Nominee structures thrust into the spotlight in Thai property sector

Resort destinations across Thailand are becoming focal points for foreigners seeking property ownership through nominee arrangements, a practice that has recently drawn renewed attention. A crackdown on alleged nominee structures linked to foreign land ownership on the island of Koh Phangan has reignited long-standing concerns within Thailand's property sector, particularly concerning areas popular with overseas buyers.

Surachet Kongcheep, head of research at property consultancy Cushman & Wakefield Thailand, noted that the issue is not confined to a single island or nationality. "Several legal structures, loopholes and informal arrangements have existed for years in markets such as Phuket, Pattaya, Samui and Bangkok, often involving both foreign investors and Thai facilitators," he stated. These practices often involve Thai-registered companies holding land or property on behalf of foreigners.

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Several legal structures, loopholes and informal arrangements have existed for years in markets such as Phuket, Pattaya, Samui and Bangkok, often involving both foreign investors and Thai facilitators.

While Thai law limits foreign ownership to a maximum of 49% of shares in a company, some structures reportedly rely on Thai nominees who have minimal financial involvement or decision-making power. These Thai shareholders can be relatives, acquaintances, or individuals introduced by legal or accounting firms. Loan agreements are also used, where Thai shareholders pledge their shares to foreign investors, effectively transferring control if loan conditions are breached. Power-of-attorney documents further allow foreigners to exercise full authority over company operations, even when legal ownership appears to be Thai.

Mr. Kongcheep explained that these nominee structures persist because investigations are complex, document-intensive, and time-consuming. The problem extends beyond foreign investors, involving a broader network of law firms, accounting firms, local brokers, and intermediaries who facilitate company establishment, sourcing of Thai shareholders, and documentation. Some Thais are motivated by financial incentives, while others may act as passive shareholders unaware of the legal implications. "The problem is not only the foreign investors," Mr. Kongcheep emphasized. "There are Thai parties helping them throughout the process."

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The problem is not only the foreign investors. There are Thai parties helping them throughout the process.