A Guide for Company Directors in Thailand

While the shareholders are the owners of the company, the directors are appointed to steer and oversee its operations and are therefore in control of managing the company’s business affairs.

Under Thai law, every company must have at least one (1) director. The director may be either Thai or foreign and is not required to be an ordinary resident of Thailand. A company may choose to appoint multiple directors to collectively manage the company’s business affairs, together referred to as the “Board of Directors”.

The powers and authority of company directors are governed by the Thai Civil and Commercial Code B.E. 2535 (1992) (as amended) (the “Civil and Commercial Code”). Additional provisions concerning directors’ powers, responsibilities, and procedures may also be set out in a company’s Articles of Association. 

A director’s key responsibility is to maintain a clear understanding of the company’s activities at all times and to properly implement and enforce the resolutions of the shareholders’ meetings. In exercising their duties, directors must carefully consider how any proposed actions may affect the company, particularly where significant financial matters are involved. Directors are expected to be active and engaged in board meetings, to question management and staff when necessary, and to obtain professional advice where appropriate to ensure that decisions are made on an informed basis.

This guide summarises key provisions of the Civil and Commercial Code and highlights the most relevant powers, duties, and liabilities of directors in Thailand. It does not, however, address potential liabilities of directors under other laws (for example, the Thai Penal Code or sector-specific legislation). Should you require further information or specific advice on directors’ duties under Thai law, please do not hesitate to contact us. We hope you find this guide useful.

What is a director?

Under Thai law, a director is appointed by the company’s shareholders and registered with the Department of Business Development (“DBD”) to manage the company and provide overall direction.

Directors are responsible for running the company in line with decisions of the shareholders’ meetings, the Articles of Association (“AoA”), and all applicable laws, including the Thai Civil and Commercial Code (“CCC”).

A director oversees the day-to-day management of the company. Directors may or may not be shareholders themselves, but they must always act in the best interests of the company. This means acting honestly, making informed decisions, and exercising the level of care and diligence that a reasonable person would apply in similar circumstances.

In practice, typical responsibilities include:

• Setting and implementing company strategy and policies;
• Preparing and filing documents with the DBD and other government agencies;
• Calling and conducting shareholders’ meetings, both annual and extraordinary; and
• Keeping proper company records and statutory books as required by law.
• Directors are expected to stay informed about the company’s activities, question management where necessary, and seek professional advice when issues are complex or unclear. 

Requirements for directors

Under the CCC a private limited company must have at least one (1) director. 

The CCC sets out the minimum qualifications for directors of companies as follows:

• A director must be a natural person who is at least 20 years old;
• A director must not be incapacitated; and
• A director must not be undischarged bankrupt.

Although there is no statutory requirement for a director to be ordinarily resident in Thailand, we usually recommend that, for practical reasons, at least one director of the company is available for in-person meetings with government agencies and banks and can sign documents when required.

Luther Comment: In Thailand, wet-ink signatures of directors are still commonly required in practice. For certain filings and governmental procedures, Thai authorities may also request a copy of the director’s work permit where the relevant documents are signed by a foreign director. To avoid such practical complications and delays, we generally recommend appointing at least one (1) Thai director

In addition to the statutory rules and regulations set-out in the CCC, a company may regulate additional director-related matters in its AoA. For example, the AoA may stipulate that directors must hold a certain number of shares, or determine the minimum and/or maximum number of directors. 

The company is generally free to include additional qualifications, powers, or procedures for directors in its AoA, as long as these do not contradict the mandatory requirements under Thai law.

Appointment of directors

The company’s first directors are usually chosen by the persons who incorporate the company (so-called promoters) and are named in the application for registration of the company. Other directors are generally appointed by an ordinary resolution of the shareholders at a general meeting.

Removal, retirement and resignation of directors

The shareholders of a company may remove any director by passing an ordinary resolution during a general meeting and may also appoint another director by ordinary resolution.

At the first ordinary meeting after the registration of the company and at the first ordinary meeting in every subsequent year one-third of the directors, or, if their number is not a multiple of three, then the number nearest to one-third must retire from office. The company’s AoA usually state that a director is eligible for immediate re-election by the shareholders.

A director may resign at any time by tendering his/her resignation in writing to the company. The resignation will take effect on the date the resignation letter is received by the company. A director who resigns may notify the registrar of his/her resignation.

Under the CCC, a director shall vacate office if:

• The director becomes bankrupt; and
• The director becomes incapacitated.

In addition to these grounds, a company’s AoA may set out additional grounds on which a director may be compulsorily be removed from his/her position.

When there is a change of a director, the company is required to notify and register the change with the DBB within 14 days from the date of such change.

Powers of directors

The directors of a company are responsible for managing the company under the control of the general meeting of share- holders and according to the regulations of the company (especially the company’s AoA). A director makes decisions regarding the day-to-day business of the company and must guide and monitor the performance of the company.

The CCC authorises company directors to exercise the majority of the company’s business powers. This includes the company’s ability to take out loans and enter into contracts, initiate legal proceedings, hire staff, and grant security over the company’s assets.

Directors can exercise these powers by passing a resolution, also commonly known as a board of directors’ resolution. Directors’ resolutions are required under the CCC for certain matters such as determining the amount of dividend to be paid to shareholders or approving share transfers (if required by the company’s AoAs). Unless otherwise provided by the regulations of the company, the directors have the following powers as described in the CCC:

• The subsisting directors may act notwithstanding any vacancy among them but, if and so long as their number is reduced below the number necessary to form a quorum, the subsisting directors may act for the purpose of increasing the number of directors to that number, or of summon a general meeting of the company but for no other purpose. The directors may fix the quorum necessary for the transaction of business at their meetings and unless so fixed the quorum shall (when the number of directors exceeds three) be three.
• Questions arising at any meeting of directors are decided by a majority of votes, in case of an equality of votes the chairman has a casting vote. A director may at any time summon a meeting of directors.
• The board of directors may conduct their meeting by means of communication technology, which must be in accordance with the laws on electronic conferencing.
• The directors may elect a chairman for their meetings, and fix the period for which he is to hold office, but if no such chairman is elected, or if at any meeting the chairman is not present at the time appointed for holding the same, the directors present may choose one of their members to be chairman of such meeting.

Further, a director of a company may delegate any of their powers to managers or to committees consisting of members of their body. Every manager or committee shall, in the exercise of the power so delegated, conform to any order or regulation that may be imposed on them by the directors. It is not compulsory under the law for a company to appoint a managing director.

If a company has multiple directors, the conditions under which they are authorised to represent and legally bind the company must be clearly defined and registered with the DBD. 

Common structures for this authority include:

• Individual authority: Any director has the power to sign for and bind the company.
• Joint authority: Documents must be signed by two or more specified directors together.
• Specific or combined authority: A hybrid model, where a variety of regulations are applicable. For example, contracts over a certain value may require joint signatures, while a single director can handle administrative filings.

Legal duties of directors

Given the wide range of powers that the directors enjoy over the affairs of the company, the CCC imposes a number of legal duties on directors to ensure that they act properly and in the best interest of the company.

The duties of a director can be broadly divided into three categories:

• Statutory duties;
• Fiduciary duties; and
• Duties of care, skill and diligence.

Statutory duties

In conducting their business, the directors must apply the diligence of a careful businessman. In particular they are jointly responsible:

• For ensuring that shareholders actually make their share payments;
• For the existence and regular keeping of the books and documents prescribed by law;
• For the proper distribution of the dividend or interest as prescribed by law; and
• For the proper enforcement of resolutions of the general meetings.

Without the consent of the general meeting of shareholders, a director must not undertake commercial transactions of the same nature as, or in competition with, those of the company, either on their own behalf or on behalf of a third party. Nor may they be a partner with unlimited liability in another business carrying on the same type of business as, or in competition with, that of the company.

Fiduciary duties

The fiduciary duties which every director owes to a company essentially concern the duty to act in good faith. This duty includes:

• Acting with the same level of care and attention as a prudent businessperson would (duty of care);
• Complying with the laws, objectives, AoA and resolutions of the board of directors and the shareholders (duty of obedience); and
• Acting in the interest of the company and avoiding conflict of interest and competitions with the company, unless consent has been given (duty of loyalty).

Duties of care, skill and diligence

The level of skill may vary with regard to the activities of the company, and a distinction may be made between 
non-executive and executive directors.

Establishing, whether a director is careful does not depend on his/her qualification or the activity of the company. The director should take business decisions after taking all available information into account and act with the standard of care that can reasonably be expected of a person who carries out the particular functions which he/she has in relation to his/her company. 

The necessary standard of care is an objective one. It is determined by looking at a fictive reasonable director in the same position.

Directors are permitted to delegate their powers and to trust their delegates, as well as other directors, to perform their duties properly. Furthermore, directors may rely on reports, statements, financial data and other information prepared or supplied by employees and professional advisers, as well as expert advice given by these individuals, provided that the directors have reasonable grounds to believe them to be reliable and competent.

However, this only applies where there is no reasonable cause for suspicion. A director who relies on others must act in good faith and make proper inquiries where the circumstances indicate the need for them. They must also not have knowledge that their reliance is unwarranted. Furthermore, directors are generally not required to supervise their fellow directors and cannot usually be held accountable for their actions or inactions.

Directors must exercise reasonable diligence when carrying out their duties. The term “diligence” does not have a clear-cut definition. What is reasonable may depend on the type of director and the activity of the company.

To comply with these duties, directors must ensure that they:

• Act honestly, carefully, and with due skill in dealing with the company’s affairs and in representing the company towards third parties;
• Prioritize the interests of the company, taking into account the interests of shareholders and creditors, even when these may conflict with their own personal interests;
• Understand and comply with their legal obligations under the CCC, as well as the company’s AoA and internal regulations;
• Remain informed of the company’s financial position and performance, ensuring that the company maintains proper accounting records, meets its obligations as they fall due, and does not incur liabilities it cannot discharge;
• Not permit the company’s business to be conducted in a manner likely to cause substantial loss to the company or its creditors;
• Use information obtained in their capacity as directors properly, and not for personal gain or to the detriment of the company; and
• Avoid conflicts of interest and make full disclosure of any material personal interest that may influence their participation or voting in board decisions.

Failure to comply with directors’ duties

Directors must ensure that they comply with their duties under the CCC and other relevant laws such as the Labour Protection Act B.E. 2541 (1998). In addition, they must also ensure that the company complies with its legal obligations. The Act Prescribing Offences Related to Registered Partnerships, Limited Partnerships, Limited Companies, Associations and Foundations, B.E. 2499 (1956) imposes specific penalties on directors if a company fails to comply with the CCC.

In general, directors are not personally liable to third parties, provided they act within the scope of their authority and do not breach their fiduciary duties. However, if there is a breach of directors’ duties under the CCC causing damages to the company, the company or, in case the company refuses to act, any of the shareholders may claim compensation from the directors. Such claims may also be enforced by the creditors of the company in so far as their claims against the company remain unsatisfied.

The liability of the directors of a limited company may be unlimited; in such case, a statement to that effect must be inserted in the memorandum. The unlimited liability of a director terminates at the expiration of two years after the date at which he ceased to hold office. Taking out Directors’ and Officers’ (D&O) Liability Insurance is a popular form of protection. 

When the acts of a director have been approved by a general meeting, such director is no longer liable for the said acts to the shareholders who have approved them, or to the company. Shareholders who did not approve of such acts cannot enter their action later than six months after the date of the general meeting on which such acts were approved.

Practicality for the change of director

Appointment of new directors

As a general rule under Thai law, directors are appointed and removed by the shareholders.

The board of directors may appoint a replacement director (i.e. to fill a vacancy) only if and to the extent expressly authorised under the AoA. Such board appointment is typically temporary and must be ratified at the next shareholders’ meeting.

Termination of director status

A director’s position may terminate by voluntary resignation or removal by the company.

In the case of voluntary resignation, no shareholders’ meeting is required, provided that the resigning director submits a signed resignation letter clearly declaring the termination of directorship. The resignation becomes legally effective upon registration with the DBD.

In the case of removal by the company, a shareholders’ resolution is required. The board of directors does not have authority to remove a director, unless otherwise ordered by a court or expressly permitted under the AoA.

If no replacement director is appointed, the resignation letter or shareholders’ resolution, as applicable, must be submitted to the DBD as supporting evidence for the registration of the change.

We are able to assist in ensuring full compliance with the CCC and other laws. This includes advice and training on the rights and responsibilities of company directors to help you with your day-to-day work and minimise compliance risks. We would further be happy to assist you with general compliance matters, such as accounting, payroll, corporate secretarial services and tax compliance, as well as general legal and tax advice. We hope we can be of assistance to you. Should you have any questions, please do not hesitate to contact us.