Thailand remains one of Southeast Asia’s most attractive investment destinations due to its strategic location and well-developed infrastructure. Foreign investors commonly establish private limited companies under Thai law to conduct business in the country. While a Thai company is recognized as a separate legal entity, its directors play a central role in managing the company’s affairs and ensuring compliance with applicable laws. Herrera and Partners H&P dispute resolution team and litigation lawyers in Thailand have prepared a summary of the relevant aspects of the liabilities of directors in companies incorporated in Thailand.
Many foreign investors mistakenly assume that directors enjoy complete protection under the principle of limited liability. In reality, Thai law imposes a number of statutory duties on directors, and personal liability may arise where directors act improperly, negligently, or in breach of their legal obligations.
Directors’ Duties under Thai Law
The duties of directors are primarily governed by the Thai Civil and Commercial Code, together with other relevant legislation such as Criminal Code, and The Act Prescribing Offences Relating to Registered Partnerships, Limited Partnerships, Limited Companies, Associations and Foundations B.E. 2499 (1956).
In general, directors owe fiduciary duties to the company and are expected to:
– act honestly and in good faith;
– exercise reasonable care, skill, and diligence;
– act within the scope of the company’s objectives and the authority granted by law and the company’s Articles of Association;
– avoid conflicts of interest; and
– ensure that the company complies with all applicable legal and regulatory requirements.
Directors are expected to act in the best interests of the company rather than for their own personal benefit or the benefit of individual shareholders.
Although shareholders generally benefit from limited liability, directors may become personally liable in several situations, such as:
- Breach of Fiduciary Duties
If a director intentionally or negligently causes damage to the company by acting beyond his or her authority, engaging in self-dealing, or failing to exercise reasonable care, the director may be liable to compensate the company for the resulting losses.
Examples include approving transactions that are clearly detrimental to the company, misappropriating company assets, entering into transactions involving undisclosed conflicts of interest, or failing to properly supervise the company’s management where such failure results in reasonably foreseeable losses.
Such liability may extend to both civil liabilities owed to the company and criminal liability where the director’s conduct satisfies the elements of a criminal offence under applicable law.
- Liability Towards Third Parties
Directors may also incur personal liability towards third parties where their own wrongful conduct causes damage.
For example, where a director knowingly makes false representations to induce another party to enter into a contract, or commits fraudulent or negligent acts during the course of business, the injured party may have a direct claim against the director in addition to any claim against the company.
In addition, where a director acts beyond the scope of their authority or outside the company’s stated objectives and such conduct causes civil damage, the director may also incur personal civil liability or be held jointly liable with the company, depending on the circumstances.
Accordingly, although under Thai law a company is generally liable separately from its directors, certain violations may give rise to concurrent liability, allowing regulators to pursue both the company and the responsible directors simultaneously.
To minimize personal exposure, directors should adopt sound corporate governance practices. Foreign directors who reside outside Thailand should also ensure that they remain adequately informed about the company’s operations, as delegation of day-to-day management does not automatically relieve directors of their statutory responsibilities.
In conclusion, serving as a director of a Thai company carries significant legal responsibilities in addition to commercial decision-making. While the principle of separate corporate personality generally protects shareholders, directors themselves may face personal liability where they breach fiduciary duties, violate statutory obligations, or engage in wrongful conduct.
Accordingly, both Thai and foreign directors should maintain robust corporate governance practices and seek legal advice whenever significant legal or commercial issues arise. Understanding the scope of directors’ duties under Thai law is essential not only to minimize legal risks but also to promote transparency, accountability, and sustainable corporate management.
If you are looking for legal advice on protecting directors and minimizing liabilities in companies in Thailand, please contact our Bangkok law firm at info@herrera-partners.com
