Ever had a sudden midnight craving for a falafel sandwich in Bangkok? Or desperately needed a barber in Chiang Mai who knows how to trim that perfect hipster beard? Ever found yourself searching for a real estate agent who can speak fluent Norwegian? If you’ve ever been in these strange-but-true situations, congratulations—you might just be the proud customer of a nominee business!. More people are starting businesses every year in Thailand—over 76,000 new ones by October, up 2.18% from last year. This shows that Thailand is still an attractive place for business. However, foreigners looking to start their own businesses face some big hurdles due to strict laws, especially when it comes to ownership rules.
One way foreigners try to get around these rules is by using “nominee structures.” A “nominee” is just a fancy, legal word for a “nominal owner.” This means a Thai national acts as the legal owner of the business on paper, but the foreigner really runs things behind the scenes. While this is illegal, it’s important to understand why many people do this. Nominee businesses often focus on meeting the needs of tourists or providing specialized services that Thai nationals may not be able to offer.
Why Nominee Businesses Matter
Nominee businesses often cater to foreign tourists, offering products or services that are hard to find elsewhere. For example, ethnic food businesses or unique cultural services that foreigners bring can be a big draw for tourists. These businesses help keep Thailand’s tourism industry vibrant and create jobs. Thai locals may not have the same skills or resources to run these types of businesses, which is why foreigners step in.
In many cases, these businesses contribute to the economy by attracting international visitors and adding diversity to the local market. The reality is that without foreign expertise, some of these specialized services would not be available, which could hurt the local economy.
The Legal Challenges for Foreigners
Starting a business in Thailand isn’t always easy for foreigners. Laws like the Foreign Business Act (FBA) put limits on how much of a business a foreigner can own in certain industries. The paperwork and approvals required can be complicated and time-consuming. For a small entrepreneur who’s just trying to start a business, it can feel like a huge obstacle.
This is where nominee businesses come in. Many foreigners see this as a way to bypass the tough legal requirements. Instead of trying to go through a complex and confusing system, they use Thai nationals to make it appear as though they are following the law. While this is against the law, it’s often seen as a way to avoid the barriers foreigners face.
What’s Being Done About Nominee Businesses?
The Thai government has been cracking down on nominee businesses. Authorities are stepping up their efforts to find and punish people who use these illegal structures. In one high-profile case in October 2024, a law firm in Phuket was caught helping 60 companies set up nominee arrangements. These businesses violated the Foreign Business Act by avoiding ownership restrictions and operating in restricted sectors. The companies involved were fined and ordered to shut down.
While these actions are necessary to protect the country’s laws, it’s important to remember that many foreigners who use nominee structures do so out of frustration with the system. They’re trying to contribute to the economy and provide services that locals might not be able to.
Why Nominee Structures Are Illegal
Nominee businesses are illegal because they allow foreigners to get around ownership rules. In these setups, Thai nationals hold majority stakes in the business, but the foreigner makes all the decisions and controls the company. The Thai “nominees” don’t really invest their own money or get involved in running the business—they are simply acting as a legal cover for the foreigner. In legal terms, a “nominee” is just a “nominal owner,” meaning they’re listed as the official owner on paper, but they don’t have real control or ownership.
This practice is considered a violation of the Foreign Business Act, and people who are caught using nominee businesses can face serious consequences, including fines, business closure, and even criminal penalties. According to Thailand criminal lawyers, violating Thailand’s foreign business restrictions can result in significant criminal penalties, including imprisonment. Thai nationals who assist in nominee arrangements can also face legal consequences.
Legal Ways for Foreigners to Start a Business
While nominee structures may seem like an easy solution, they come with a lot of risks. Thankfully, there are legal ways for foreigners to set up a business in Thailand. One option is to form a joint venture with a Thai partner, where the foreigner can still have a say in the business while following the law. Another option is to apply for special permits to operate in certain industries.
The Thai Chamber of Commerce has suggested using technology like big data and AI to better track foreign business activities and prevent illegal nominee arrangements. They also recommend making the process easier and clearer for foreign investors.
Conclusion
Nominee businesses are often seen as a way to work around Thailand’s tough foreign ownership laws. While these businesses can contribute to the economy by offering unique services to tourists and local customers, they come with serious legal risks. The Thai government has every right to enforce the law, but it’s important to understand the reasons why foreigners turn to nominee structures in the first place. By improving the legal process and making it easier for foreigners to operate within the law, Thailand can encourage more investment while protecting local businesses and interests.
