement can be structured proportionally — for example, 2% of distributable profit to preference shareholders and 98% to ordinary shareholders.
Reverse Scheme
Enhanced voting rights and dividends are attributed to preference shares held by the foreign investor. Each preference share carries 10 votes; each ordinary share carries 1. Thai shareholders hold ordinary shares at 51%.
Legal Considerations
Once preference shares are issued, the rights attached to them cannot be altered (Section 1142 CCC) without a capital increase and the consent of affected shareholders. Charter drafting must be precise and complete before incorporation.
Regulatory outlook — watch this space. The preference shares method is currently legal in most sectors. The DBD’s ongoing review of the FBA specifically targets this mechanism. For financial institutions and insurers (under the Financial Institution Business Act 2008 and relevant Insurance Acts), the use of preference shares to give foreign investors effective control is already prohibited. A broader FBA-level restriction has not been enacted — but investors in regulated or sensitive sectors should monitor developments actively.
Switching to Preference Shares in an Existing Company
Where a company was originally incorporated with ordinary shares only, transitioning to a preference share structure requires:
- An extraordinary general meeting and Articles of Association amendment
- A capital increase by issuance of new preference shares
- Initial distribution of new shares proportionally to all shareholders (to maintain the 51/49 ratio at the point of issuance)
- Redistribution to achieve the target voting control structure — while maintaining the 51/49 equity split throughout
Cross-Shareholding
Two Thai companies each hold 51% of the other’s shares, while foreign investors hold 49% in each. Both companies qualify as Thai-majority under the FBA. The structure creates mutual dependency that structurally limits either Thai partner’s ability to act unilaterally.
Tax complexity. Cross-shareholding creates complications in dividend taxation between related entities. Qualified tax advice is required before implementing this structure.
2026 note. Cross-shareholding falls within the scope of the DBD’s ongoing FBA review. Whether it would be captured by a future “actual control” test depends on how effectively foreign investors exercise decision-making authority across both entities.
Blank Share Transfer Instrument
A Thai shareholder signs an undated, incomplete share transfer form — without specifying the transfer date or the new owner. This allows the foreign investor (or a designated third party) to complete and execute the transfer at any time, without the Thai shareholder’s future cooperation.
This method is popular for its invisibility in corporate documents.
2026 risk — significantly elevated. From April 2026, Thai directors must sign an Investment Confirmation Letter on the record when amendments add foreign signing authority, declaring that no nominee arrangement exists. A Thai shareholder holding shares subject to a blank transfer instrument cannot sign that declaration without exposing themselves to criminal liability under FBA Section 36 and Criminal Code Sections 137 and 267.
This method carried legal risk before 2026; that risk is now directly triggered at every qualifying amendment filing. We do not recommend it as a standalone control mechanism..
Loan Secured by Share Pledge
A foreign investor provides a loan to a Thai shareholder. The loan is secured by a pledge over the Thai shareholder’s shares (loan-pledge agreement). The share certificate passes to the pledge holder until the loan is repaid. The pledge agreement may additionally grant the pledge holder voting authority, dividend rights, and the right to demand a share transfer on default.
The critical legal distinction. A share pledge as genuine loan security — where the Thai shareholder has real economic participation and where the pledge terms reflect a commercial lending relationship — is a legally defensible structure. It becomes an illegal nominee arrangement when side agreements strip the Thai shareholder of all voting rights and dividend entitlements, leaving them with no independent legal or economic position. That combination violates Section 36 FBA.
2026 risk — significantly elevated. The January 2026 bank statement requirement directly tests whether Thai shareholders’ capital is genuinely their own. Where a Thai shareholder’s shares were funded by a loan from the foreign investor, the capital originated from the foreign party — failing that test on its face. This structure also carries direct Section 36 exposure if the pledge terms grant effective foreign control.
Take specific legal advice before using this structure under the current enforcement framework.
Two-Tier Ownership Structure (Thai Holding)
A Thai holding company holds shares in one or more operating companies. The holding company is 51% owned by a Thai partner and 49% by the foreign investor, with preference shares typically used for management control. The operating company is 51% owned by the holding company, with the remaining 49% held directly by the foreign investor.
Since the holding company does not conduct operational activities, it does not require foreign work permits or significant registered capital. Acquisition of shares in the operating company can be financed through a loan from the foreign investor, with shares acting as collateral.
Both entities qualify as Thai under the FBA, since neither crosses the 50% foreign shareholding threshold.
Advantages. Centralised control over multiple subsidiaries; efficient dividend flow from operating company to holding to foreign investor; the holding company can also function as an intra-group lender.
2026 note. The structure is legitimate where both entities have genuine commercial substance and where the holding company’s Thai majority is real. The DBD’s FBA review specifically examines structures where foreign investors exercise effective control through layered ownership — the Thai holding is among the mechanisms under scrutiny. Proper capitalisation and genuine Thai participation at holding level remain important.
Choosing the Right Structure
No single structure is universally optimal. The right approach depends on:
New formation vs. existing company. Preference shares are easiest to implement at incorporation. Retrofitting requires a capital increase, an EGM, and an Articles amendment. Plan the structure before filing, not after.
Single entity vs. group. A Thai holding structure suits investors planning multiple operating companies or wanting clean separation between holding and operations. For a single company, preference shares combined with a solid shareholders’ agreement is typically sufficient.
Relationship with the Thai partner. The quality and durability of the Thai partner relationship determines how much contractual protection is necessary. A well-structured shareholders’ agreement reduces dependence on any single mechanism.
Sector. Preference shares are already prohibited as a control mechanism for financial institutions and insurers. In real estate, tourism, hotels, and cannabis — sectors with elevated enforcement attention — the structuring choices require particular care.
Timing relative to filings. Under the 2026 framework, every qualifying amendment triggers documentation requirements. If you are planning a restructure, the sequence and timing of filings matters. Getting the structure right before the first qualifying amendment is substantially cheaper than correcting it afterward.
Key Considerations
Each structure described in this article carries a different risk profile, and that profile has shifted materially with the 2026 regulatory changes. The distinction the authorities now draw — between structures built on genuine Thai participation and those designed to replicate nominee control under a formal label — is sharper than it has ever been.
The documentation submitted at registration, and on every subsequent qualifying amendment, must be consistent with the actual ownership and control structure. Inconsistency between documents is now a systemic risk, not just a theoretical one.
Foreign investors are strongly advised to evaluate all potential risks before selecting a structure — particularly in sensitive sectors such as real estate, tourism, hotels, trading, agriculture, and cannabis. Professional guidance is essential.
Protecting minority shareholder rights requires careful structuring through the Articles of Association and through contractual arrangements such as shareholders’ agreements. Poorly executed strategies carry serious consequences. Tailored approaches are required for each individual situation.
Get a Structure Review
Every structure described in this article carries a different risk profile under the 2026 enforcement framework. If you are setting up a Thai company, reviewing an existing structure, or considering a restructure before your next amendment filing, talk to us before you file. Getting the structure right at the start is significantly cheaper than correcting it later.
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Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. The information contained herein reflects the state of Thai law and regulatory practice as understood at the time of publication and may not reflect subsequent developments. Every situation is different, and the application of law depends on specific facts and circumstances. Nothing in this article should be relied upon as a substitute for professional legal advice tailored to your individual situation. AIM Bangkok accepts no liability for any action taken or omitted in reliance on the information in this article. If you require legal advice, please contact us to discuss your specific circumstances.
