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Legal Duties and Liability of Directors
A director of a company, under Thai law, is a person who appointed by a shareholders’ meeting and empowered to lead and act on behalf of the company. Companies in Thailand can (and often) appoint more than one director in any combination so to have different roles and be able manage different business functions and activities of the companies.
What does the company director do?
There are certain duties that the company director must do:
- Duty of care: The company director shall act with diligence and caution as an ordinary person undertaking business activities under similar circumstances. The company director shall act in good faith and in the best interests of the company. The director shall ensure that all books and corporate documents of the company are duly recorded and kept as prescribed by law.
- Duty of Loyalty: The company director shall not (i) undertake commercial transactions of the same nature as the company or (ii) be a partner with unlimited liability in another commercial concern carrying on a business of the same nature as the company, and competing with, the company, either on his/her own account or that of a third person unless permitted by the shareholders’ meeting.
- Duty of Obedience: The company director shall ensure that the company’s business activities comply with the laws and regulation. The director shall strictly comply with the company’s Articles of Association.
- Duty of Disclosure: The company director shall provide accurate, suffice and up-to-date information including but not limited to financial and non-financial information, and business operation of the company to the shareholders in a timely manner.
- Other statutory duties: There are other duties stipulated under the laws such as the director shall ensure that the payment of shares is made by the shareholders, the proper distribution of dividends and the proper enforcement of resolution of the board of directors’ meeting or shareholders’ meeting.
What are the legal liabilities of the director?
Under Thai laws, any breach of the director’s duties as set out above could result in director’s personally civil and criminal liabilities and a civil and/or criminal claim may be brought by an injured party (e.g. the company itself, shareholder, creditors, government agencies) against the director which depends on the nature or ground of the dispute/allegation.