The “Series Seminar on Cross-Border Investment Legal Compliance for Chinese Enterprises in Southeast Asia (Thailand and Indonesia Sessions),” jointly initiated by Starry Law Firm and the Shenzhen Enterprise Going Global Legal Services and Fact-Finding Centre, was successfully held at the Shenzhen Enterprise Going Global Legal Services and Intellectual Property Centre (International Arbitration Building).

Under the theme “Legal Expertise as the Sail, Guiding Overseas Expansion,” the event focused on Thailand and Indonesia, two popular destinations for Chinese enterprises expanding overseas. It provided a systematic analysis of investment structures, market-access rules, implementation pathways, and the compliance risks of greatest concern to businesses. The seminar attracted a large number of business leaders, investors, and in-house legal professionals planning their Southeast Asia presence.

I. Expert Presentations

Attorney Pan Chenxing, Founder of Starry Law Firm Thailand and Indonesia, delivered a systematic analysis of Thailand’s investment environment and foreign investment regulatory framework. Drawing on years of practical experience supporting Chinese enterprises establishing operations in Thailand, Attorney Pan examined common investment pathways and structural arrangements in depth.

Attorney Pan noted that Thailand applies differentiated regulation to industries and shareholding ratios under the Foreign Business Act (FBA), while Board of Investment (BOI) policies provide exemption pathways for promoted activities. In practice, however, enterprises often face compliance risks because of uncertainty in business classification and pathway selection. Against a backdrop of increasingly stringent enforcement, reliance on nominee shareholder arrangements is more likely to trigger regulatory scrutiny.

Meanwhile, Attorney Deng Mingyue, Founding Partner of Starry Law Firm Indonesia, led the Indonesia session. Starting from the country’s business environment, she outlined Indonesia’s legal system, investment access rules, and operational establishment process. Attorney Deng stressed that, despite Indonesia’s market and resource advantages, foreign ownership restrictions, approval procedures, and employment rules remain highly complex from a compliance perspective. Without a systematic compliance framework, enterprises may incur additional costs and legal risks during both project implementation and day-to-day operations.

II. Interactive Discussion

During the interactive session, participating enterprises engaged in in-depth discussion around recurring issues encountered in actual operations. Compliance risks associated with nominee shareholder arrangements in Thai foreign-invested structures and employment matters in Indonesia emerged as key topics of interest.

Risks of Nominee Shareholder Arrangements in Thailand

Q: A company establishes a joint venture in Thailand and asks a Thai individual shareholder to hold shares on its behalf. During operations, that Thai shareholder adjusts the shareholding structure or even changes shareholders without the Chinese party’s consent. How should the company protect its rights and manage the risks in this situation?

Attorney Pan explained that nominee arrangements are common in Thai foreign-invested enterprises, but the scope for remedies after a dispute is very limited. In Thailand, nominal shareholding is itself unlawful. Consequently, when faced with such issues, many enterprises are reluctant to seek relief through police reports or court proceedings, because formal proceedings may also lead to scrutiny of the enterprise’s own compliance position.

Attorney Pan further noted that Thailand’s scrutiny of nominee arrangements now focuses on commercial substance rather than formal compliance. Regulators will generally examine:

• whether the Thai shareholder has made a genuine capital contribution;

• whether the Thai shareholder participates in operational decision-making; and

• whether the Thai shareholder has a legitimate source of funds and the capacity to perform the relevant obligations.

1. The key is not post-event remediation, but advance planning

• Avoid purely nominal shareholder arrangements wherever possible.

• Select Thai local shareholders who genuinely participate in the business and understand its operations.

2. Protect the Chinese party’s control through shareholding structure design

• Adopt an ordinary-share and preference-share structure to separate dividend rights from voting rights.

• Execute comprehensive shareholders’ agreements.

• Provide for veto rights over material matters, board control rights, and other appropriate safeguards.

In short, it is far preferable to design the structure properly when the company is established than to attempt remedies after a dispute arises.

Termination of Employment Relationships in Indonesia

Q: In Indonesia, what differences apply to compensation when employees under fixed-term employment agreements (PKWT) and indefinite-term employment agreements (PKWTT) resign, agree to terminate employment, or are dismissed?

Attorney Deng explained that Indonesia’s labour law framework provides materially different compensation mechanisms for different contract types. The Job Creation Law and its implementing Government Regulation No. 35 of 2021 introduced a uniform compensation regime for fixed-term employment agreements (PKWT). Where an Indonesian employee has worked continuously for at least one month, the employer must pay compensation when the contract expires. The amount is calculated pro rata by reference to the employee’s actual months of service: (months of service ÷ 12) × one month’s salary. If the employer unilaterally terminates the contract early, it must pay both the pro-rated compensation and an additional contractual penalty equivalent to the employee’s full salary for the remaining contract term.

For employees under indefinite-term employment agreements (PKWTT), the above compensation regime does not apply. However, where the company terminates employment, employees may be entitled by law to severance pay calculated by reference to length of service, a long-service award for employees with three or more years of service, and compensation for unused annual leave, among other entitlements. This creates a compensation structure centred on long-term protection.

Whether dealing with nominee-shareholder risks in Thailand or employment compensation in Indonesia, the underlying issue is often that enterprises have not completed sufficient structural design and rule-mapping at the market-entry stage. Only by designing legal compliance solutions at the outset of an investment and complying strictly with local legal requirements throughout operations can enterprises achieve manageable risks and stable, long-term development in Southeast Asia’s complex and evolving markets.