In case you are a foreign investor looking to set up a business in Thailand, you should be aware of the legislation relating to naming a director or a board of directors in this country.
The most usual form of business entity utilized by foreign investors in Thailand is the private limited company. Such an entity is managed by a board of directors in compliance with the memorandum of association and the articles of association of the company. The minimum number of directors which is required is one. Private limited companies in Thailand are regulated by the Thai Civil and Commercial Code, which does not provide any regulations that limit the right of foreign citizens to own shares in such an organization. Our law firm in Thailand can offer more information on this matter. You can also rely on us if you need help in setting up a business in Thailand.
How are company directors appointed in Thailand?
The appointment of company directors will begin during the Thai company formation procedure when the shareholders hold their first meeting and prepare the documents needed for incorporation. The procedure of appointing company directors in private companies are rather simple, however, in public companies where the structure of the business is more complex and often includes minority shareholders, a voting procedure in which the directors are nominated can take place. This procedure is completed in order to protect minority shareholders.
Once the directors are appointed, their names must be stated in the Articles of Association of the business, their names must also be recorded with the Trade Register. Also, the persons appointed as directors must file declarations through which they accept their role in the company with the Companies Register.
Our law firm in Thailand can help with the entire business incorporation procedure, including with the preparation of the documents which need to be filed with the Trade Registry.
Directors’ powers in Thai companies
During the general meeting of the shareholders, the director can be granted certain powers which need not be mistaken with their duties and responsibilities. It is important to note that the powers refer strictly to completing activities which lead to meeting the objectives of the company.
Generally speaking, the director of a Thai company must exercise his or her duties with care, due diligence, in good faith and by bearing in mind the best interest of the company. The director must also respect the provisions of the Thai Commercial Law and the bylaws of the company.
It is important to note that shareholders can also act as company managers, as there are no restrictions in this sense.
Thai company directors will be restricted from altering the company’s share capital or amending the business’ statutory documents.
Can foreign citizens by directors of a Thai company?
The Civil and Commercial Code does not impose any regulations relating to the nationality of the directors in a private limited Thai company. It is, therefore, possible for a foreign citizen to become one of the directors or the sole director of a Thai company.
After being named the director of a Thai company, a foreign citizen would need to apply for a work permit with the relevant authorities, even if he or she is not paid for this position.
For foreign citizens who live outside Thailand, a work permit is not required even if the person in question regularly signs documentations for the organization, as long as this is undertaken from outside the country. Our Thai lawyers can provide more details on how to obtain a work permit in the country.
Independent company directors in Thailand
The Thai Company Law also provides for companies to appoint independent directors who can help in various matters which require impartiality. When appointing independent directors, a Thai company must consider the following requirements which must be respected by the appointed person:
- the person can hold shares in the company; however, their quota cannot exceed 1% of the total number of shares issued;
- the person must have not been a director, employees or a delegated employee in a subsidiary of the company for at least 2 years when appointed;
- the person cannot have any family or other relations with other company directors, managers or shareholders;
- the person must prove he or she has not worked in another company which represents the competition or has held more than 1% of the shares in another competing business;
- the person must also prove he or she did not have any work or business relations with a competing company 2 years before being appointed;
- the person must have not been a consultant earning more than 2 million TBH per year in a competing business 2 years prior to the nomination.
Our lawyers in Thailand can offer more information on how independent directors can be appointed in a company.
Nominee directors in Thailand
The Thai legislation does not provide or restrict the use of nominee directors in a Thai company. This is often the choice of foreign investors who cannot be present in the country and who decide to hire a Thai resident or national to take on the role of a director in the company.
The nominee director will be entrusted various actions in the company, most of the times offering fiduciary services being the most important ones.
Our attorneys in Thailand can offer more information about hiring nominee directors for your company.
Duties and responsibilities of directors in a private limited Thai company
According to the Thai Civil and Commercial Code, the duties of the directors of a private limited Thai company consist of:
• Managing the company according to their experience and knowledge;
• Making sure that the payment of shares is made by the shareholders;
• Organizing the keeping of books and documents;
• Distributing the dividend or interest payments;
• Enforcing the decisions made in the shareholder meetings.
Among the responsibilities of the directors of such a Thai company, we would like to mention:
• He or she should not effectuate trading transactions of the same nature and compete with that of the business, either on his or her own account or those of third individuals, without prior consent or decision of the shareholder meeting;
• He or she should not partner with unlimited liability in other companies of the same nature or competing with that of the organization.
FAQ on company directors in Thailand
Here a few of the most common questions related to company directors answered by our Thai attorneys:
1. Can a Thai company have a corporate director?
Yes, Thai companies can also have corporate directors.
2. Can company directors own shares in the company they work for in Thailand?
Yes, company directors can own shares in the company they work for.
3. Must the directors be employees of the Thai company?
There are no restrictions for the directors to be employees of the company they work for, however, there are no requirements for them to be.
4.For how long can a person be a director in a Thai company?
There is no limit of time for a director to serve a private company, however, in the case of public companies, at least one-third of the directors must retire at the annual meeting of the shareholders.
Please get in touch with a Thailand lawyer for more details regarding the legal responsibilities that directors of a Thai company have to meet.