Responsibilities of the Board of Directors Under Thai Law

Introduction

In the corporate structure, the Board of Directors (BOD) plays a crucial role as the company’s representative in business operations. The BOD is responsible for acting on behalf of the company and holds significant responsibilities under Thai law.

Responsibilities of the BOD and Due Care

The BOD has duties and responsibilities outlined in various laws, regulations, and the company’s articles of association. Thai law imposes an additional obligation on the BOD to operate the company’s business with the diligence of a careful businessperson, considering the company’s interests and operating under shareholders control. This practice, known as “Due Care,” is a fundamental principle in Thai corporate law, emphasizing the need for careful and prudent business operations.

The Right to Sue the BOD

A limited company in Thailand is a juristic person, separate from its directors and shareholders. Actions performed by the BOD within the company’s objectives and in the company’s name are the responsibility of the company itself. Claims arising from these actions should be made directly against the company, not the BOD.

However, when the BOD’s actions cause damage to the company, the right to sue the BOD for compensation is granted to:

1. The company itself
2. Shareholders
3. Creditors of the company (to the extent that their claims against the company remain unsatisfied)

Third parties can claim damages from the BOD only when the BOD’s actions fall outside the company’s objectives. If the actions comply with the company’s objectives, third parties have no right to claim compensation directly from the BOD.

Burden of Proof for the BOD

In lawsuits brought by the company, shareholders, or creditors, the BOD must demonstrate that they:

1. Exercised due care in business operations, or
2. Their actions were ratified by resolutions of the general meeting

For third-party claims, the BOD must prove that their actions were conducted within the scope and objectives of the company.

The Illegitimacy of Shifting the Burden of Proof to the BOD in Criminal Cases

The Constitutional Court Decision (CCD) No. 12/2555 ruled that laws allowing charges of an offense against the BOD automatically when the wrongdoer is a juristic person were unconstitutional. The CCD ruled that the laws presume the BOD guilty based on status as the one responsible for undertaking the business of such entity that commits an offense, not the actual fact of the case, unless proven not involved in the said entity’s offense, resulting in improperly shifted the burden of proof to the BOD as defendants when the wrongdoer is juristic person, contradicting the principle of presumption of innocence enshrined in Section 29, paragraph 2 of the Constitution of the Kingdom of Thailand. Under the fundamentals of human rights, the defendant shall be proved beyond reasonable doubt by the plaintiff that the defendant is guilty, it is not the duty of the defendant to prove themselves innocent just that he or she is a person responsible for undertaking the business of a juristic person that commits an offense.

Conclusion

The BOD has significant duties and responsibilities under Thai law, including adherence to the company’s scope and objectives. In cases of damages arising from company operations, the right to sue is granted to the company, shareholders, and creditors. Third parties may only sue the BOD for actions outside the company’s scope and objectives. However, direct criminal suits against the BOD have been deemed unconstitutional as they contradict the presumption of innocence principle in the Thai Constitution.

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