Limiting the Authority of a Company Director

When foreign investors do business in Thailand, it is often more expedient to hire a Thai person to serve on the board of directors along with the foreign directors. Generally, Thai law does not require a limited company to have a Thai national to serve on the board of directors. Furthermore, maintaining control of the board of directors is one manner by which foreign investors protect their interests in a majority Thai-owned company. Nevertheless, there are a few different situations where having a Thai national serving on the board of directors is helpful. For example, the most common situation is where a foreign investor has just established a company, but has not yet secured a work permit and subsequently is not able to proceed with his or her own work permit application due to a lack of any directors authorized to endorse the application.

A similar scenario would be a non-resident foreign investor who establishes a company in Thailand, but then requires a local director to operate the company in his or her place. Thai directors are also useful where the foreign director lacks a work permit, but the company requires a license to operate. In such cases, the Thai director can sign off on any required applications on behalf of the company. However, despite the conveniences, most foreign investors may be apprehensive about the idea of sharing control of the company with a Thai director. In cases where appointing a Thai director would be useful, the foreign investors can take certain measures to secure their interests:

A Thai limited company must define the authority of its directors, that is, it must specify the exact name or numbers of directors required to bind the company. When the company is registered, the authority of directors may be specific and may state the any limitations on the authority of each director, such as only one director being allowed to sign for financial or commercial transactions.

The company resolution to open a corporate bank account should clearly specify which director or persons have authority to withdraw money from the corporate bank account.

It is helpful if the board of directors consist of odd number of directors, perhaps with foreign directors outnumbering the Thai directors. In such cases, the company regulations may be drafted to specify which matters must be decided by a majority vote of the board of directors. Assuming the foreign directors outnumber the Thai directors, it would then be possible that foreign directors could outvote the Thai directors every time a resolution of the board of directors must be passed.

Company law in Thailand is quite complex. Foreign investors in Thailand are advised to seek the advice of competent legal counsel before starting business operations in Thailand.

 

Category: Business in Thailand, Company Law, Company Registration