The Corporate Veil Under Thai Law
Under Thai law, a company is considered to be a juristic person, meaning that it comes into existence as a result of law. The intention of a company is expressed through a natural person, namely a “Director.” The Director, once appointed by the majority of the shareholders, becomes the representative of the company and is bound by a strict legal duty to perform as described in the Company’s objectives. Any act of a Director therefore, is deemed to be an act of the Company.
However, in the event of litigation, many of those seeking remedies against a juristic person will attempt to “pierce the corporate veil.” The main reason for this is to facilitate the enforcement of a judgment by making the Director personally liable for any damages awarded in a claim, and in doing so likely gain a potential advantage in recovering the proceedings of a judgment.
Piercing the Corporate Veil
Under Thai laws, if a director has been acting in accordance with the company’s objectives, such a director is normally not liable for acts performed on behalf of the company. However, by virtue of a Supreme Court decision, a director or directors may liable to a claimant if the court is persuaded that the Director himself or the Directors themselves:
- Acted in bad faith.
- Acted outside the objectives of the company.
- Used the company solely for the purpose of holding assets without engaging in other business.
When the corporate veil is pierced, Director(s) are personally exposed to any claims. However, commission of any or all of the above acts needs to be explicit or the normal rules will apply.
It is important to bear in mind that when it comes to litigation, a claimant will most likely seek to maximize the probability of recovering their losses by naming as many people as possible as defendants in the litigation. Therefore, good asset protection planning and early advice from an experienced lawyer when doing business in Thailand is your best protection in the business battlefield.
For legal advice or service, please contact us using this form or call us at 02-259-8100.
Category: Business in Thailand, Company Law
About the Author (Author Profile)
Mr. Parin Kienthong is attorney at law at Siam Legal. A graduate of Ramkhamheang University, Bangkok. He is a licensed lawyer and possessed a certificate of Advanced Intellectual Property Law from Lawyer's Council of Thailand with 5 years experience in various field including litigation, bankruptcy, and legal execution.
