About this series Doing business in Thailand means occasionally encountering situations that would simply never happen in Japan. This series looks at common legal trouble patterns for Japanese SMEs — written as a readable column, not a legal textbook.
A conference room in Bangkok. The Thai partner you had worked with for years spoke quietly: “The shares in this company — they’re really mine, aren’t they. The Japanese side doesn’t have much to do with this anymore.” — What could you do at that moment?
Business in Thailand and the “Nominee” Question
Foreign nationals operating businesses in Thailand face restrictions under the Foreign Business Act (FBA), which limits foreign ownership in many sectors. As a result, some Japanese companies structure their operations through Thai partners who hold some or all of the shares — whether as genuine joint venture partners or, in some cases, as nominees.
When relationships are good, these structures work smoothly. The problem comes when they don’t.
Common Breakdown Patterns
① “I’m not selling my shares”
When a Japanese company begins to consider restructuring or exit, the Thai partner refuses to transfer their shareholding. Without proper exit provisions in a Shareholders’ Agreement (SHA), legal options to compel a transfer are limited.
② Control of company seals and bank accounts
In Thai companies, whoever holds physical control of the corporate seal and bank account signature rights has significant practical power over the entity. After a relationship deteriorates, there are cases where a partner has blocked access to accounts or begun transacting in the company’s name unilaterally.
③ “I’m the majority shareholder — this is my company”
A nominee shareholder who held shares in name only may begin asserting that the economic interest truly belongs to them, and claim management rights accordingly. When a nominee structure was used specifically to navigate FBA restrictions, that structure itself carries inherent legal risk.
Why Does This Get So Complicated?
When Japanese companies choose partners in Thailand, the decision is often grounded in personal trust — “they’re someone I can rely on.” That instinct isn’t wrong. But when business conditions change — a downturn, a succession issue, a decision to exit — personal relationships alone can’t resolve the situation.
In Japanese business culture, a handshake agreement carries weight. In Thai legal proceedings, documents are everything.
What You Can Do Before It Happens
A well-drafted Shareholders’ Agreement (SHA)
At the time the joint venture is formed, it is worth considering an SHA that includes:
- Right of First Refusal: if a party wishes to sell shares, the other party has the right to purchase them first
- Drag-along / Tag-along rights: if one party sells, the other can be required — or permitted — to sell alongside them
- Deadlock provisions: a defined process for resolving management gridlock
- Exit clauses: buyout or liquidation procedures under specified conditions
Maintaining operational control
Consider structuring bank account signature rights and corporate seal custody so that the Japanese side retains meaningful involvement, not just on paper.
Reviewing nominee arrangements
If your structure uses nominees to navigate FBA restrictions, it is worth reviewing the arrangement in light of ongoing FBA reform developments — and addressing any structural risk sooner rather than later.
”Work Out the Rules While You’re Still on Good Terms”
When SHAs and deadlock provisions are proposed, a common reaction is: “Wouldn’t bringing this up seem rude to the partner?” Think of it like a prenuptial agreement — setting the rules while the relationship is strong is what protects both parties.
Next time: what happens when a business counterpart simply disappears — unpaid invoices and the overnight exit.
For questions about JV structure review, shareholders’ agreement drafting, or related Thai business law matters, please feel free to contact us.
This article is for general informational purposes about Thailand’s legal system and does not constitute legal advice under Thai law. For specific matters, please consult a Thai-qualified legal professional. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys.