Directors’ rights and duties.

Every limited company shall be managed by a director or directors under the control of the general meeting of shareholders and according to the regulations of the company (section 1144 of the Commercial and Civil Code (CCC)).

Capacity of the directors

A director may be any physical person, Thai or foreign, and does not have to reside in Thailand. If the director is foreign though, a work permit should be requested (the latter requires the company to be VAT registered). Note, in some cases you need a Thai director (e.g. TAT).

If a foreign director would be authorised to sign for the company at the moment of incorporation, and more than 50% of the shares are held by Thai, then the source of the funds of the Thai shareholder will have to be disclosed (e.g. bank statements) to proof that they actually paid for the shares. This process can be quite time-consuming.

Rights and duties of the directors

The directors are in charge of the day-to-day business. Where the liability of the shareholders in a private limited company is limited to their contribution into the capital, the liability of the directors can be unlimited. The latter will however only be the case if such a statement has been inserted in the Memorandum of Association (Section 1101 of the CCC).

It can be said that it is an international rule that directors must exercise their powers as a ‘bonus pater familias’ and must act in the best interest of the shareholders. They should thus keep their personal interests separated from the company to avoid any conflict of both interests. Article 1168 of the CCC obliges every director, in the conduct of the business, to apply the diligence of a careful business man.

In particular, the directors are jointly responsible for:

  • Assuring the payment of the shares by the shareholders
  • Existence and regular keeping of the books and documents as prescribed by the law
  • The proper distribution of the dividends or interests and
  • The proper enforcement of the resolutions of the general meetings

A director must not without the consent of the general meeting of shareholders, undertake commercial transactions of the same nature as and competing with that of the company, either on his own account or that of a third person, nor may he be a partner with unlimited liability in another concern carrying on business of the same nature as and competing with that of the company.

It is however important to mention that, when the acts of a director have been approved by a general meeting, such director is no longer liable for the said acts to the shareholders who have approved them, or to the company. Shareholders who did not approve of such acts cannot enter their action later than six months after the date of the general meeting on which such acts were approved (section 1170 of the CCC).

Disqualified director

All acts done by a director shall, notwithstanding that it be afterwards discovered that there was some defect in his appointment or that he was disqualified, be as valid as if such person had been duly appointed and was qualified to be a director (Section 1166 of the CCC).

Criminal liability

From a criminal point of view, directors can be held liable for many different offences. It concerns in most cases intentional acts, but some omissions can also cause criminal liability. In some cases Thai law even foresees a substitute liability: a director will automatically be held liable in case the company violates a specific statute. Moreover, they can bear responsibility not only as principal, but also as employing person, publishing person or acting in other capacities. Most commonly the liability will result from not fulfilling tax requirements (on time), where the directors will be held jointly liable with the company.

Claims against the company and the director

Claims against the directors for compensation for injury caused by them to the company may be entered by the company or, in case the company refuses to act, by any of the shareholders. Such claims may also be enforced by the creditors of the company in so far as their claims against the company remain unsatisfied (article 1169 of the CCC).

The errors of a director may be attributed to the company if those mistakes have been made within the scope of employment or for the company’s benefit. And there is more, a company may be found guilty even it is not possible to identify and/or convict the director itself. This ‘automatic’ liability of the company can be reduced in the articles of association by requiring absence of culpability (in this case, the company cannot be held liability for fraud that was committed by the directors).

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About Acclime.

As a leading provider of corporate services, we specialise in covering everything startups and established companies need to successfully start and operate their new business in Thailand. By seamlessly navigating our clients through the complexities of Thai bureaucracy, we allow them to fully focus on their business and operate it with peace of mind.