A "foreigner" is defined to mean : (1) a natural person whose nationality is not Thai; (2) a juristic person that is not registered in Thailand; (3) a juristic person registered in Thailand that possesses the following nature: a juristic person with one-half or more of its capital held by persons under (1) or (2), or with one-half or more of its total capital invested by persons under (1) or (2); a limited partnership or a registered ordinary partnership whose managing partner or manager is a person under (1). (4) a juristic person registered in Thailand with one-half or more of its capital held by persons under (1), (2) or (3) or a juristic person comprised of persons under (1), (2) or (3) who invest in at least one-half of the total capital of such a juristic person.

“Capital” is defined to mean the registered capital of a limited company, the paid up capital of a public limited company or the money invested by the members or partners of a partnership or juristic person.

Thai limited companies owned by foreigners

Many foreigners will establish a Thai limited company to carry on business in Thailand. The company will be considered a foreigner under the Foreign Business Act if half or more of the company’s capital is held by foreigners.

If the company’s business activities fall within the scope of the Act, the company may be established with a majority Thai shareholding so that the Act does not apply to its business.

Historically, such companies have often been established with different classes of shares issued to the foreign and Thai shareholders. The shares issued to the foreigners would carry rights that allow them to effectively control the day-to-day operations of the company. The shares could also carry superior rights to dividends and liquidation distributions. The interest of the majority Thai shareholder(s) is therefore akin to that of a passive investor.

Sometimes a Thai holding company may be incorporated into the legal structure to hold the majority shareholder interest in the operating company.

Thais cannot hold shares in a company to enable a foreigner to operate a business in order to avoid the Act.

Amendments proposed to the Foreign Business Act (FBA)

In 2007, the cabinet approved draft amendments to the Act, including a change to the definition of "foreigner".

Under the proposed new definition of “foreigner”, a Thai company with foreign individuals or companies that have the power by law, the articles of association or by way of agreement to cast half or more of the votes of the company, will be deemed a foreigner under the Act.

The proposed amendment to the FBA (“new Act”) provides that a Thai juristic person that is not a foreigner as defined under the present FBA but is a foreigner as redefined under the new Act and operates a business of the type as prescribed in the Lists attached to the new Act on the date it comes into force, shall notify the Director-General of Department of Business Development in accordance with the criteria and procedures set forth by the Director-General in order to obtain a certificate if such juristic person intends to continue operating such business. 

The notification shall be made within one year from the date the new Act comes into force.  After the certificate is obtained, the juristic person may continue to operate the business under the following conditions:

The new Act was sent to the National Legislative Assembly (NLA) for consideration and approval. In early August 2007, the draft was withdrawn from the NLA for further revision, following an attempt to expand the definition of "foreigner" to include a Thai company whose management was controlled by foreigners. It is now uncertain that the current interim government will be able to pass amendments to the Foreign Business Act during its term in office.

Categories of restricted businesses

The business activities that fall within the scope of the Foreign Business Act are divided into three categories and listed in Schedules 1, 2 and 3 to the Foreign Business Act. The Schedules are listed at the end of this chapter. 

Businesses listed under Schedule 1 are closed to foreign investment because of special reasons.

Businesses listed under Schedule 2 are businesses related to national safety and security, businesses affecting cultural arts, traditional customs and folk handicrafts, and businesses affecting natural resources or the environment. These businesses are closed to foreign investment, except where permission is obtained from the Minister in charge of the Foreign Business Act with the approval of the Cabinet.

Businesses listed under Schedule 3 are businesses in which Thai nationals are not yet ready to compete with foreigners. These businesses are closed to foreign investment, except where permission is obtained from the Director-General of the Department of Business Development with the approval of the Foreign Business Committee.

Some changes to the businesses listed in the Schedules were included in the draft amendments to the Act approved by cabinet in January 2007, but in general they are not significant and do not reduce the types of businesses subject to the Act.