Foreigners in Thailand are routinely told that various mechanisms give them "control" of their Thai company. Directors' seats, bank account access, side agreements - lawyers and company formation agents present these as solutions to the foreign ownership problem. They are not.
When the Department of Special Investigation (DSI) investigates a company for nominee violations, they do not care about your director appointments or your bank account access. They care about one thing: beneficial ownership. Who actually owns this company? Who actually controls the money? If the answer is "a foreigner operating through Thai nominees," you have committed a crime under the Foreign Business Act.
This guide debunks the most common control myths and explains what Thai authorities actually investigate.
Myth 1: "I Have 2 of 3 Directors, So I Control the Company"
"As long as I appoint 2 of the 3 directors, I maintain control even though Thais own 51% of shares"
This is perhaps the most commonly repeated myth in Thai company formation. Company agents routinely suggest this structure as if it provides meaningful protection. It does not.
The Legal Reality
Director positions do not change ownership. The Foreign Business Act regulates beneficial ownership of business, not management appointments.
- Having 2 of 3 directors means you control daily operations - but operations control is evidence of nominee structure, not protection from it
- Thai shareholders can legally remove directors at any shareholder meeting by majority vote
- If Thai shareholders hold 51%+ and decide to replace all directors, they can do so legally in a single meeting
- DSI investigators specifically look for structures where foreigner directors control companies owned by passive Thai shareholders - this is evidence of FBA violation
What DSI Actually Sees
When investigators examine a company where a foreigner holds 49% equity but has 2 of 3 director seats, they ask:
- Why does the minority shareholder control the board?
- Who are these Thai majority shareholders? Did they actually invest money?
- Can they explain the business operations?
- Do they receive dividends proportionate to their ownership?
The director structure itself becomes evidence of the nominee arrangement, not protection from prosecution.
Myth 2: "I Control the Bank Account, So My Money Is Safe"
"I'm the sole signatory on the company bank account, so Thai shareholders can never take the money"
Many foreigners believe that bank account control provides security. This is legally meaningless and actually incriminating.
The Legal Reality
Bank signatory status is a corporate governance matter that shareholders can change at any time. More importantly, sole signatory control by a minority shareholder is a red flag for investigators.
- Thai shareholders can pass a board resolution changing bank signatories
- They can appoint new directors who then change bank access
- Thai banks will follow properly documented shareholder resolutions
- Your current signatory status provides zero legal protection against shareholder action
Why This Is Evidence Against You
DSI's "Control Signals" investigation stream specifically examines who authorizes payments, who controls money flows. When they discover that a 49% foreign shareholder is the sole bank signatory while 51% Thai shareholders have no financial access, this is prima facie evidence of nominee structure.
The argument "I control the bank account" actually proves that the Thai shareholders are not genuine owners - they have no financial involvement in the business they supposedly majority-own.
Myth 3: "My Side Agreement Protects Me"
"I have a side letter/agreement where Thai shareholders agree to vote as I direct and transfer shares on my request"
Side agreements, nominee agreements, and undisclosed shareholder arrangements are not legal protections - they are confessions of criminal activity.
The Legal Reality
Side agreements documenting nominee arrangements are:
- Void and unenforceable - Thai courts will not enforce contracts for illegal purposes
- Evidence of crime - These documents prove you knew the arrangement was designed to circumvent FBA restrictions
- Useless in disputes - If Thai nominees refuse to honor the agreement, you cannot sue to enforce it because the underlying arrangement is illegal
- Discovery risk - During investigations, these documents can be seized and used as evidence
The Catch-22 of Side Agreements
If you have a side agreement that demonstrates your control over Thai shareholders, you have documented your own FBA violation. If you try to enforce that agreement in Thai courts, you are admitting to a crime. Thai courts will not assist you in recovering assets from an illegal nominee structure.
Real-World Consequence
Foreigners have lost everything when Thai nominees simply walked away. The foreigner cannot go to police (they would be confessing to FBA violation), cannot go to civil court (the agreement is unenforceable), and cannot go to their embassy (no jurisdiction over Thai business matters).
The Thai nominees, having committed no crime against the foreigner that a Thai court will recognize, face no consequences for keeping the assets.
What DSI Actually Investigates
Understanding the investigation methodology reveals why control myths fail. DSI does not care about your corporate governance arrangements - they look at substance.
| Investigation Area | What They Examine | What Triggers Red Flags |
|---|---|---|
| Funding Trail | Source of funds for share capital; bank records for share subscription payments | Thai shareholders cannot prove independent sources; money came from or through the foreigner |
| Control Signals | Who signs contracts, authorizes payments, makes decisions; email trails; board minutes | Foreigner makes all operational decisions; Thai shareholders absent from management |
| Benefit Flow | Dividend distributions; management fee payments; profit allocation | Thai shareholders receive no dividends; profits flow to foreigner through fees |
| Filing Consistency | Cross-reference DBD records, tax filings, work permits, payroll | Inconsistencies between claimed ownership structure and actual business operations |
Beneficial Ownership vs. Legal Ownership
The critical distinction Thai authorities make is between legal ownership (who is listed as shareholder on DBD records) and beneficial ownership (who actually owns and controls the business).
Legal Ownership
Legal ownership is what appears on corporate registration documents - the shareholder registry filed with the Department of Business Development (DBD). In a typical nominee structure, this shows Thai nationals holding 51%+ of shares.
Beneficial Ownership
Beneficial ownership is the reality behind the paper structure - who actually:
- Invested the money for share capital
- Bears the financial risk of the business
- Makes strategic and operational decisions
- Receives the profits of the business
When legal ownership and beneficial ownership diverge - when paper says Thai but reality says foreign - this is FBA violation.
The "Genuine" Test
Thai authorities increasingly apply a "genuineness" test to shareholder structures:
- Did Thai shareholders genuinely invest their own money?
- Do they genuinely participate in business decisions?
- Do they genuinely receive profits proportionate to ownership?
- Is there genuine economic substance to their ownership?
If the answer to any of these questions is "no," the structure fails the test and constitutes nominee violation.
How "Control" Is Determined in FBA Cases
In FBA enforcement cases, authorities determine control by examining the total picture, not isolated factors. Key indicators include:
Financial Control Indicators
- Who provided the capital for share subscriptions?
- Whose bank account funded the company?
- Who guarantees company debts or leases?
- Who receives the economic benefits of the business?
Operational Control Indicators
- Who signs contracts with suppliers and customers?
- Who negotiates major deals?
- Who is the contact person for business relationships?
- Whose decisions drive business strategy?
Administrative Control Indicators
- Who has email and system access?
- Who manages employee relationships?
- Who handles regulatory compliance?
- Whose name appears on business correspondence?
When these indicators consistently point to a foreigner while Thai shareholders remain passive, the structure is a nominee arrangement regardless of corporate governance documents.
The Bottom Line
Every "control" mechanism commonly sold to foreigners - director positions, bank access, side agreements, voting rights - is either irrelevant to beneficial ownership analysis or actually serves as evidence of nominee violation.
Thai authorities are not fooled by paper structures. They investigate substance: money flows, decision-making patterns, operational control, benefit distribution. If a foreigner is the beneficial owner operating through passive Thai nominees, no corporate governance trick changes that reality.
The only legitimate paths to foreign business control in Thailand are:
- BOI Promotion - Legal 100% foreign ownership for qualifying activities
- Treaty of Amity - For US citizens in non-restricted businesses
- Foreign Business License - Formal approval for List 2/3 activities
- Genuine Joint Venture - Real Thai partners with real investment and real participation