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3 Regulatory Framework Relating to Investment in

Thailand by Private Equity

The previous Paragraph has provided an overview of the private equity
investments and discussed about the common investment structure
of private equity. This Paragraph will discuss about private equity

transactions from the Thai law perspective, starting from setting-up
entities in the investment structure, investment into the portfolio

companies, management of the portfolio companies until exit from
the portfolio companies.

3.1 Regulatory Concerns Regarding Setting-up Entities in the
Investment Structure

Most of the private equity transactions in Thai market are
cross-border whereby the funds, which are formed outside
Thailand, invest in portfolio companies in Thailand through the

SPVs, which are incorporated under Thai laws. This investment
structure is driven mainly by Thailandûs foreign investment

restrictions, especially those prescribed in the Foreign Business
(15)
Act of Thailand 1999 (the çFBAé) and the Land Code.

(15)
In addition to the FBA, foreigners may also be subject to other specific laws which impose
foreign investment restrictions. For instance, the Financial Institutions Businesses Act 2008
requires a financial institution operating financial businesses in Thailand to have at least
75% of its total number of issued shares with voting rights held by Thai nationals and at
least three-fourths of its directors be of Thai nationality. In addition, a 10% ceiling is
imposed on the shareholders of the financial institution such that no person may hold,
directly or indirectly, more than 10% of the total issued shares in any financial institution,
unless permission from the Bank of Thailand is granted.
The Land Transport Act 1979 imposes similar requirements for a company applying
for a license to operate fixed route transport, non-fixed route transport, and transport by
a small vehicle. That is, the company applicant is required to have: (1) Thai nationality (i.e.
incorporated under Thai laws and having a headquarter located in Thailand); (2) at least
half of its directors be of Thai nationality; and (3) at least 51% of its shares held by, among
others, a Thai national.

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