Thursday, May 11, 2023

The Green Rush: An Exploration of the Legalities of Foreign Cannabis Business Ownership in Thailand

 I have been witnessing a surge in inquiries about the legalities surrounding foreign (US) cannabis business ownership in Thailand. Indeed, many American cannabis businesses are flourishing in Thailand, and the topic of Thai cannabis legalization is a hot subject of discussion among them.

While I am not licensed to practice in Thailand, I can share a broad overview of the current Thai regulations based on my understanding. If you are considering expanding your cannabis operations to Thailand, this will serve as a basic preliminary guide. However, for a comprehensive consultation, you should consult with a Thai attorney.

In Thailand, foreign businesses are governed by the Foreign Business Act (FBA), which ordinarily requires at least 51% of the shares in a business to be held by Thai nationals. However, the cannabis business in Thailand is subject to a different set of regulations.

According to the Thai Narcotics Act, Section 26/5.34, the licensing authority may issue a license to produce, import, export, distribute, or possess narcotics of category 5, which includes cannabis, under certain conditions.

For individual applicants, they must be Thai nationals and domiciled in Thailand. For companies, the entity must be registered under Thai law, and at least two-thirds of the directors, partners, or shareholders must be Thai nationals. Furthermore, the entity is required to have an office in Thailand.

While these regulations seem to heavily favor Thai nationals, they also open avenues for foreign investors interested in the Thai cannabis industry. Though the majority stake (two-thirds) must be held by Thai nationals, foreign investors can still hold a significant minority stake.

The Green Rush

Some of those American and Canadian cannabis businesses are doing very well in Thailand.

As a hub for the cannabis industry, Thailand has seen an influx of American cannabis businesses and other foreign entities looking to capitalize on the burgeoning market. But recently, it appears that this 'Green Rush' is not all rosy. Local cannabis growers in Thailand are voicing concerns that their businesses are being undercut by cheaper, illegal imports from overseas, particularly from the United States. This has raised pertinent questions about the legality and regulations surrounding foreign cannabis business ownership in Thailand.

In June 2022, Thailand took a significant step by striking cannabis off its list of banned narcotics. This was part of a high-profile campaign by Health Minister Anutin Charnvirakul to establish the kingdom as a global hub for medical cannabis. However, nearly a year later, local growers and sellers are lamenting that they are unable to compete with the influx of illegal imports from the U.S that are sold at a fraction of the price of the homegrown buds.

Despite the decriminalization, Thailand's parliament has yet to pass a long-awaited cannabis bill, leaving the regulatory framework for the industry in a state of uncertainty. In this vacuum, foreign money has seeped into the market, with dispensaries across the country reportedly pushing low-cost cannabis imported illegally from the U.S.

Local cannabis entrepreneurs have reported being approached by foreign brokers selling cheap, untaxed, smuggled weed. The weed is then sold at two to five times its original price, undercutting the local growers who are unable to compete with these prices. This scenario has led to growing concerns about the sustainability of local businesses in the face of booming demand and the growing influence of foreign entities.

To conclude, the Thai cannabis market presents an exciting opportunity for foreign investors. However, the current situation highlights the importance of a balanced approach that ensures the growth and sustainability of local businesses while also welcoming foreign investment. As the legal cannabis industry continues to grow and evolve globally, the opportunities for business expansion into new markets like Thailand will undoubtedly increase. The key is to stay informed, stay compliant, and stay ahead of the curve.