Liability of Limited Partner in Thailand

A defining characteristic of the Limited Partnership under the Civil and Commercial Code of Thailand is that it distinguishes between limited partners and managing partners. This is a different situation than with an ordinary partnership where all the partners have joint and unlimited liability. In a limited partnership, the managing partner or partners assume joint and unlimited liability, while the limited partners are only liable up to the amount of their respective contributions. However, there is an important exception whereby a limited partner may be held jointly and unlimited liable where he or she “interferes” in the management of the partnership. According to Section 1088 of the Civil and Commercial Code:

• “If a partner with limited liability interferes with the management of the partnership, he becomes jointly and unlimited liable for all the obligations of the partnership.
• Options and advice, votes given for the appointment or dismissal of managers in cases provided by the contract of partnership, are not considered as interference with the management of the partnership.”

Therefore an interesting legal issue to consider is when a limited partner will be held to have interfered in the management of the partnership. The Thai Supreme Court addressed this issue in Decision No. 2066/2545. The proceedings involved litigation between a corporate plaintiff who sued the Defendant (hereinafter the First Defendant) which was a limited partnership. The Court addressed the matter as follows:

• “The Second Defendant, who is the managing partner, must be held jointly liable with the limited partnership, which is the First Defendant. As for the Third Defendant, this is a partner with limited liability, however the Third Defendant was responsible for delivering goods to foreign countries and received a power of attorney from the First Defendant to make payments by cheque. Furthermore, the Third Defendant also entered into a Memorandum of Understanding, and affixed the corporate seal of the First Defendant and acted in the name of the First Defendant. Therefore, it can be considered that the Third Defendant interfered in the management of the First Defendant. The Third Defendant must therefore be jointly and unlimitedly liable with First Defendant and Second Defendant with regards to the Plaintiff according to the first paragraph of Section 1088…”

Company law in Thailand is complex. Furthermore, different organizational structures may be more suitable for different types of business activity. Foreign investors in Thailand are advised to consult with competent corporate lawyer in Thailand before beginning business operations in Thailand.

 

Category: Business in Thailand, Civil and Commercial Law, Company Law