:: Legal Issues for Foreign Investors  : 1. Foreign Business Act

A. Introduction
Foreigners in Thailand derive their legal rights primarily from the domestic laws of Thailand. In general, foreigners enjoy the same basic rights as Thai nationals.

Restrictions on foreign ownership in commercial banks, insurance companies, commercial fishing, aviation businesses, commercial transportation, commodity export, mining and other enterprises exist under various laws. In addition, Thai participation will frequently be required in those activities seeking permission from the BOI.




B. The Foreign Business Act
The Foreign Business Act of 1999, which became effective on March 4, 2000, repeals and replaces the 1972 National Executive Council Announcement 281, better known as the Alien Business Law. The Act serves to define an "alien," and identifies the scope of foreign participation in business in Thailand.

An "alien" is defined as:

  • A natural person who is not of Thai nationality;
  • A juristic entity that is not registered in Thailand ;
  • A juristic entity incorporated in Thailand with foreign shareholding accounting for one-half or more of the total number or value of shares;
A limited partnership or ordinary registered partnership whose managing partner or manager is a foreigner
 

C. Businesses Subject to Regulation
Businesses that initiate activities that fall under Lists 1, 2, or 3 of the Foreign Business Act (listed below) are subject to the limitations imposed by the Act. 

Activities that fall under List 1 are strictly prohibited to aliens. 

Businesses that are covered by List 2 are prohibited to aliens unless specific permission is granted by the Commerce Ministry, by and with an appropriate Cabinet resolution. Alien juristic entities allowed to engage in List 2 activities must meet the following two conditions:

  • At least 40 percent of all shares are held by Thai persons or non-alien juristic entities (This may be reduced to 25 percent on a case-by-case basis)
  • Two-fifths of the members of the Board of Directors are Thai

Activities in List 3 are prohibited to aliens unless permission is granted by the Director General of the Department of Commercial Registration, Ministry of Commerce, by and with the approval of the Foreign Business Board.

An alien can engage in businesses in Lists 2 or 3 of he is a promoted investor in accordance with either the Investment Promotion Act, the Industrial Estate Authority of Thailand Act, or other laws.

List 1 - Businesses in which alien participation is not permitted

  • Newspaper undertakings and radio and television station undertakings
  • Lowland farming, upland farming, or horticulture
  • Raising animals
  • Forestry and timber conversions from natural forests
  • Fishing for aquatic animals in Thai waters and Thailand's Exclusive Economic Zone
  • Extraction of Thai medical herbs
  • Trade in and auctioning of Thai ancient objects or ancient objects of national historical value
  • Making or casting Buddha images and making monk's bowls
  • Dealing in land

List 2- Businesses concerning national security or safety with an adverse effect on art and culture, customs, or native manufacture/handicrafts, or with an impact on natural resources and the environment.

  • Production, disposal, sale, and overhead of:

o Firearms, ammunition, gunpowder, and explosives
o Components of firearms, gunpowder, and explosives
o Armaments and military vessels, aircraft, or conveyances
o All kinds of war equipment or their components

  • Domestic transport by land, water, or air, inclusive of the undertaking of domestic aviation
  • Dealing in antiques or objects of art and works of art, and Thai handicrafts
  • Production of wood carvings
  • Raising silkworms, producing Thai silk thread and weaving, or printing patterns on Thai silk textiles
  • Production of Thai musical instruments
  • Production of articles of gold or silver, niello ware, nickel-bronze ware, or lacquer ware
  • Production of crockery and terra cotta ware that is Thai art or culture
  • Production of sugar from sugarcane
  • Salt farming inclusive of making salt from salty earth
  • Making rock salt
  • Mining, inclusive of stone blasting or crushing
  • Timber conversions to make furniture and articles of wood