Director Rights & Duties in a Company Limited
Duties & Obligations:
The duties of director in a limited company are covered under the Civil and Commercial Code of Thailand (hereinafter referred to as the ‘CCC’). Generally, a company director will be recognized as the agent of the company, to duly conduct business of the Company provided that it is done in compliance with the law and the scope of company’s objective and its’ Articles of Association (‘AoA’).
Director Standard of Care: The duties/responsibilities of a director of a company (as specified under the CCC) are set out in section 1168 paragraph 2 of the CCC, which provides that the directors must in their conduct of the business apply the diligence (standard of care) of a careful business man.
Specific Responsibilities of Directors: The Directors are jointly responsible for the following:
- For the payment of shares by the shareholders being actually made;
- 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.
Obligation re Conflict of Interest: Paragraph 3 of section 1168 of the CCC prohibits a director from undertaking 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, nor may he/she be a partner with an unlimited liability in another concern carrying on business of the same nature as and competing with that of the company. The reason is to protect the company from a conflict of interest between company and a director’s personal interest.
The CCC also provides that ‘in a matter in which the interests of a juristic person (i.e. the company) conflict with those of the representative of the juristic person (i.e. the director), the latter has no representative power’.
Obligation regarding Calling an EGM: The Directors must without delay summon an EGM meeting when the company has lost half the amount of its capital, in order to inform the shareholders of such loss.
Summing an EGM if Written Request made by Shareholders: An extraordinary meeting of the shareholders (EGM) must be summoned if a requisition to that effect is made in writing by shareholders holding not less than one-fifth of the shares of the company. The requisition must specify the object for which the meeting is required to be summoned.
Moreover, the CCC imposes an obligation on the directors by providing that ‘Whenever a requisition for the summoning of an extraordinary meeting is made by the shareholders according to the last preceding section, the directors shall forthwith summon such meeting’.
Balance Sheet: A balance-sheet (financial statement) must be made at least once every twelve (12) months, at the end of such twelve months as constitute the financial year of the company.
The financial statement/balance sheet must contain a summary of the assets and liabilities of the company and a profit and loss account. The balance-sheet must be examined by one or more auditors and submitted for adoption to a general meeting of the shareholders within four (4) months after its date.
A copy of it must be sent to every person entered in the register of shareholders (as stated on shareholder register & form BorOrJor5) at least three (3) days before the general meeting of shareholders. Copies must also be kept open at the offices of the company during the same period for inspection by the shareholders. On submitting the balance-sheet, the directors must lay before the general meeting of shareholders a report showing how the business of the company was conducted during the year under review (i.e. the previous financial year). Any person is entitled to obtain from a company a copy of its latest balance-sheet on payment of a sum not exceeding twenty Baht. It shall be the duty of the directors to send to the Registrar at DBD a copy of every balance sheet not later than one month after it has been adopted by the general meeting.’
Books and Accounts: The directors must cause true accounts to be kept:
- Of the sums received and expended by the company and of the matters in respect of which each receipt or expenditure takes place; and
- Of the assets and liabilities of the company.
Maintaining Records of Minutes, Proceedings and Resolutions: The directors may cause minutes of all proceedings and resolutions of meetings of shareholders and directors to be duly entered in the books which shall be kept at the registered office of the company. Any such minutes signed by the chairman of the meeting at which such resolution were passed or proceedings had, or by the chairman of the next succeeding meeting, are presumed correct evidence of the matters therein contained, and all resolutions and proceedings of which minutes have been made are presumed to have been duly passed.
Any shareholder may at any time during business hours demand inspection of the above documents.
Auditor Vacancy: If any casual vacancy occurs among the auditors, the directors shall forthwith summon an extraordinary meeting (EGM) for the purpose of filling the vacancy.
The liability of the directors can be unlimited provided that this shall only occur if such a statement has been inserted in the Company’s Memorandum of Association. Claims against the directors for compensation for injury caused by them to the company may be made by the company or, if the company refuses to take such action then the shareholders can take such legal action. Claims against the directors may also be enforced by the creditors of the company provided that their claims against the company remain unsatisfied.
In relation to director liability, it is worth noting that when the director’s actions have been approved by a resolution of the general meeting of the shareholders (i.e. a duly called Annual General Meeting or ‘AGM’ or an Extraordinary General Meeting or ‘EGM’), then the director is no longer liable for the said acts to the shareholders or the Company as they have been approved.
On the other hand, if a company director acts beyond the objectives and Articles of Association of the company or if no ratification/approval is obtained from the general meeting of shareholders, then such action will not bind the company under section 66, and the director must be personally liable for any loss in accordance with sections 76, 1167 of the CCC.
A company director when exercising their powers as a director of the company must act according to the standard of diligence of a careful business person. The diligence of careful business person requires the director to have higher degree of care rather than that of an ordinary person. When a director applies the standard of diligence of a careful business person, the director has no civil liability for loss or damage occurring to the company.
Criminal Liability of Directors: According to Thai law, directors can be held criminally liable for several offences. In some cases a director will automatically be held liable in case the company violates a specific statute. They can be held jointly liable with the company. Some examples of this can be seen with tax obligations or violations of Thai labour law.
Rights of a Director
Initiate Legal Relationships: A director is entitled to initiate legal relationships and undertake legal acts with third parties in the name of company under the control of the general meeting of the shareholder.
Note: If a director (authorized director) wishes to execute a contract or document on behalf of a company then he/she should be careful to do so in compliance with the signing conditions as stated in the Company’s latest Affidavit of Company Registration (as held by the DBD). If they are unable to sign themselves then they should give a power of attorney (PoA) to a third person to sign on their behalf (this PoA should also be executed in compliance with the Company’s Affidavit of Company Registration) but note that certain official documents can only be executed by the Authorized Directors and not third parties authorized by a PoA.
Resignation: A director has a right to resign if there will still be at least one director remaining. According to section 1153 of the CCC ‘any director who wishes to resign from his/her post shall tender his resignation letter to the company. Unless the letter provides otherwise, the resignation shall take effect from the date of resignation letter reaches the company. A director who resigns may also notify the Registrar at the DBD of his resignation.
Note: Once a director resigns then the Company’s Affidavit of Registration will need to be updated at the DBD to reflect this change.
Right to Fill Vacancies on the Board of Directors: Any vacancy occurring in the board of directors otherwise than by rotation (i.e. retirement) may be filled up by the directors, but any person so appointed shall retain his/her office during such time only as the vacating director was entitled to retain the same.
Right to Summon Board of Director Meeting: A director may at any time summon a meeting of directors.
Right to appoint Chairperson: The directors may elect a chairperson of their meetings, and fix the period for which he/she is to hold office as chairperson, but if no such chairperson is elected, or if at any meeting the chairperson is not present at the time appointed for holding the meeting, the directors present may choose one of their members to be chairperson of such meeting.
Delegation of Power: The directors 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.
Calling an EGM of the Shareholders: The directors may summon a extraordinary general meeting of the shareholders whenever they think fit.
Chairing Shareholder Meetings: The chairperson of the board of directors shall preside at every general meeting of shareholders (every AGM and EGM). However, if there is no such chairperson, or of at any general meeting he/she is not present within fifteen minutes after the time appointed for the holding the meeting, the shareholders present may elect one of their members to be chairperson.
Calls on Shareholders for Payment of Balance of Share Price:
Unless otherwise decided by a general meeting of the shareholders, the directors may make calls upon the shareholders in respect of all money being due on their shares.
Numbers of Directors:
There must be a minimum of 1 authorized director of the Company. In relation to setting the setting the number of directors this must be set by the general meeting of shareholders (AGM or EGM).
Appointment and Removal of a Director
The CCC provides that a director can be appointed or removed only by a general meeting’ (of the shareholders i.e. duly called EGM or AGM).
However, if a general meeting (of the shareholders) removes a director before the expiration of his/her period of office, and appoints another person in his/her stead, the person so appointed shall retain his/her office during such time only as the removed director was entitled to retain the same.
Directors don’t have a right to remuneration but they can be given remuneration if it is approved by a resolution passed at the general meeting of shareholders (i.e. AGM or EGM).