If you are a managing director of a private limited company in Thailand, you may have decided to leave the task of handling your company’s legal, tax, and accounting formalities to your firm’s in-house lawyer and accountant, or to outsource it to a law firm and accounting office.
However, every director should be well aware that he personally holds certain duties and liabilities to and on behalf of the company, which the law does not allow him to delegate away. Note that a director is not the company’s owner — the owners are the shareholders. The director is merely the company’s agent, acting for and on behalf of the company. As a result, the director carries certain responsibilities to the company, and breaching them can result in personal liability. A director may be held civilly liable if:
- The director acts outside the scope of his authority. Company directors may only act for the company in the course of implementing and furthering the company’s objectives, and must exercise due skill and care in doing so. The Civil and Commercial Code of Thailand (“CCC”) requires a director to act as a reasonably and normally skilled businessperson would in acting for the company; and
- The director puts his own interests ahead of the company’s. The CCC requires that the company’s interests always take precedence over the director’s other interests, including personal and other business interests. For example, a director may not enter into an agreement — such as a lease or loan agreement — on behalf of both the company and himself personally, without shareholder consent.
If a director violates either of these duties and the company suffers damage as a result, the director may be held civilly liable for that monetary damage by the company or its shareholders.
It doesn’t end there, however. Unlike in many other jurisdictions, a company director in Thailand can also be held criminally liable for his actions. At Duensing Kippen’s most recent count, there are over 90 different laws providing for a director’s personal criminal liability for acts or omissions on behalf of the company — and many of these laws provide for multiple counts of liability.
For example, under the Determining Offenses Relating to the Registered Partnership, Limited Partnership, Limited Company, Association, and Foundation Act, a director may face fines even higher than those imposed on the company itself, as well as time in prison. These offenses include failures to comply with CCC requirements, such as:
- Failing to keep and properly maintain a register of shareholders at the company’s registered office — punishable by a fine of up to THB 50,000;
- Moving the company to a new address without proper notice to the Ministry of Commerce — also punishable by a fine of up to THB 50,000;
- Failing to hold the company’s required annual general shareholders’ meeting;
- Failing to issue legally required notice;
- Failing to ensure the company’s shares are properly and actually paid up — directors may be fined up to THB 50,000. It is not enough, for instance, to register the company as a THB 2 million company simply to obtain a work permit and then leave the matter unattended; and
- Failing to fulfill the director’s obligations to:
- (a) submit a proper annual audit to the Ministry of Commerce; and
- (b) keep all minutes and resolutions of board and shareholders’ meetings at the company’s registered office.
A director may face not only fines but imprisonment of up to seven years if found to have entered a false statement or made a material omission regarding 6(a) or 6(b) above.
This article highlights that a director of a Thai company carries personal liability for his acts or omissions under several different laws. The examples given above are only a few of the most general liabilities applicable to all directors — there are many others. Additional liabilities may also apply depending on the type of activity the director’s company engages in. It is therefore highly advisable that directors familiarize themselves with all legal liabilities applicable to them, so they can exercise proper caution and avoid incurring personal liability.