Thai-U.S. Treaty of Amity Frequently Asked Questions

The purpose of this article is to address a few questions that are frequently raised by clients regarding the Thai-U.S. Treaty of Amity, which allows U.S. citizens and companies to be exempted from most of the restrictions of the Foreign Business Act of 1999. Although the meaning of the Treaty of Amity itself is rather straightforward, the law is still nuanced and there are several points which may serve as stumbling blocks for U.S. businesses seeking to invest in Thailand under the treaty. Some of the more important issues are as follows:

Is it illegal for an American citizen to act as a nominee in a Treaty of Amity company on behalf of a non-U.S. foreigner?

Although the Foreign Business Act criminalizes nominee shareholding by Thai nationals on behalf of foreigners, the law does not explicitly criminalize nominee shareholder by a U.S. national in a Treaty of Amity company. Therefore, in theory at least, a U.S. national could act as a nominee for a non-U.S. foreigner. Nevertheless, the requirements imposed by the DBD when issuing Treaty of Amity certificates makes it difficult for a U.S. national to act as a mere nominee as will be explained later.

To what extent can non-U.S. foreigners be involved in a Treaty of Amity company?

Non-U.S. nationals, including Thai nationals, are only allowed to invest up to 49.99% of the capital in a Treaty of Amity company. However, Non-U.S. nationals, excluding Thai nationals (i.e. third-party nationals), are generally not allowed to serve on the board of directors except under specific circumstances. Third-party nationals are allowed to serve on the board of directors if they are outnumbered by the number of U.S. or Thai nationals. Furthermore, they are only allowed to sign on behalf of the company only if they must co-sign with either Thai or American directors.

Under what conditions is a U.S. company with non-U.S. shareholders or juristic shareholders allowed to register a Treaty of Amity company?

The DBD only allows legal entities registered in the U.S. with majority American ownership and only authorized American directors to be granted protection under the Treaty of Amity. In the event that the majority owners of a U.S. company is itself a legal entity that legal entity must be eligible to register a Treaty of Amity company in its own right in under for the company to do so.

Does the Treaty of Amity grant U.S. nationals and companies the right to operate businesses that are restricted by special laws?

No. The treaty is enforced through the Foreign Business Act and because Section 13 of the Foreign Business Act requires that specific laws regulating foreign ownership in a certain business prevail over the Act, any specific laws prevail over the Treaty of Amity. For example, although the treaty does not prohibit Americans from operating a tourism business, the Tourism and Tour Guide Act of 2008 does serve as a specific law restricting foreign investment in the tourism business. Therefore the Tourism and Tour Guide Act would prevail over the Treaty of Amity.

The Treaty of Amity is complex. American investors interested in doing business in Thailand under the treaty are advised to consult with competent Thailand lawyers.

 

Category: Business in Thailand, Company Law, Company Registration