Chapter 9: Limitation of Rights in Land of Certain Categories of Juristic Persons

Section 97 establishes the cornerstone principle of Thai land law regarding corporate ownership: any company with 49% or more foreign shareholding is treated identically to an alien individual for purposes of land acquisition. This means such companies are subject to all the restrictions under Chapter 8, effectively prohibiting them from owning freehold land in Thailand except under the narrow exceptions outlined in Sections 86–96.

Key thresholds to understand:

• Below 49% foreign ownership: The company is treated as a Thai entity and may own land freely, subject to general Land Code provisions.
• At or above 49% foreign ownership: The company is classified as a foreign entity and is prohibited from owning freehold land (except under ministerial permission per Section 86).
• Majority foreign shareholders by number: Even if foreign shareholders hold less than 49% of capital, having a majority of shareholders who are foreign can trigger the restriction.
• Control test (subsection 3): Beyond pure percentage thresholds, the law examines actual control. If foreigners control the majority of voting rights or hold more than half of director/manager positions, the entity is treated as foreign regardless of capital share.

The final paragraph of Section 97 introduces a critical anti-avoidance mechanism: shares held by entities that are themselves classified as foreign under this Section are counted as foreign-held. This prevents layered corporate structures from being used to disguise the true level of foreign control.

Using Thai nominees to hold shares on behalf of foreigners in order to circumvent the 49% rule is illegal under Thai law. The practice is prosecutable under multiple statutes:

• Land Code: Land acquired through nominee arrangements is subject to forced disposal under Section 98 and criminal penalties under Chapter 12.
• Foreign Business Act B.E. 2542 (1999): Section 36 imposes penalties of up to 3 years imprisonment and/or fines up to 1,000,000 Baht for Thai nationals acting as nominees for foreigners.
• Criminal Code: Nominee arrangements may constitute fraud and forgery of documents.

The Department of Lands has intensified enforcement in recent years, conducting audits of company shareholder registers and cross-referencing data with the Department of Business Development (DBD). Companies suspected of nominee structures may be ordered to prove the legitimacy of Thai shareholders' investment funds, demonstrate genuine Thai management control, and show that Thai shareholders receive actual dividends proportionate to their holdings.

Consequences of discovery: Forced disposal of land, criminal prosecution of both the foreign and Thai parties, potential corporate dissolution, and blacklisting from future land transactions.

When a Thai company applies to purchase, transfer, or register rights over land, the competent officer at the Land Department conducts a verification process to determine whether the company qualifies as a Thai entity under Section 97. This process includes:

• Shareholder list review: The company must present its current shareholder register (Bor Oj 5) certified by the Department of Business Development, showing all shareholders, their nationalities, and their shareholding percentages.
• Capital verification: Officers verify that the paid-up capital shown in the company's records matches the DBD filing and that Thai shareholders have genuinely contributed their portion.
• Source of funds inquiry: In cases of suspicion, the Land Department may require Thai shareholders to demonstrate the source of their investment funds, including bank statements and evidence of financial capacity.
• Corporate chain analysis: If any shareholder is itself a juristic person, the officer will trace through the chain of ownership to determine the ultimate beneficial ownership, applying the cascading rule in the final paragraph of Section 97.
• Director and management review: The list of directors and authorized signatories is examined to assess whether foreigners hold controlling management positions.

Land Offices across Thailand have become increasingly sophisticated in their verification procedures, and many now use electronic databases shared with the DBD to cross-check company information in real time.

Section 98 mirrors the disposal mechanism in Section 94 (applicable to alien individuals under Chapter 8) and extends it to juristic persons classified as foreign under Section 97. The Director-General has discretion in setting the disposal period, which is typically between 180 days and one year depending on the circumstances.

Trigger events for Section 98:

• A Thai company's shareholding structure changes such that foreign ownership exceeds 49%, converting it to a foreign entity under Section 97.
• A company is discovered to have used nominee shareholders, and the true foreign ownership exceeds the threshold.
• A company acquires land while already exceeding the foreign ownership threshold.

If the entity fails to dispose of the land voluntarily within the prescribed period, the Director-General may order a public auction of the land under Section 94 procedures. The proceeds, after deducting administrative costs, are returned to the entity. This mechanism ensures that land does not remain indefinitely in the hands of entities that do not qualify for ownership.

Cross-reference: Section 94 – Disposal of alien-owned land

Section 99 imposes an affirmative obligation on land-owning juristic persons to self-report changes in their ownership structure that push them over the Section 97 thresholds. This proactive reporting requirement is designed to ensure the Land Department can promptly initiate disposal proceedings under Section 98 when necessary.

Practical scenarios triggering the reporting obligation:

• A share transfer that causes foreign shareholding to reach or exceed 49%.
• A capital increase in which foreign investors subscribe to new shares, pushing the foreign ratio over the threshold.
• Appointment of foreign directors that causes foreigners to hold a majority of board seats.
• A change in the structure of a parent company that causes its Thai subsidiary (a shareholder in the land-owning entity) to itself be classified as foreign under Section 97's cascading rule.

The 60-day window begins from the date of the actual change, not from the date the company becomes aware of it. Corporate secretaries and legal advisors should therefore monitor share register changes closely and calendar the reporting deadline.

Section 100 creates a dual-layer penalty framework targeting both the juristic person as an entity and the individual officers responsible for the violation. The penalties under the Land Code itself are relatively modest by current standards (fines of 10,000–20,000 Baht), but the real consequence is the forced disposal of the land under Section 98, which can result in significant financial loss.

Important considerations:

• Personal criminal liability: Subsection (2) imposes imprisonment of up to two years on individual directors and managers who knowingly permit illegal land acquisition. This personal liability cannot be avoided through corporate indemnification.
• Cumulative penalties: The penalties under Section 100 are in addition to (not in lieu of) the forced disposal under Section 98. A company may face fines, its directors may face imprisonment, and the land is still subject to compulsory sale.
• Additional statutes: Violations may also trigger prosecution under the Foreign Business Act B.E. 2542 (1999), with significantly higher penalties of up to 3 years imprisonment and 1,000,000 Baht in fines.

Cross-reference: Chapter 12 – Penalties (general penal provisions)