Joint Ventures and Shareholders' Agreements in Thailand 2026: Where Lawful Protection Ends and a Nominee Structure Begins under the New DBD Checks

Key takeaways

• The legal test has not changed; the way it is checked has. The Foreign Business Act still treats a company as "foreign" when foreigners hold half or more of its shares. What took effect in 2026 is a source-of-funds check at registration: the current DBD Order No. 2/2569, in force since 1 August 2026, requires an investment explanation statement and the Thai shareholders' bank statements.
• "Effective control" is a reform direction, not current law. The DBD is reviewing whether to add it to the definition of a foreigner; no bill has been tabled. Practitioners use five indicators to test a structure: voting control, the Thai shareholders' source of funds, who appoints management, contractual rights that shift decision-making, and where the profits actually go.
• The old preference-share design is now high-risk. Thai shareholders holding 51% with one vote per ten shares and the foreign investor holding 49% ordinary shares with full votes: under the source-of-funds check, whether the Thai side really paid for 51% is tested first; if the law moves to effective control, this structure is the first target.
• Blanket veto rights are equally risky. A foreign minority that can veto routine hiring, small expenditure and every dividend leaves the nominal majority with no real decision-making power, which is a classic nominee indicator.
• Preference share rights cannot be changed once issued (Civil and Commercial Code section 1142). The only way to adjust them is to cancel the shares by capital reduction and issue new ones; a design mistake is hard to undo.
• The line between lawful protection and unlawful control is proportionality. Board seats in proportion to shareholding, reserved matters limited to genuinely major decisions, transfer restrictions and information rights protect an investment; letting the minority run the business is control.
• The design logic has to change: from "how do we keep control at 49%" to "how do we build a real joint venture and protect our legitimate interests".

When a foreign company's business in Thailand falls on the restricted lists of the Foreign Business Act and it has not taken the BOI or Foreign Business Licence route, it has to form a joint venture with a Thai partner.

And once you are in a joint venture, the question arrives: with only 49%, how do you make sure your investment is not diluted or sidelined?

For more than a decade the market has sold a standard answer: preference shares that cut the Thai partner's votes, a shareholders' agreement that gives the foreign investor sweeping vetoes, and pre-signed share transfer forms and powers of attorney. The package is widely circulated among foreign investors and sold by a number of consultancies as a standard product.

In the 2026 enforcement environment the risk of that package has risen sharply, and several of its components are themselves evidence of a nominee relationship. This guide sets out the current rules and the reform direction, which traditional techniques have become dangerous, and what a shareholders' agreement should actually say.

1. First question: do you need a joint venture at all?

Before discussing joint venture terms, confirm that a joint venture is necessary.

A joint venture should be the last option, not the first. Many foreign investors go looking for a Thai partner before they have properly assessed BOI eligibility, and give up a far lower-risk route. An American investor should check the Treaty of Amity first; it removes the ownership problem for most service and trading businesses, though not BOI's incentives or work-permit relief. The routes and their conditions are compared in our guide to setting up a company in Thailand for foreign investors .

Note also that a ministerial regulation in force since 28 August 2026 removed eight categories of services from the licensing requirement, including administrative, HR and IT services between affiliated companies. Before forming a joint venture, confirm that the business is still on the restricted lists.

The rest of this guide deals with the design questions that arise once a joint venture is unavoidable.

2. What changed in 2026: current rules and the reform direction

This is the most important section of the guide, and the one on which the market's commentary is most often wrong.

Current law: still the shareholding percentage

Section 4 of the Foreign Business Act uses shareholding: a company in which foreigners hold half or more of the capital is a "foreigner". Below half, it is in principle a Thai company. As at September 2026 that provision has not been amended.

The rule is simple and clear, and for that reason has long been circumvented by technique: a Thai majority on paper, foreign control in substance.

What took effect in 2026: the source-of-funds check

The authorities did not change the definition; they started checking the money at registration. The Central Registrar issued three orders in succession in 2026:

Under the current Order No. 2/2569:

• At incorporation: an investment explanation statement, bank statements for each Thai shareholder covering the three months before they paid for their shares, and a statement for the account of the director who received the capital.
• On a change of registration that makes a foreigner an authorised director or adds a foreign partner: the signing director files an investment confirmation statement.
• A company incorporated on or after 1 August 2026 that makes such a change within its first year must also file the explanation statement and bank statements showing the capital was received in full.

The check tests one thing: whether the Thai shareholders' money is their own.

The reform direction: effective control

A view circulating in the market is that Order No. 1/2569 "introduced an effective control test". It did not. The order's only content was the investment confirmation statement; it says nothing about control or voting rights.

"Effective control" is genuinely under discussion, but its status is a legislative review: the DBD is evaluating the Foreign Business Act, including whether the definition of a foreigner should look beyond the first layer of shareholding, how cross-holdings should be looked through, and whether the penalties are adequate, and held a public hearing in April 2026. No amendment bill has yet been tabled.

The five indicators practitioners use

Although effective control is not yet law, five indicators are already in common use in nominee investigations and due diligence:

These are not an official review standard; they are a practitioners' synthesis. Only the second, source of funds, is expressly required by the current order. The other four matter because, once a nominee investigation starts, or if the law is amended to include effective control, they are exactly what will be examined.

So a joint venture structure cannot be designed by asking only "is this lawful today". It also has to answer "will it survive the amendment".

3. Three traditional control techniques and their risk today

3.1 The preference share structure

The traditional design: the Thai shareholders hold 51% of the capital as preference shares with reduced votes (for example one vote per ten shares); the foreign investor holds 49% ordinary shares with full votes (one share, one vote). Sometimes enhanced votes and dividends are attached to preference shares held by the foreign side instead.

The legal basis: a Thai company may issue ordinary and preference shares, with the voting and dividend rights of each defined in the articles.

The 2026 risk: significantly higher, for two reasons. First, the DBD's evaluation of the Foreign Business Act is reviewing the definition of a foreigner and the look-through of cross-holdings; structures that use voting arrangements to get around the shareholding cap are the most likely target of an amendment. Second, the bank-statement requirement now in force tests directly whether the Thai shareholders paid for their shares with their own money, and the typical problem with a preference share structure is that the Thai side never actually paid for 51%.

3.2 Veto rights

The traditional design: the shareholders' agreement gives the foreign investor a veto over major decisions.

The line is the meaning of "major". The commonest overreach: the Thai side holds a majority of the shares, but the shareholders' agreement gives the foreign investor a veto over almost everything, down to routine hiring, small expenditure and every distribution of profit.

The problem is that the veto then covers day-to-day management rather than protecting the investment. When the Thai side cannot hire one person or spend a small sum without foreign consent, the nominal majority shareholder has no substantive decision-making power.

3.3 Powers of attorney and share waivers

The traditional design: the Thai shareholders sign in advance irrevocable powers of attorney, share transfer forms or waivers of voting rights, held by the foreign investor.

This is the most dangerous of the three. In nominee investigations and in due diligence, side agreements that transfer voting rights and economic benefit, and irrevocable powers of attorney, are treated as classic signs of a nominee structure. The fatal feature of these documents is that they do not protect the foreign investor; they are direct evidence that a nominee relationship exists. Once an investigation or litigation starts, they become the strongest material in the hands of the authorities and the other side.

4. A technical trap in preference shares

Even if you decide to use preference shares, one technical limit has to be known in advance.

Under section 1142 of the Civil and Commercial Code, once preference shares have been issued, the rights attached to them cannot be changed. The Council of State's view is that even a resolution of the preference shareholders does not suffice; the only way to adjust them is to cancel the shares by reducing capital and then issue new shares by a capital increase.

That means a design mistake is hard to undo. A company that has only ordinary shares and wants to move to a preference share structure also has to go through a set procedure and resolutions; it is not an adjustment that can be made at any time.

Practical advice: the rights attached to preference shares must be settled at incorporation, and designed for compatibility with a later BOI application, the entry of a new investor and an exit by sale.

5. So what should the shareholders' agreement say?

This is the question the guide is really answering.

Under the new regime the design logic should change: not "how do we keep control by technique", but "how do we build a genuine joint venture and protect our legitimate investment interests".

The core test of whether a clause is safe: does it protect the capital invested, or does it run the business?

5.1 Relatively safe protective clauses

What these clauses have in common is that they protect the value and liquidity of the investment, not the command of daily operations.

5.2 Clauses to avoid or to assess carefully

5.3 One test

If a shareholders' agreement "works well" even when the Thai side takes no part in management, bears no risk and shares no profit, it is not a joint venture agreement. It is a nominee arrangement.

Conversely, a genuine joint venture agreement should work best when both sides are actively engaged.

6. Three design points in the governance structure

6.1 The board and the authorised signatories

The composition of the board should match the shareholding. The signatory arrangement has more room: joint signature by a Thai director and a foreign director is common and relatively safe, because it protects both sides rather than giving one side command.

Note that one of the triggers for the current order's check is precisely "a foreigner as authorised director", so a structure in which the foreign side alone can bind the company is not advisable. What the signatory designation means for the foreign director personally is in our guide to director liability in Thailand .

6.2 Thresholds for reserved matters

Reserved matters should be neither too wide nor too narrow. The recommended approach:

• Distinguish by monetary threshold rather than including everything; set the threshold at a level that is genuinely major for a company of that size.
• Distinguish by nature: structural matters (amending the articles, capital changes, disposal of core assets) in; operational matters (routine procurement, ordinary hiring) out.
• Reserved matters may require a special resolution, but should not be designed so that the foreign side alone can veto everything.

6.3 Deadlock

The commonest reason joint ventures fail is not breach by the other side but a standoff in which nothing can be decided. The usual mechanisms:

• Escalation: negotiation between the parties' senior executives for a fixed period.
• Third-party valuation: an independent opinion on the disputed matter.
• Put and call options: one side names a price and the other chooses to buy or sell (the "Russian roulette" or "Texas shoot-out" clauses).

These mechanisms matter more in Thailand than in many jurisdictions, because litigation there is slow and expensive; see our guide to debt recovery in Thailand for what a Thai court process actually involves.

7. Transfer restrictions: a legitimate tool to protect the investment

Transfer restrictions are among the few clauses almost never treated as control, because they protect the liquidity of the investment rather than the command of the business.

For a 49% investor the tag-along right matters most: it ensures that if the Thai partner sells to a third party, you are not left running the company with a stranger.

8. Five checkpoints before you commit

One: confirm that a joint venture is necessary. Re-assess BOI, IEAT, FBL and, for US investors, the Treaty of Amity. A joint venture should be the last option.

Two: confirm that the Thai partner is real. Did they actually pay for their shares? Can the source of funds be explained? Do they actually take part in management? If the answers are all no, that is not a partner; it is a nominee.

Three: review any existing structure. A company set up years ago on a nominee arrangement is an exposed position under the 2026 checks, and it will be found in any due diligence before a listing, a financing or a sale; see our guide to legal due diligence on a Thai subsidiary . Assess legalisation early.

Four: keep the shareholders' agreement and the articles consistent. The agreement is a contract between the parties; the articles are the company's public constitution. Where they conflict, the articles prevail as to the company's operation and its effect on third parties, and under section 1129 of the Civil and Commercial Code a share transfer restriction binds the company only if it is in the articles. Reserved matters, board seats and transfer restrictions should be reflected in the articles as well.

Five: design for the exit. Whether the structure will be compatible with a later BOI application, whether a new investor will require a restructuring, and how valuation and drag-along will work on a sale.

Before 2026 the central question of a Thai joint venture was "how do we keep control at 49%". After 2026 that question is itself the source of the risk. The source-of-funds check and the reform direction target exactly the techniques built to keep control: weighted votes, blanket vetoes, powers of attorney, funding arrangements. The more ingenious the technique, the more it stands out in an investigation. Only two kinds of structure are sustainable: a lawful majority through BOI, IEAT, an FBL or the Treaty of Amity, or a genuine joint venture with proportionate clauses that protect your investment.

Frequently asked questions (FAQ)

What changed in 2026 in the way Thailand reviews joint venture structures?

The legal test is unchanged; the method of checking is new. The Foreign Business Act still looks at whether foreigners hold half or more of the shares, but since 2026 the authorities check the source of funds at registration: the current DBD Order No. 2/2569, in force since 1 August 2026 and replacing Orders 2/2568 and 1/2569, requires an investment explanation statement, three months of Thai shareholders' bank statements and the receiving director's statement at incorporation, and an investment confirmation statement when a change of registration makes a foreigner an authorised director. "Effective control" is a reform direction under review by the DBD with no bill yet tabled; the claim that Order 1/2569 introduced an effective control test is wrong. The five practitioners' indicators, voting control, source of funds, appointment of management, contractual rights shifting decisions, and profit distribution, are a useful self-test.

Can I still use preference shares to reduce the Thai partner's votes?

The risk has risen significantly. The traditional design gives the Thai shareholders 51% in preference shares with reduced votes and the foreign investor 49% ordinary shares with full votes. Thai company law does allow two classes with different rights, but the DBD is reviewing the definition of a foreigner and the look-through of cross-holdings, and structures using voting arrangements to get around the cap are the likeliest target. The current Order 2/2569 also requires the Thai shareholders' bank statements, and the typical flaw in these structures is that the Thai side never paid. Remember section 1142 of the Civil and Commercial Code: once issued, preference share rights cannot be changed except by cancelling the shares and issuing new ones.

Can the shareholders' agreement give the foreign investor a veto?

Yes, but the scope decides the risk. The question is whether the veto protects the investment or runs the business. The relatively safe approach limits reserved matters to genuinely major decisions, amending the articles, capital changes, disposal of major assets, a change of core business, dissolution, major related-party transactions, with monetary thresholds that are material for the company's size. The high-risk version is a blanket veto over operations: the Thai side holds a majority but cannot hire one person, spend a small sum or distribute a dividend without foreign consent, leaving the nominal majority with no real power.

Do pre-signed share transfer forms or powers of attorney from the Thai shareholders protect me?

No; they are the most dangerous arrangement of all. In nominee investigations, side agreements transferring voting rights and economic benefit and irrevocable powers of attorney are treated as classic signs of a nominee structure, and these documents are direct evidence that the relationship exists. Under sections 36 and 37 of the Foreign Business Act a nominee arrangement carries up to three years' imprisonment, a fine of THB 100,000 to 1,000,000, or both, and the court may order the business stopped, the company dissolved or the shareholding ended; under the deportation rules in force since August 2026 the foreigners involved may also be deported. Some consultancies still sell these documents as a standard product. Be careful.

How that regulation works, why a fine or probation does not close the file, and why a general manager who is not a registered director is still exposed, are in Thailand's New Deportation Regulation 2026: How a Foreign Business Act Conviction Can End a Foreign Executive's Stay, Even on Probation or a Fine .

Which shareholders' agreement clauses are relatively safe?

Those that protect the value and liquidity of the investment rather than the command of daily operations: board seats in proportion to shareholding; reserved matters limited to structural decisions; information and audit rights; transfer restrictions (ROFR, tag-along, drag-along, lock-up); non-compete; IP ownership and licensing; deadlock mechanisms (escalation, third-party valuation, put and call options); and exit provisions (triggers, valuation, payment). Tag-along matters most to a 49% investor, because it stops you being left with a stranger when the Thai partner sells.

How do I tell whether my structure is a joint venture or a nominee arrangement?

One test: if the agreement "works well" even when the Thai side takes no part in management, bears no risk and shares no profit, it is a nominee arrangement, not a joint venture. A genuine joint venture should work best when both sides are engaged. Check four things: did the Thai side actually pay, can the source of funds be explained, do they take part in decisions, and do they actually receive dividends. If the answers are all no, the structure will not survive the 2026 source-of-funds check however the documents are drafted.

Which prevails, the shareholders' agreement or the articles of association?

They are different in nature. The agreement is a contract that in principle binds only its signatories; the articles are the company's public constitution with effect on third parties once registered. Where they conflict, the articles prevail as to the company's operation and its effect on third parties. Reserved matters, board seats and transfer restrictions should therefore be reflected in the articles, not left in the agreement alone; otherwise the agreement may say one thing while the company's actual operation and registered particulars are unaffected. The articles are also a registration document that the authorities examine when reviewing the structure, so design them with that in mind.

Our company was set up years ago on a nominee arrangement. What should we do now?

It is an exposed position; deal with it early. The current Order 2/2569 checks the source of funds at incorporation and on changes involving a foreign signatory, the authorities are reviewing existing companies across agencies, and an amendment adding effective control would widen the net. Thai shareholders who cannot explain their funds and take no part in management will not pass. The options are to assess whether the business can obtain a lawful majority through BOI or an FBL, to redesign a genuine joint venture with the Thai side, or to adjust the business scope so that it leaves the restricted lists. Note too that buying a company built on a nominee structure and keeping the arrangement after completion is itself a breach; treat the nominee question as a priority item in due diligence before any acquisition.

How a share deal, an asset deal and the 2023 merger differ in what the buyer inherits, and the 12 due diligence items for a Thai target, are in Buying a Company in Thailand 2026: Share Deal vs Asset Deal, the 49% Rule, Licence Succession, Merger Control and a 12-Point Due Diligence Checklist for Foreign Buyers .

How Louis Group can help

Louis Group has offices in Taipei and Bangkok, with Thai-qualified lawyers working alongside Taiwanese colleagues. We advise foreign investors on Thai joint ventures and corporate governance: assessment of the entry route (BOI, IEAT, FBL, Treaty of Amity or joint venture), design and review of shareholders' agreements and articles of association, compliance review and restructuring of existing structures, due diligence on joint venture partners, deadlock and exit mechanisms, and shareholder disputes. If your Thai shareholding structure was set up years ago and has not been reviewed since, review it before the next capital increase or new investor.

Author: Raymond Yu (Po-Chang Yu) , Founder and CEO of Louis Group.

*This article is general legal information, not advice on a specific case. The amendment of the Foreign Business Act is still under review and the registration orders may change again; outcomes depend on the facts, the business activity and the structure. Take advice from a Thai-qualified lawyer and rely on the latest announcements of the Department of Business Development.*

Related reading

• Setting Up a Company in Thailand 2026 for Foreign Investors: The 49% Rule, Nominee Shareholder Risk, Capital and Work Permit Ratios, BOI and the New DBD Checks
• Legal Due Diligence on a Thai Subsidiary 2026: What Buyers, Lenders and IPO Underwriters Check, the Nominee and BOI Deal-Breakers, and the 6-to-9-Month Timeline
• Director Liability in Thailand 2026 for Foreign Directors: Civil Exposure, Criminal Risk, Signing Authority and the Work Permit Trap