Services / Cross-border transactions and investment
Half or more: how the foreign test computes
Whether a company is foreign is not answered by counting the nationality of its shareholders at one level, because the definition in section 4 has several layers and two independent measures.
The line is at half or more
Section 4(3)(a) of the Foreign Business Act B.E. 2542 (1999) treats a Thai-registered juristic person as foreign where shares constituting half or more of its capital are held by a natural person without Thai nationality or by a juristic person not registered in Thailand. The words half or more mean that exactly fifty per cent already qualifies, which is why the working line sits at forty-nine.
Two measures working independently
Section 4(3)(a) sets two tests joined by or: a juristic person half or more of whose share capital is held by foreigners, or one in which foreigners have invested half or more of the total capital. The first measures shares, the second measures the value contributed. A structure that keeps the shareholding below half therefore still has to be checked against the second, because meeting either is enough.
The definition runs up the chain
Section 4(4) is the layer most often overlooked: it treats as foreign a Thai-registered juristic person half or more of whose share capital is held by persons under (1), (2) **or (3)**. Including (3) means that a Thai company which is itself foreign under (3) then carries that status into any company in which it holds half or more. The analysis therefore has to run up the whole chain rather than stopping at one level.
For partnerships the test is the manager, not the capital
Section 4(3)(b) stands separately: a limited partnership or registered ordinary partnership whose managing partner or manager is a natural person without Thai nationality is foreign. That subsection says nothing about proportions of capital at all. Structuring a partnership by controlling the contributions therefore does not answer it, because what it measures is who manages.
Bearer shares count as foreign
The closing words of the section 4 definition provide that, for its purposes, shares of a limited company issued in bearer form are deemed to be shares of a foreigner, unless a ministerial regulation provides otherwise. That operates without any need to establish who actually holds them, so a structure with bearer certificates still outstanding is worth examining at the outset.
PREPARE
What to bring
- The shareholder list at every level up to natural persons
- Each holder's nationality, and where each entity is registered
- The value each party actually contributed
- What form the share certificates were issued in
- Who the managing partner is, if the vehicle is a partnership
QUESTIONS
Questions this raises
We hold forty-nine per cent. Is that the end of it?
Forty-nine per cent answers only the share limb in the first half of section 4(3)(a). The capital limb in the second half of the same subsection remains, and so does section 4(4), which carries the test up the ownership chain. All three have to be checked rather than the single percentage at one level.
Our Thai shareholder is itself another Thai company.
Section 4(4) treats as foreign a juristic person half or more of whose shares are held by persons under (1), (2) or (3). A shareholder being registered in Thailand therefore does not close the question, because whether that entity itself falls under (3) has to be examined, and if it does the status carries up to the company under review. Tracing the chain to natural persons is work that has to be done.
LAW
The legislation
- Foreign Business Act B.E. 2542 (1999), section 4
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