The Foreign Business Act explained
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The Foreign Business Act B.E. 2542 (1999) controls which business activities foreigners may carry on in Thailand. It is the reason many foreign-founded companies are majority Thai-owned, and the reason that structure has to be set up honestly.
Who counts as a foreigner
Under the Act, a company registered in Thailand is treated as foreign if foreigners hold half or more of its shares. A company in which foreigners hold up to 49 percent and Thais hold at least 51 percent is generally treated as Thai for the purposes of the Act. Other laws, such as land and condominium laws, have their own definitions.
The three lists
The Act attaches lists of restricted businesses.
| List | What it covers | Can a foreign company do it? |
|---|---|---|
| List 1 | Businesses closed to foreigners for special reasons, such as newspapers, broadcasting, rice farming and land trading | No |
| List 2 | Businesses related to national security, culture, arts and natural resources | Only with cabinet approval and a ministerial permission, rarely granted |
| List 3 | Businesses in which Thais are considered not yet ready to compete, including most services, retail and wholesale below set capital levels, accounting, legal services, construction and many others | Only with a Foreign Business Licence |
List 3's broad category of "other service businesses" catches much of what small foreign-run companies do, which is why a foreign-majority company running a service business usually needs a licence or another exemption.
Foreign Business Licence
A foreign company can apply to the DBD for a Foreign Business Licence to carry on a List 3 activity. The application has to show the benefit to Thailand, and the process takes time. Minimum capital requirements apply, typically 3 million baht for businesses on the lists and 2 million baht for others, with the amount assessed per activity.
Other routes
Board of Investment promotion
Companies promoted by the BOI can be majority or fully foreign-owned in promoted activities and receive a certificate under the Foreign Business Act. BOI promotion depends on the activity, the investment level and other conditions.
US Treaty of Amity
United States citizens and US-majority companies can apply for a Treaty of Amity certificate, which allows majority US ownership for most activities, with exceptions including communications, transport, land ownership and some others.
Free trade agreements and special laws
Some agreements and industrial estate rules provide narrower exceptions.
The 49 percent structure
Many foreign founders use a company where they hold 49 percent and Thai shareholders hold 51 percent. This is lawful when the Thai shareholders are real investors. It becomes unlawful when the Thai shareholders are nominees who hold shares for the foreigner. Courts and authorities look at where the share capital came from, who controls the company and who receives the profits. Preference share structures that strip Thai shareholders of economic rights attract scrutiny.
Practical steps
- Write down exactly what the business will do, since the activity determines the list.
- Check whether BOI promotion or the Treaty of Amity applies before choosing a 49/51 structure.
- Plan the share structure with a Thai lawyer, and keep evidence of every shareholder's investment.
Related: registering a Thai limited company.