Legislation urged to regulate use of Thai nominees by foreign businesses

The ombudsman is urging the government to speed up the enactment of a law to tighten up controls over foreign businesses using Thai nominees as their partners to conduct businesses in Thailand, to get around the alien business law and other legal requirements.

The ombudsman, Songsak Saicheua, claimed that the use of Thai nominees by foreign businesses is so widespread that it may pose a security threat, adding that such malpractice has been found in business sectors such as public transport, retailing, online business, food and beverages, agriculture, real estate and durian plantations.

Several such plantations, in Rayong and Chanthaburi provinces, were found to be owned by Chinese businessmen using Thai nationals as their nominees.

Some of these foreign-controlled businesses are also linked to criminal activities, such as money laundering and illegal trading, he added.

Songsak said he has proposed amendments to the existing Alien Business Act B.E. 2542 (1999), to redefine the meanings of alien, and acts deemed to be those of a nominee, and to increase the penalties to up to 7 years imprisonment for both the Thai and foreign partners.

Foreigners who use Thais to buy and own land in the country, such as for durian plantations, would have the land confiscated and nationalised, instead of forcing the foreigners to sell the land to the state.

Any company which is 51% owned by Thai nationals, but which is effectively controlled by foreigners, even though they hold a minority stake, is regarded as a foreign company, said the ombudsman.

Songsak also recommended that the Law Council of Thailand helps to monitor foreign companies seeking legal advice for doing businesses in Thailand and warns them of the legal consequences of using nominees.

Since there is no specific law to regulate the use of nominees by foreign investors, he suggested the government add this issue to the national agenda, before the problem gets out of control and threatens national security.

According to the Business Development Department, there are 926,950 registered companies in Thailand. Of these, 127,522 have foreign partners, including 18,288 where foreigners hold 49% stakes.