1. Legal Foundation of Director Duties in Thailand

The primary legislation governing directors of private limited companies is the Thai Civil and Commercial Code, particularly:

• Sections 1144–1170 CCC – Governance structure, appointment, and authority of directors
• Section 1168 CCC – Standard of care for directors
• Sections 1169–1170 CCC – Director liability

Although these files are uploaded, this article provides general educational content without quoting or analyzing any specific legal document.

 

2. Key Duties of Directors Under Thai Law

2.1 Duty to Act in Good Faith

Directors must perform their functions honestly, in good faith, and in the best interests of the company. This aligns with fiduciary duties commonly found in other jurisdictions.
Examples of breach:

• Approving a contract that benefits the director personally
• Using company information for personal gain

2.2 Duty of Care (Section 1168 CCC)

Directors must exercise the level of care that a “prudent businessperson” would exercise under similar circumstances.

This includes:

• Adequate supervision of management
• Careful review of financial statements
• Ensuring regulatory compliance

Failure to do so may result in civil liability to the company or shareholders.

2.3 Duty to Comply with the Law and Company’s Articles

Directors must ensure that the company operates within:

• Thai laws and regulations
• The company’s Articles of Association
• Resolutions of the shareholders’ meetings

Examples:

• Filing annual financial statements
• Maintaining correct corporate records
• Ensuring the company complies with licensing requirements

2.4 Duty to Avoid Conflicts of Interest

Directors must not engage in business that competes with the company or misuse their position for personal benefit.
If a conflict arises, the director must disclose it and abstain from voting.

2.5 Duty to Maintain Accurate Company Records

Thai corporate law requires directors to ensure accurate preparation and storage of:

• Shareholder registers
• Directors’ registers
• Minutes of shareholders’ and board meetings
• Annual accounts and balance sheets

Failure to keep proper documents may lead to penalties or liability during audits or disputes.

 

3. Civil Liability of Directors

3.1 Liability to the Company

If directors breach their duties and cause the company loss, they may be personally liable for damages.
Examples:

• Reckless business decisions without proper due diligence
• Improper use of company funds
• Negligent approval of illegal transactions

A company or shareholders can file a civil claim for compensation.

3.2 Liability to Shareholders

Shareholders may sue directors if:

• Their rights are violated
• Directors act beyond their authority
• Directors’ misconduct damages shareholder interests

For instance, issuing shares without shareholder approval may lead to personal liability.

3.3 Liability to Third Parties

Directors may become personally liable when:

• Acting outside the scope of authority
• Signing contracts without proper corporate authorization
• Engaging in fraudulent or negligent misrepresentation

In such cases, third parties may pursue claims directly against the director.

 

4. Criminal Liability of Directors

Thai law imposes criminal responsibility on directors for certain types of misconduct. These typically involve:

4.1 Accounting and Corporate Filing Violations

Failure to:

• Submit annual financial statements to the DBD
• Keep correct accounting records
• Maintain statutory registers

can result in fines and, in some cases, imprisonment.

4.2 Fraud, Embezzlement, and Misappropriation

Directors may face criminal prosecution under Thai Penal Code provisions for:

• Fraud
• Embezzlement
• False documentation
• Misuse of corporate property

Criminal penalties include imprisonment, fines, or both.

4.3 Breach of Specific Regulations

Depending on the industry, directors may also be liable under:

• Tax laws
• Labour laws
• Environmental regulations
• Consumer protection laws
• Anti–Money Laundering laws

Non-compliance may trigger both corporate penalties and personal liability.

 

5. Administrative Penalties

Directors may also encounter administrative sanctions from regulatory bodies such as:

• Department of Business Development (DBD)
• Revenue Department
• Social Security Office

Penalties can include:

• Fines
• Blacklisting
• Disqualification from acting as a director

 

6. How Directors Can Reduce Legal Risk in Thailand

6.1 Maintain Accurate and Timely Records

Ensure proper preparation and filing of:

• Financial statements
• Company meeting minutes
• Corporate books
• Minutes meeting

6.2 Implement Internal Controls

Adopt clear systems for:

• Approvals of expenditures
• Contract reviews
• Compliance checks

6.3 Avoid Personal Conflicts of Interest

Directors should disclose any potential conflicts and avoid participating in related decisions.

6.4 Seek Professional Guidance

Engage legal, tax, and accounting experts to support compliance, especially for foreign directors unfamiliar with local regulations.

6.5 Document Decision-Making

Maintain clear board minutes demonstrating:

• Reasonable business judgment
• Consideration of risks
• Transparency

This can be crucial evidence in defending against potential claims.

 

7. Common Pitfalls for Foreign Directors in Thailand

Foreign directors often face challenges such as:

• Lack of familiarity with Thai reporting deadlines
• Signing documents without understanding liability implications
• Allowing nominee structures that violate Thai law
• Assuming that being “a foreigner” shields them from responsibility

Under Thai law, a director Thai or foreign can be held personally accountable for misconduct or negligence.

 

Frequently Asked Questions (FAQ)

 

1. Can a foreigner be a director of a Thai company?

Yes. Thai law allows foreigners to serve as directors, but they must comply with all obligations and liabilities applicable to directors.

2. Can directors be personally liable for company debts?

Generally, no—unless they acted beyond their authority, engaged in fraud, or breached their duties. Certain regulatory penalties may also attach personally.

3. What happens if directors fail to file annual financial statements?

The company and its directors may face fines, and continued non-compliance may trigger further administrative or criminal penalties.

4. Are nominee directors liable?

Yes. Even if appointed as a “nominee,” the director is legally responsible for all actions taken in that role.

5. Can shareholders sue directors?

Yes. Shareholders may bring a civil claim if directors breach their duties or act contrary to the company’s interests.

 

Contact Lex Bangkok

Understanding director duties and liabilities under Thai law is essential for proper corporate governance, especially for foreign-owned companies. If you need assistance with company compliance, corporate structuring, director obligations, or risk mitigation, Lex Bangkok’s legal team is ready to help.

Contact us today for professional guidance on Thai corporate law.

info@lexbangkok.com