However, every director should be well aware that he personally has certain duties and liabilities to and on behalf of the company for which the law does not allow delegation.
Note, a director is not the company’s owner—the owners are the shareholders. The director is merely the company’s agent who acts for and on behalf of the company. Therefore, the director has certain responsibilities to the company. Such responsibilities result in personal liability and the director may be held civilly liable if:
1. A director acts outside the scope of his authority granted from the company to the director.
Company directors must only act for the company in the course of implementing and aiding the company’s objectives and must exercise due skill and care in doing so.
The Civil and Commercial Code of Thailand (CCC) requires a company director to act as a reasonably and normally skilled businessperson would in acting for the company; and
2. The CCC also requires that a director may not put his interests ahead of the company’s.
The interest of the company must always take precedence over the director’s other interests, including a director’s personal interests and other business interests (if any).
Thus, for example, a director may not enter into an agreement such as a lease or a loan agreement on behalf of the company and himself personally without the consent of shareholders.
If the director violates either of these example duties, and the company is damaged as a result, then the director may be held civilly liable by the company/shareholders for any monetary damage.
However, it does not end there. In Thailand, unlike many other jurisdictions, a company director cannot only be held civilly liable for his actions as a director but also may be held criminally liable for such.
At Duensing Kippen’s most recent count, there more than 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 such criminal liabilities.
For example, under the Determining Offenses Relating to the Registered Partnership, Limited Partnership, Limited Company, Association, and Foundation Act a director may face even higher fines than the company, as well as time in prison, for such acts. These acts include failures on the part of company to comply with the requirements of the CCC, for example:
1. The CCC requires a company to keep a register of shareholders at the company’s registered office. If the company does not have or does not properly maintain such a register, the company’s director is liable for a fine of up to B50,000;
2. The director may also be liable for a fine of B50,000 if the company moves to a new address without giving proper notice to the Ministry of Commerce;
3. The same liability is also applicable if the company fails to hold the required annual general shareholders’ meeting;
4. If the director has failed to issue the legally required notice of an upcoming annual general shareholders’ meeting;
5. If the company’s shares are not properly and actually paid up, its directors may be held liable for a fine of up to B50,000; it is therefore not enough to simply register the company as, for example, a B2-million company so that director can obtain a work permit and neglect the paying up of the capital;
6. A director is obliged to:
a) Submit a proper annual audit to the Ministry of Commerce; and
b) Keep all minutes and resolutions of the director’s board and shareholders’ meetings at the company’s registered office address.
A director may be not only fined but can also be imprisoned for up to seven years if he or she is found to have made any false statement about, or any material omission from 6(a) and (b).
In this article we have pointed out that a director of a Thai company has personal liability for his acts or omissions under several different relevant laws.
Note that the examples we give above are only a very few of the most general legal liabilities applicable to all directors – there is a multitude of others.
Furthermore, there are many other such liabilities that may be applicable to a director, depending on the type of activity in which the company engages.
Thus, it highly advisable that directors be aware of all of the legal liabilities applicable to their company so that they may exercise proper caution to avoid incurring personal liability.
Duensing Kippen is a multi-service boutique law firm specializing in property and corporate/commercial matters and arbitration and litigation proceedings arising therefrom. It is also the only firm in Thailand with three Members (MCIArb) of the Chartered Institute of Arbitrators. Duensing Kippen is also the only such firm in Thailand that compliments its property and corporate/commercial legal expertise with a core tax law practice. Duensing Kippen can be reached by email to phuket@duensingkippen.com. For more information visit duensingkippen.com