Directors in today’s global market are increasingly being held personally liable for their actions that harm their companies, as well as facing civil and criminal liabilities for failing to comply with the procedures and requirements of various laws. In Thailand, directors of private limited companies face the genuine possibility of criminal sanctions for violations of the Civil & Commercial Code (CCC). Further, there are several Acts for which the violation thereof can result in criminal sanctions, including fines and even imprisonment. Directors can find themselves subject to criminal sanctions for such minor infractions as late filing or inadvertently filling out a form incorrectly.
By accepting the assignment as a director, the director establishes a contractual relationship with the company based on two distinguishable obligations:
Both categories are in the exclusive competence of the director. The obligations relating the functioning of the company pertain to all acts aimed at ensuring the operations of all corporate bodies, to which the director is responsible by law or by the Articles of Association of the company. In this context, the following can be included: the obligation to call the shareholder meeting; the responsibility to prepare and approve the draft budget and to convene the meeting for approval. Furthermore, the obligation to keep accounting records; to announce, register and fulfil the duties of the Business Register. The director is prohibited from acting in conflict of interest with the company or in competition with the latter.
The management obligations indicate all acts aimed to achieve the corporate purpose. For example, the obligation to provide the company with an adequate organizational and accounting structure, to guarantee safety in the workplace and to ensure that the company is acting in accordance with the law. From this point of view, the most important obligation is to act with diligence, i.e. to identify and implement all the necessary measures to take care of the interests of the company.
The scope of this obligation is measured on the basis of two criteria:
In the event of a court judgment, the Judge will evaluate the director’s behavior based on the aforementioned criteria. The level of diligence required from a long-experienced managing director of a multinational company may be different from that of a director of a private company with small turnover volumes.
If the following conditions are fulfilled, a Director is liable of non-fulfilment or incorrect fulfilment of his obligations:
Actions to enforce the liability of a director of a limited liability company can be raised:
Directors can minimize their risks by being aware of their duties and responsibilities and ensuring that they are performed prudently and diligently. Among the steps that a director can take to minimize his liability are the following:
It is notable that the director holds the position of the company’s legal representative according to the Thai Civil and Commercial Code, based on which a lawsuit is in practice often filed together with a lawsuit against the company. For example, in an employee dismissal case, the director may be sued as the second defendant and claiming for compensation due to his authority to make a decision for the aforementioned act on behalf of the company. However, the law sees the director as a legal representative which is granted protection in terms of personal liability to third parties for any act that has been done prudently and diligently within the scope of his authority. By virtue of his legal representation, such action shall be attributed to the company.
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