Doing Business in Thailand

For reason I cannot come to understand many foreign investors view Thailand as a place where you can do business as you want without having to worried of the potential consequences. Nothing could be farthest from the truth than this belief.

Owning a business through a private limited company is in generally quite safe because as a shareholder your liability will be limited to the amount of the shares you own. If you have paid your subscription to the capital of the company in full, and if you can prove it then you are out of the woods. This will be true as long as you do not become a director or an officer of the company you are a shareholder off.

 While the terms of director is self explanatory the concept of officer is not really defined. In a nutshell an officer is any director or other employee of the company who is involved in the company decision-making or attributed special powers or duties by the Board.

While being a Director or an Officer of your company has advantages it is not a free ride and the position comes together with a lot of potential responsibilities and liabilities as directors and officers can be held both civilly and criminally liable to persons injured by their actions or their failure to act.

 Not only are Directors liable towards the company shareholders, suppliers, employees but they may also become liable towards third parties and the government.

Broad Principles applicable to the Liability of Directors of a Thai company 

 The following principles are applicable:

1. Directors and officers liability may be civil or criminal.
2. On a civil point of view, while the company liability is limited the director liability may be unlimited
3. On a civil point of view directors liability extend to a period of two years after the date of their resignation
4. On a criminal point of view and according to Tillike that keeps tab on this matter they were at end of July 2007 “eighty-one laws imposing criminal penalties on directors and officers in Thailand. written into statutes covering such fields as banking and finance, commerce and industry, education, intellectual property, labor and tax, to name a few.” 
5. Directors or Officers responsibility may result from their actions, their omissions (failure to act) in some case from their negligence.
6. Worth, Directors and Officers responsibility may also streams from the actions or omissions of their subordinate staff even if the Directors or Officers were not directly responsible.

 Duties and Obligation of Directors or Officers of a Thai Company

 The main duties of Directors are as follows:

1. Directors must be diligent and always act with due care in the interest of the company. For example, Directors are among other responsible to insure that he capital has been paid up when it is declared so
2. Directors or Officers must not be involved in decision were they have a conflict of interest
3. Directors should not forget the company shareholders and make sure that their decisions are validated by the company shareholders and or the Board. A company or its shareholders may not sue its Directors or Officers for actions that have been approved by the company.
4. While Directors or Officers of public and private companies have similar duties and obligations Directors and Officers of public companies will be held to a higher standard of care.

For an example of provisions which create a criminal liability of companies Directors or Officers please read my post Thailand Taxes Reporting Requirements and Sanctions and you will notice that as a Director or Officer your criminal liability may result from an act as simple than failing to fulfill a reporting requirement on time.

Overall doing business in Thailand is as complex than anywhere else and anyone becoming Director of a Thai company should surround himself of qualified advisors that may guide him in the minefield of corporate responsability. 

Note: This post is an excerpt of Rene Philippe Dubout next book: “How to Invest Safely Into Thailand” to be published in January 2010

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact.

Originally posted 2009-11-08 07:06:53.

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