LEGAL CORNER
How liable are company directors
in Thailand?
If a company director operates
the company in accordance
with his authorized power, he is
protected from legal claims of
other shareholders. However,
this protection seizes to exists if
the proper procedures specified
by Thai Law and not strictly
followed.
The Author
Ms. Chulaporn Sam-Arng
Attorney – at – Law
Chulaporn has represented a diverse
group of clients in matters relating
to business law and liaising with
foreign firms. She can be contacted at
chulaporn@juslaws.com
Jus Laws & Consult International Law
Firm is an innovative, independent
international law firm, dealing almost
exclusively with international clients,
who seek legal advice whether in
business affairs, corporate matters, tax
issues, risk management, structuring and
restructuring of company entities suitable
to different types of business, criminal
and civil disputes, litigation or arbitration
in the Kingdom of Thailand. Our offices
are in Bangkok, Phuket and Samui.
20
“Company Director + Liability +
Thailand”
A lberto, an authorized Director of his
own company, is googling the above
combination in a bid to obtain some
urgently-needed legal information, having
just received an official copy of a complaint
which cites him as the defendant in a case
against his wife and his friend who are the
other company shareholders. Who would
ever have thought that his beloved wife and
his loyal friend would join forces and turn
against him?!
9 months ago, Alberto was in desperate
need of money after his investments on the
stock market failed to provide returns, and
the final installment of his home loan saw
his bank accounts emptied of every cent.
An ever-increasing pile of unpaid bills did
nothing to ease his financial burden.
What choice did Alberto have but to
mortgage the company’s only asset -the Com-
pany land- as security for a loan agreement
made with a generous friend of a friend.
Being the sole authorized signatory of his
51% Thai-owned Company, Alberto knew
perfectly well that he could conduct this trans-
action himself without so much as consulting
the other shareholders. The language barrier
he would overcome with a little help from
one of his Thai acquaintances. Even his Thai
lawyer, who appeared to be competent and
professional didn’t have any objections.
It seemed almost too easy; the Minutes of
a Shareholders’ Meeting alone would suffice.
These minutes, ratified only by him, would
show a “resolution” of the shareholders to
enter into the loan and mortgage agree-
ments. The legal requirement1 that a written
announcement appear in the newspaper
calling for a meeting of the shareholders
could be side-stepped by fabricating the
requisite documents while simultaneously
avoiding the headache of involving the other
2 shareholders. It took Alberto no time at all
to complete this single transaction, and he
soon received the loan as planned. However,
Alberto was naive in his actions. He did not
have bad intentions but rather he needed the
money and he needed it quick! In his haste,
he completely neglected to comply with the
proper legal procedures and to secure the
concurrence of the other shareholders.
1
Section 1175 of the Civil and Commercial Code B.E. 2535 (TCCC)
2
Section 1170 of TCCC
3
Section 1101 of TCCC
4
Section 1144 of TCCC
5
Section 1169 of TCCC
6
Section 1195 of TCCC
7
Section 25 of the Act on Offenses concerning registered Partnerships, Limited Partnerships,
8
Limited Companies, Associations and Foundations B.E. 2499
Needless to say, it wasn’t long before
the other 2 shareholders discovered the
undisclosed and somewhat unwelcome
transaction. The generous creditor, who
for his part had believed the Minutes of
the Shareholder’s Meeting to be genuine,
decided to foreclose on the arrangement
and recover all of the capital and interest.
Alberto soon realized that his actions had
adversely affected both the Company and
the shareholders. Never had he thought of
himself as a “defendant” in a case. Never
had he thought that his status as Director
could lead him to such wayward actions.
His Google search in the aftermath of the
events, simply verified to him what he had
been afraid of;
that “If a company director operates the com-
pany in accordance with his authorized power,
he does not have any liability to the company
(or the shareholders)2 unless the company direc-
tor agrees to have unlimited liability3 or unless
he exceeds his authorized powers.” 4
He also discovered that “the company
shareholders may claim for compensation
against the directors for injury caused by
them”5 and that “minutes of a Meeting made
from a non-existing shareholder meeting can
be revoked”6.
As if that wasn’t enough, he also learned
that “failure to comply with the procedure to
call for a shareholder meeting could result in a
company director being fined not over 50,000
THB"7 and that “using false Minutes of a Meet-
ing can result in prosecution”8
While Alberto is thrilled with the informa-
tion he gleaned from his internet search, he
also regrets that said information simply con-
firms the content of the well-written complaint
along with his liabilities. He is devastated at
the prospect of a 3 year prison sentence.
Being the Director of a Company in
Thailand means being the only authorized
signatory of that company. Negligent advice
from a lawyer, and at times the belief that a
signature will make things easier, can lead to
a Director facing unfortunate consequences.
Some noteworthy advice is, of course, to
choose shareholders that you can trust and
involve them in every decision. The best
advice, ultimately, is that despite what some
Thai lawyers may say, when in Thailand, you
should always respect Thai Law.