Pachara points out that he had previously warned about the U.S. Section 301 issue and recommends four measures to overhaul foreign business laws to close nominee loopholes following the U.S. tariff hike on Thailand.
On 31 July 2026, Pachara Naripthaphan, a member of the Securities and Exchange Commission (SEC) board, commented on the U.S. raising tariffs on Thai goods by 12.5% under Section 301, citing forced labor and structural overcapacity as main reasons. He said this is a significant issue reflecting long-standing structural problems.
Pachara said that although the government's aim to shift from a “controlling state” to a “facilitating state” is a good and correct approach, it must not forget that every regulatory relaxation must be accompanied by stronger oversight mechanisms. Otherwise, leniency will create loopholes for bad actors to exploit.
“The heart of the problem the U.S. accuses Thailand of is foreign products entering through minimal processing to claim Thai origin, as well as illegal forced labor in our businesses. I see this as a critical starting point for the government to address, since it connects to the broader issues,” said Pachara.
One illegal foreign nominee problem, which is the root of the current societal issues, actually stems from long-term government neglect. Without serious correction, it will eventually become a more complex problem for Thai society.
“We see foreign nominees in Thailand’s main tourist provinces. We see nationality rights misused in export products. All are manifestations of the same underlying problem in various forms. If the government is serious about fixing this, it must take the opportunity to overhaul this distorted system entirely, not just patch problems piecemeal,” Pachara said.
Pachara added that besides overproduction and forced labor issues previously mentioned, another concern is that many Thai businesses currently have nominees holding shares and exploit preferred share loopholes to control companies.
Looking at businesses in southern tourist provinces reported in the news, the pattern is that foreign investors hold less than the Thai legal limit under the Foreign Business Act, but most of their 49% shares are preferred shares with superior rights—especially voting, veto, or director appointment rights—making it appear that Thais control the business, while actual decision-making power rests with foreigners, Pachara explained.
He further explained that this problem is complicated by Section 1142 of the Civil and Commercial Code, which prohibits any amendment to preferred share conditions once set at company registration. This permanently locks in foreign-set terms, with almost no way to change them later. This contrasts with laws in the UK and Malaysia, which allow amendments under shareholder protection mechanisms.
He made the following suggestions to address these issues:
1. Review Section 1142 of the Civil and Commercial Code to allow modification of preferred share conditions and share conversion under minority shareholder protections like in the UK and Malaysia, instead of an absolute ban, so that conditions used to circumvent foreign business laws can be amended.
2. Review the definition of “foreigners” under the 1999 Foreign Business Act to add “control power” criteria alongside current shareholding proportions. Consider special rights attached to preferred shares such as special voting, veto, or director appointment rights. If a foreigner holds less than half but effectively controls the business, they should be regulated under the law similarly to majority shareholders, closing legal loopholes that lag behind modern control structures.
3. Support the Department of Business Development with broader tools and methods that look beyond shareholding proportions to include company bylaws and preferred share terms, to better reveal true management structures. This will improve government oversight and enhance business sector transparency.
4. Integrate data across agencies—the Department of Business Development, Revenue Department, Board of Investment, and Bank of Thailand—to track capital flows and control structures comprehensively.
These four approaches must be pursued simultaneously. Pachara sees these issues as interconnected. Companies controlled by foreigners through these structures often evade labor standards and supply chain scrutiny, appearing as Thai businesses superficially, while real power is foreign-held.
If the government wants to seriously solve this, it must rigorously investigate nominee structures and review outdated laws to prevent legal loopholes from becoming tools that cause Thailand and its people to lose control over domestic businesses and suffer trade disadvantages internationally.
Pachara also added that investors are like customers of the country. Good service is not difficult; it requires attention to provide a good user experience, ease of use, and most importantly, equal regulatory oversight without loopholes or special privileges.
“Today, some bad actors exploit these loopholes to benefit from Thailand. If the government can truly close these gaps, it will elevate the country in the long term,” Pachara concluded.