Status of Directors 

Appointment of Directors: 

The basic requirements for becoming a director in a Thai company are that the director be a natural person twenty years of age or older who is not incompetent or bankrupt. Foreigners and non-residents are generally allowed to act as directors. However, there are certain requirements that a company have a specific number of Thai and/or resident directors.

In contradistinction, however, companies which exist under the Treaty of Amity and Economic Relations between the Kingdom of Thailand and the United States of America are required to have a majority of directors who are American. 

A general meeting of the shareholders of a company is required upon appointing a director. If a position on the board of directors becomes vacant, the remaining directors may fill the vacancy for the unexpired term of that director, provided there is no prohibition by the company's articles of association.

A general meeting of shareholders is also required to remove a director. However, if a director becomes bankrupt or incompetent, he or she may be removed without a general shareholder meeting. 

With regard to public companies, directors are elected for a three year term and Thai law dtipulates that at least one-third of the directors retire annually. Retiring directors are however eligible for re-election. It seems to be common practice in some cases to have all the directors resign each year and then re-elect them. 

Remuneration is required to be paid periodically to directors who are also employees. Directors who also serve as employees are also entitled to compensation and severance pay as well as other benefits that employees are regularly entitled to. Work permits are required for those foreign directors who act as directors in Thailand. If certain documents such as applications for telephone lines or custom card applications are signed by a foreign director, that director must be in possession of a work permit on behalf of the company involved. If this is not done, the signed document may be rejected by the governmental agency concerned and the acting director may also be subjetc to other legal risks. 

Directors who are not acting as employees are entitled only to remuneration approved by the shareholders. They might also be entitled to reimbursement for incurred expenses on behalf of the company.

Responsibilities of Directors. The following are joint responsibilities shared by the directors: the existence and regular keeping of books and documents in accordance with the law; actual payment of shares by the shareholders; the proper distribution of dividends of interest in accordance with the law; and the proper enforcement of the resolutions of the general meetings. 

General powers to manage the company lies with the board of directors, although one or more directors in any sort of combination to manage the company and bind the company by their signatures may be appointed. Detailed in a certificate issued by the Ministry of Commerce are the powers of the directors to bind the company.

Great care must be taken by the directors in regards to conduct and management of the company. 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 must not be undertaken by a director. Thai law also prohibits a director acting as a partner with unlimited liability in other commercial concerns carrying on similar or competing business with that if the main company. However, resolutions may be passed allowing a director to be a partner with unlimited liability in other such business entities, but a general meeting of directors must deem it appropriate.

Civil Liability. The law of agency is the principal body of law that governs the relationship between directors, the company and third persons. A claim against the directors for any harm the directors have caused to the company may be entered on behalf of the company. In most cases the directors are the only people who have authority to enter a claim. The Civil and Commercial code provides that a claim against a director may be initiated by any shareholder or creditor of the company. Such action may be brought by any one or more shareholders with an aggregate of at least 5% of the shares in the case of public limited companies.

If a third person is injured, liability will not fall personally on a director, so long as he has acted within the scope of his proper authority, but will bind the company. If the director has acted without authority or beyond the scope of his authority, and such action has not been approved by the company, then he will be personally liable to the injured third party. If a director's actions falls below the standard of a "careful businessman" then the company will be liable to the third person, but the company may claim indemnity against the director. 

In cases of bankruptcy or liquidation directors have no special liability for a company's debts unless personal injury was caused to the company. In a case such as this, they would be liable as indicated above. In contrast, the 1998 amendment to the Bankruptcy Act states that directors who fail to cooperate with a bankruptcy receiver or planner, fail to submit explanations required, or fail to report false claims or make false statements will be held criminally liable.

Criminal Liability. A showing of intent or negligence must be found regarding persons charged with a criminal act under Thai criminal law. Once a court of law has established to the court's satisfaction that a criminal act has been committed, then the burden of proof shifts to the responsibility of the director to prove his innocence. Failure to act, such as failure to file a required report or a balance sheet will be dealt with by imposition of criminal liability. Criminal liability regarding bad checks signed by a director (including company checks) is commonly imposed. Directors may also be criminally liable for false statements in any official documents which they have signed on behalf of the company. Incidents involving fire or accidents which cause serious injury have sometimes resulted in the arrest of a director. This has been done on the basis the the director's mismanagement has caused the accident or injury. Statute provides discretionary power to prosecute or settle out of court, although most cases are dealt with at the lower level and settled out of court.

Indemnification for civil liability is permissible, but indemnification for criminal liability is void and unenforcable. If an act was ratified or approved by a general meeting of shareholders, then a director cannot be held liable. He is also relieved of liability in any case where a shareholder has voted to ratify his act. On the other hand he does remain liable to shareholders who did not vote in his favor for six months.