The Foreign Business Act B.E. 2542, enacted in 1999, is the primary legislation governing foreign participation in Thai business activities. Most foreign property owners who hold a villa through a Thai company are aware of the Act in broad outline but have rarely needed to think about it in detail. The Act has been in force for over two decades, the standard 49 percent foreign and 51 percent Thai company structure was sold to foreign buyers as compliant with it, and enforcement was inconsistent enough that the underlying legal exposure rarely materialised in practice.

The position has changed materially between 2025 and 2026. The Department of Business Development has issued a sequence of orders that change how the Act’s existing provisions are enforced. The orders themselves do not change the underlying law. What they change is the practical likelihood that an arrangement that has always been technically illegal will be identified and prosecuted as such. For owners of villas held through Thai companies, this means examining the company against the Act’s actual provisions rather than against the assumption that whatever was sold to them complies with the Act.

This article explains what the Foreign Business Act actually says about nominee structures, what the 2025 and 2026 orders have changed about enforcement, what the practical implications are for existing villa-holding companies, and what the realistic options are for owners whose companies may no longer withstand scrutiny.

What the Foreign Business Act actually prohibits

Two sections of the Act are particularly relevant to property-holding companies. Section 36 addresses Thai nationals or juristic persons who assist a foreigner in operating a business that the foreigner is not permitted to operate, including by acting as a nominee in holding shares “with a view to enabling the foreigner to operate the business in circumvention or violation of the provisions of this Act.” Section 37 addresses foreign principals who use Thai nominees to operate businesses they cannot operate directly.

Both sections carry the same penalties: imprisonment for up to three years, fines of 100,000 to 1,000,000 baht, or both. Where violations involve continuing non-compliance with court orders, daily fines of 10,000 to 50,000 baht apply until the violation ceases. The court can also order cessation of the assistance, dissolution of the partnership or juristic person, and similar remedies that effectively unwind the arrangement.

The Act does not prohibit foreigners from holding shares in Thai companies. Foreign shareholders can hold up to 49 percent of a Thai company’s shares without making the company “foreign” under the Act’s definition. What the Act prohibits is the use of Thai nationals as nominees holding shares on behalf of foreigners, with the purpose of circumventing the foreign business restrictions. The distinction is between genuine Thai shareholders making real investments and notional Thai shareholders fronting for foreign principals.

Thai Supreme Court decisions have consistently applied a substance-over-form approach to determining whether a structure is a nominee arrangement. Supreme Court Decision Number 17923/2557 (involving land holdings on Koh Samui) convicted both the foreign principal under Section 37 and the Thai nominee under Section 36, and ordered cancellation of the title. Supreme Court Decision Number 5457/2560 treated a purported loan agreement as a simulated arrangement designed to disguise foreign control and refused to enforce it. Supreme Court Decision Number 2252/2560 looked past a 35 percent foreign minority stake to the source of funds, concluding that because the foreigner provided the actual operating capital against nominal Thai equity, the entity was effectively a foreign operator of a prohibited business.

The judicial position has been clear for years. What changed in 2025 and 2026 is the regulatory environment that brings these cases to court.

What Order Number 2/2568 changed

Order Number 2/2568 was signed by the Department of Business Development on 9 December 2025, published in the Royal Thai Government Gazette on 22 December 2025, and took effect on 1 January 2026. The order replaced the earlier Order Number 205/2555, which had governed Thai shareholder verification since 2012.

The change is in the evidence Thai shareholders must provide at company registration. Under the previous order, Thai shareholders in mixed-ownership companies were required to submit a bank balance certificate showing capacity to pay for the shares. The review was effectively limited to checking that the balance exceeded the share investment amount, and the certificate could be obtained on registration day without any actual contribution having been made.

Order Number 2/2568 requires Thai shareholders to submit bank statements covering the three months prior to the share subscription payment, from the account used to pay for the shares. The statements must show transactions corresponding to the share investment amount and timed to match the registration. The order shifts the focus from “did the shareholder have enough money at one point in time” to “did the shareholder actually pay for the shares from their own funds, traceable through their banking history.”

The order applies in two specific situations: where foreign shareholders hold less than 50 percent of registered capital (which captures the classic 49 percent foreign and 51 percent Thai structure used for villa-holding companies), and where there are no foreign shareholders but a foreigner serves as a director with signing authority. The second category is important because it captures structures where foreigners avoided formal foreign shareholding but retained control through director appointments.

Order Number 2/2568 applies at the point of company registration and to amendments that introduce the relevant conditions. For new villa-holding companies formed from 1 January 2026 onwards, the Thai shareholders must demonstrate genuine financial contribution to the share capital. For existing companies that were formed under the previous regime, the order applies when amendments are made that trigger its provisions.

The companion orders and the wider enforcement framework

Order Number 2/2568 is part of a broader regulatory package rather than a standalone change.

Order Number 1/2569 was issued on 16 March 2026 and takes effect on 1 April 2026. It addresses amendments to existing companies that introduce foreign nationals as partners, shareholders, or authorised directors, and requires written confirmation of investment with source-of-funds documentation. The order closes the “amendment loophole” that allowed existing all-Thai companies to be transferred or restructured to introduce foreign control without triggering the registration-stage scrutiny that Order Number 2/2568 imposes on new formations. Mandatory in-person verification by all relevant Thai parties is required for the in-scope amendments, ending the practice of completing such changes through legal agents under power of attorney alone.

Order Number 5/2568 addresses the use of State Welfare Card holders, low-income Thai nationals, as nominee shareholders. It requires welfare card holders appearing as shareholders or directors to attend the registrar in person with matching bank statements, preventing the use of financially incapable individuals as front shareholders.

The Intelligence Business Analytic System (IBAS) has been operational since late 2025. It is an AI-powered platform that cross-references corporate registry data with other government databases, including tax records, banking data, and land titles, to identify companies showing patterns consistent with nominee arrangements. The system flagged approximately 46,000 companies as potentially problematic and identified 53,000 corporate links worth further investigation, according to Department of Business Development statements.

The Department of Business Development has also disclosed that out of approximately 118,000 mixed-ownership Thai companies with foreign shareholding between 0.01 and 49.99 percent, the department estimates that around 80 percent (roughly 94,000 companies) may be using nominee structures to bypass the Foreign Business Act. The enforcement campaign is sized accordingly.

Six sectors have been identified as particularly vulnerable to nominee practices: tourism, land trading and property businesses, e-commerce and logistics, hotels and resorts, agriculture, and general construction. Villa-holding companies fall directly within the land trading and property businesses category. The provinces with the highest concentrations of suspected nominee activity (Chonburi, Chiang Mai, Surat Thani, Phuket, and Krabi) are precisely the regions where foreign villa ownership is most common.

The actual control test

A consultation paper issued by the Department of Business Development in early 2026 proposes amendments to the Foreign Business Act that would shift the test for “foreign” companies from a purely shareholding-based assessment to one based on actual control. Under the proposed test, a company could be reclassified as foreign even where Thai nationals hold a majority of shares, if the foreign party exercises actual control over the business through factors including the source of operating capital, decision-making authority, economic benefit, and the substance of corporate governance.

The proposed actual control test draws on Section 36 of the existing Act and on Department of Business Development interpretive guidance. The judicial decisions cited above already apply a substance-over-form analysis. What the proposed amendment would do is codify the actual control test in the Act itself rather than leaving it to case-by-case judicial interpretation.

The consultation paper is open until 30 April 2026 and is not yet law. Whether the proposed amendments are enacted, in what form, and on what timeline is uncertain. The Department of Business Development has acknowledged that the actual control test has a wide perimeter that would affect not only deliberate nominees but also small and medium-sized enterprises, regional service companies, and long-standing joint ventures that structured operations around the rules as written. Whether the final draft includes grandfathering provisions for existing structures, a defined compliance window, and workable thresholds will determine how disruptive the change is in practice.

A separate proposal under consideration would amend Section 94 of the Land Code to allow forfeiture of unlawfully held land to the state without compensation, rather than the current requirement that the foreign owner dispose of the land but retains the sale proceeds. There is also discussion of classifying Foreign Business Act violations as predicate offences under the Anti-Money Laundering Act, which would allow asset freezing and seizure without the criminal forfeiture process otherwise required.

These changes are proposed rather than enacted. Owners and prospective buyers should not assume they will or will not be enacted, but should understand that the direction of regulatory and legislative travel is consistently toward stricter enforcement rather than relaxation.

What this means for existing Thai villa-holding companies

The practical implications for owners of existing villa-holding companies depend on what kind of company they actually have. The Thai company structure itself is legal. What is illegal is the use of Thai nationals as nominees holding shares on behalf of foreign principals to circumvent the Foreign Business Act.

A company with Thai shareholders who genuinely contributed capital, who hold real economic interests in the company, and where the company conducts genuine commercial activity is not affected by the changes in the same way. The Act has always permitted such structures, and the enforcement campaign is focused on distinguishing them from nominee arrangements rather than challenging them.

A company with Thai shareholders who hold shares on paper at the foreign owner’s request, without genuine financial contribution to the share capital, without ongoing economic interest in the company, and where the company exists primarily to hold the villa rather than to conduct commercial activity, is now in a more exposed position than at any time in the past two decades. Detection probability has increased substantially through the AI-powered IBAS system, the coordinated information sharing across the Department of Business Development, the Land Department, the Revenue Department, and the Anti-Money Laundering Office, and the documented prosecutions of more than 850 cases by early 2026.

Property owners in some regions, including Hua Hin and Prachuap Khiri Khan, have reported receiving formal letters from the Department of Business Development requiring them to confirm that the company owning their land or villa is legitimate. The letters give recipients a period (often one year) to respond with evidence that Thai shareholders genuinely invested their own funds, that the company carries out genuine commercial activity, and that financial records reflect real business operations rather than passive land holding.

The criteria authorities are reportedly examining include whether Thai shareholders actually paid for their shares (supported by bank statements or official receipts), whether the company generates income from genuine commercial activity rather than shareholder loans, whether expenses match the nature of the stated business, and whether the company reports taxable profits rather than consistent losses or zero-profit filings. A company that has filed zero-profit returns for fifteen years while holding a villa is a structure that the current regulatory environment is positioned to identify.

The realistic options

The realistic options for owners of existing nominee company structures depend on the specific facts of the company, the property, and the owner’s circumstances. None of the available options is uniformly straightforward.

The first option is to do nothing and continue with the existing arrangement. This was the rational choice when enforcement was inconsistent and detection probability was low. It is a materially weaker position in 2026 than it was in 2024. The risks include investigation by the Department of Business Development with the burden on the owner to prove the company is legitimate, criminal prosecution under Sections 36 and 37 of the Foreign Business Act with the associated fines and imprisonment exposure, court-ordered dissolution of the company, forced sale of the property under current law (or potentially forfeiture without compensation if the proposed Land Code amendment is enacted), and reputational and visa consequences that may extend beyond the immediate property issue.

The second option is to genuinely operate the company as the law requires it to be operated. This means ensuring that Thai shareholders actually own their shares with genuine financial contributions documented in their banking history, that the company conducts real commercial activity (not just passive land holding), that it generates legitimate income, files proper tax returns showing taxable profits or genuine business losses, and maintains records that would satisfy a substance-based review. For some villa-holding companies this is achievable if commercial activity can be genuinely added (rental management, professional services, related business operations). For others it requires fundamental restructuring of the company’s purpose and operations.

The third option is to restructure the property holding through one of the legal alternatives discussed in the previous articles in this series. This typically involves transferring the property out of the Thai company into a structure where the foreign owner has direct registered rights (such as a registered 30-year lease combined with a registered superficies). The transaction structure depends on the existing company’s circumstances, the willingness of the Thai shareholders to cooperate, the tax implications of the transfer, and the willingness of a Thai counterparty to take ownership of the land for the new structure to be registered against. This is the option most likely to produce a defensible long-term position, but it requires planning, capital, and legal execution.

The fourth option, applicable to a smaller number of cases, is to bring the company within a legal framework that permits foreign ownership at the level actually involved. For property-holding purposes this is rarely available, because the relevant exemptions (Board of Investment promotion, Industrial Estate Authority of Thailand zones, Eastern Economic Corridor regime, Treaty of Amity for US nationals) are not typically applicable to residential villa ownership. Where they do apply, they are the most secure structure available, but the qualifying conditions are specific and narrow.

The right choice depends on facts that this article cannot address. What is clear is that the option of doing nothing has become substantially more risky, and the options for active remediation are more attractive in 2026 than they were even twelve months earlier.

What this means for new buyers

For prospective buyers considering a villa purchase in 2026, the Thai company route is significantly more difficult to establish than it was previously. Order Number 2/2568 means that any new company formed in 2026 with the classic 49 percent foreign and 51 percent Thai structure faces immediate scrutiny on the source of Thai shareholder funds. A Thai national without verifiable independent financial capacity to fund their share contribution cannot complete the registration in the same way that was possible under the previous regime.

The lawyers and accountants who facilitated such structures previously now face their own professional and criminal exposure, and many have stopped offering the services. The Department of Business Development has been explicit about targeting professional enablers as well as principals and nominees. The Pattaya enforcement action in March 2026 reportedly revoked business licenses of several law and accounting firms found to be facilitating nominee structures.

For new buyers, the established legal alternatives (registered 30-year lease combined with registered superficies, condominium freehold under the 49 percent quota, usufruct for owner-occupied residential use, or a genuinely operating Thai company with real Thai investors and real commercial activity) remain available and continue to be the appropriate routes. The Thai company route is still legal for genuine companies; what has become significantly more difficult is the nominee company route that was widely sold as compliant but was never legally sound.

The architectural perspective

The legal review of an existing company structure should come before any significant architectural investment in the property. Capital invested in extensions, renovations, or substantial upgrades sits on top of whatever legal structure underlies the property. If the legal structure may be unwound, the investment is at risk in a different way than the architectural decisions alone would suggest.

For owners considering significant works, the appropriate sequence is to address the legal position first, then make the architectural decisions on the basis of the resolved structure. For owners in nominee arrangements specifically, this typically means engaging a Thai property lawyer to review the company, identify the realistic options, and execute whatever restructuring is appropriate before further investment in the property.

For prospective buyers, the legal structure decision precedes the architectural conversation. The choice between the available legal routes (registered lease with superficies, condominium, genuine Thai company) affects the design brief, the investment proposition, and the long-term holding strategy. Architects working on early-stage villa briefs should be alert to clients whose understanding of their legal structure does not align with what current Thai law actually permits, because the architectural brief assumes legal foundations that may not be present.

The bottom line

The Foreign Business Act has prohibited nominee structures since 1999. The Thai Supreme Court has applied a substance-over-form analysis to these arrangements consistently. What changed in 2025 and 2026 is the practical likelihood of detection and prosecution, not the underlying legality of the structures.

For owners of existing villa-holding companies, the right question is not whether the structure is compliant in theory but whether it can withstand the substance-based scrutiny that is now being applied in practice. Companies with genuine Thai shareholders making real capital contributions, with real commercial activity, and with proper financial substance can continue as they are. Companies that look Thai on paper but were funded and controlled by foreign principals are in a materially weaker position than they were even twelve months ago.

For prospective buyers, the legal alternatives that have always been available (registered lease with superficies, condominium freehold, usufruct, and genuinely operating Thai companies) provide established routes to participate in the Thai property market without the risk profile of nominee arrangements. The Thai company route is still legal for genuine companies; what has changed is that the formal appearance of compliance is no longer sufficient.

Important note on legal advice

This article provides general information about the Foreign Business Act and recent regulatory developments in Thailand based on publicly reported sources and is intended as context for villa owners and prospective buyers. It is not legal advice and should not be relied upon as legal advice.

The Tropical Architect and Nay Sirirat are not licensed legal advisers. Thai corporate and property law is complex, applies differently to different fact patterns, and may change with legislation or further judicial decisions. Any decision about purchasing, holding, or restructuring property in Thailand should be made on the advice of a qualified Thai property and corporate lawyer with current knowledge of the relevant law and enforcement practice. The choice between continuing with an existing structure, operating it as a genuine business, restructuring the property holding, or bringing it within a legal exemption framework requires case-specific analysis that this article cannot provide. We strongly recommend that anyone affected by the matters covered in this article seek specific legal advice from a licensed Thai lawyer.

For structured guidance on every stage of a villa build in Thailand — from land purchase through to handover — see The Thailand Build Blueprint™ at thetropicalarchitect.com/the-blueprint

For architectural guidance on your specific project, book a strategy session with Nay at thetropicalarchitect.com/consultations