Business In Thailand And Preference Shares

Most business activities in Thailand are prohibited or restricted for foreigners. Foreigners are generally not allowed to operate businesses in Thailand. Some specific business categories are absolutely prohibited for foreigners while others may be operated if an exemption and permission has been granted under a specific Act or treaty.

Instead of applying for a special business license or exemption under Thai law the most popular form of business entity among foreign investors in Thailand is the private Thai limited company (majority Thai owned) structured with preference shares allowing the foreign investor to control the company.

Under the current structure of the Foreign Business Act foreigners can operate most restricted businesses for foreigners by using preference shares.

Preferred or preference shares in Thailand are usually higher ranking shares giving the holders priority in certain matters of the company limited. The structure of preference shares opposite ordinary shares in a Thai company is typically used to give control over certain matters or preference in certain situations to a group of shareholders above another group of shareholders in the company.

For now, Thailand has not changed the preference structure allowing foreigners as a minority shareholder to control a Thai limited company, however there is a discussion in the Thai government and Ministry of Commerce if preference shares and foreign voting rights and management in a Thai company should be used as a criterion in defining a company foreign or Thai. With new regulations the government is currently discouraging foreigners to invest in Thai businesses by restricting the use of Thai nominee shareholders in a partly foreign owned Thai company, however has not issued restrictions on the use of preference shares and majority voting rights by foreign shareholders in a Thai company.

It is not yet known if foreign voting rights and management in a Thai company will be used as a future criterion under the Foreign Business Act in defining a Thai company a foreign company.

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