Under the corporate structure of a limited company pursuant to Thai law, directors act as agents of the juristic person and are vested with authority to manage the company’s affairs and bind the company vis-à-vis third parties. However, such authority is inherently accompanied by strict legal duties and liabilities.

In practice, a significant number of business disputes in Thailand—particularly in the context of joint ventures and shareholder disputes—often escalate from claims against the company to claims against directors in their personal capacity. This approach is frequently employed as a strategic mechanism to exert pressure and enhance bargaining leverage in negotiations.

Legal Framework under the Civil and Commercial Code

Statutory Duties of Directors

Section 1168 of the Civil and Commercial Code (CCC) requires directors to conduct the company’s business with due care and in good faith, and to comply with the company’s articles of association and shareholders’ resolutions.

Furthermore, Section 1174 CCC establishes that directors are jointly liable for damage caused to the company if such damage results from acts in violation of law, the company’s articles, or from negligence. This provision reflects a fundamental principle that individual directors cannot evade liability by merely relying on board resolutions. Each director is required to exercise independent judgment and perform duties with due care and good faith.

With respect to violations of law, liability arises where directors undertake or approve actions contrary to applicable laws, including business laws, tax laws, or other relevant legislation. Even where such actions are commercially motivated or yield short-term benefits to the company, compliance with the law remains a fundamental obligation and cannot be waived.

Regarding violations of the company’s articles of association, directors must strictly adhere to prescribed authority and procedural requirements. Actions exceeding such authority or failing to follow required procedures—such as approving transactions without shareholder approval where required—may give rise to liability, even if not unlawful per se.

As to negligence, the law does not shield directors simply because decisions are made in a business context. Directors are expected to exercise the level of care that a person in a comparable position would exercise under similar circumstances. Decisions made without adequate information, disregard of foreseeable risks, or failure to act when action is required may constitute negligence. However, where directors can demonstrate that decisions were made in good faith, based on sufficient information, and within a reasonable business judgment framework, courts may find no negligence.

Notably, liability under Section 1174 is joint among directors. Directors participating in a decision may be jointly liable unless they can demonstrate non-involvement or that they expressly objected and such objection was duly recorded in the minutes. Accordingly, board minutes serve as critical evidentiary documents.

Fiduciary Duties under Thai Law

Although Thai law does not expressly use the term “fiduciary duty,” the concept is recognized through judicial interpretation and application of the CCC.

• First, directors owe a duty of care, requiring informed, prudent decision-making consistent with what a reasonable person in a similar position would do.

• Second, directors owe a duty of loyalty, requiring avoidance of conflicts of interest and prohibiting the use of position for personal gain or for the benefit of related parties. Where conflicts are unavoidable, full disclosure and abstention from decision-making are required.

• Third, directors owe a duty of good faith, requiring actions to be taken in the best interests of the company. Abuse of authority or actions motivated by improper purposes may result in personal liability.

Types of Liability in Business Litigation

Liability to the Company (Internal Liability)

Directors may be liable to the company where their conduct causes damage, including:

• Approval of high-risk transactions without adequate due diligence
• Failure to follow proper procedures (lack of due process)
• Acting beyond authority under law, articles, or shareholder resolutions

Such conduct may constitute breaches of duty of care and good faith.

In practice, liability often arises where transactions lack commercial justification, involve undisclosed related parties, or bypass required approval processes.

Where the company fails to pursue claims, shareholders may initiate a derivative action on behalf of the company, particularly where directors control the company or where governance structures impede independent action.

Liability to Shareholders (Shareholder Claims)

In shareholder disputes, directors frequently become key defendants due to their control over corporate decision-making.

Common allegations include:

• Minority oppression
• Failure to disclose material information
• Preferential treatment of certain shareholders or related parties

Such disputes may lead to challenges against the validity of resolutions, claims for damages, or applications for interim protective measures.

Liability to Third Parties (Third-Party Liability)

While the company is generally liable as a separate legal entity, directors may incur personal liability where:

• Their actions constitute a tort under Section 420 CCC
• They make false representations causing damage
• They act fraudulently or ultra vires

Thai courts apply the principle of “substance over form”, focusing on the actual conduct and intent rather than formal corporate structure.

Where the company is used as a vehicle for wrongful conduct, courts may impose personal liability on directors, effectively preventing abuse of corporate personality.

Judicial Trends in Thailand

Thai courts place significant emphasis on whether directors acted with due care and good faith. Key considerations include:

• Adequacy of information reviewed
• Thoroughness of deliberation
• Existence of reasonable business justification

If directors demonstrate proper process and good faith, courts may decline to find negligence even where losses occur.

Conflict of interest is treated strictly. Failure to disclose or abstain typically results in liability.

In cases involving misuse of corporate structure, courts may apply piercing the corporate veil, holding directors personally liable.

Common Dispute Issues in Thailand

Frequent dispute scenarios include:

• Non-transparent related-party transactions
• Asset transfers during shareholder conflicts
• Resolutions disadvantaging minority shareholders
• Failure to follow approval procedures

These issues are particularly prevalent in joint venture disputes and family businesses, often leading to litigation involving director liability and resolution invalidation.

Litigation Strategies

Claimant Strategy

Claimants often sue both the company and directors to expand liability and increase negotiation leverage.

Common strategies include:

• Alleging bad faith or conflict of interest
• Seeking interim measures (e.g., asset freezing, share transfer restrictions)

These measures serve both legal and strategic negotiation purposes.

Defense Strategy

Directors should focus on demonstrating:

• Compliance with law and governance standards
• Application of the business judgment rule
• Absence or proper management of conflicts of interest

Reliance on expert opinions (legal, financial, valuation) may strengthen the defense.

Ultimately, proving good faith and proper process is central to mitigating liability.

Practical Risk Management Measures

To mitigate liability risks, directors should:

• Maintain detailed and accurate board minutes reflecting decision-making rationale
• Implement formal conflict-of-interest disclosure mechanisms
• Seek professional advice (legal/financial) where appropriate
• Strictly comply with laws and corporate governance rules
• Consider obtaining Directors and Officers (D&O) Liability Insurance

Conclusion

Directors’ liability under Thai law has become increasingly significant in modern business litigation, particularly in complex investment and joint venture structures.

Directors must not only set policy but also operate within a strict legal accountability framework subject to close scrutiny.

Understanding fiduciary duties, ensuring procedural integrity, and maintaining robust documentation and governance systems are essential to mitigating legal risks.

Ultimately, effective risk management enhances confidence among shareholders, investors, and business partners, contributing to long-term corporate stability and sustainability.

Disclaimer

This article is prepared for general informational purposes only and does not constitute legal advice for any specific case. Readers are advised to seek professional legal counsel before relying on this information. The publication of this article does not create a lawyer–client relationship. All rights reserved under the Copyright Act B.E. 2537 (1994).

Author: Pinprapus Chartikavanich
Date: 24 March 2026