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Director’s Criminal Liabilities

Summary: Impact of the Act Amending Provisions of Laws Relating to Criminal Liability of Juristic Person Representatives (effective 12 February 2017) on Directors’ Criminal Liabilities Under the Act Prescribing Offences Related to Registered Partnerships, Limited Partnerships, Limited Companies, Associations, and Foundations B.E. 2499 (1956)

It is commonly known that apart from the duties to manage a company under the company’s scope of objectives and under the control of shareholders’ meetings, the directors of a limited company also have duties under the law with which they must comply. These duties are set out in the Civil and Commercial Code (“CCC”).

For instance, the directors must, in their conducting of day-to-day business, apply diligence as would a sensible businessperson with regard to, in particular, the payment of shares, the creation and regular keeping of books and documents, the proper distribution of dividends to shareholders, and the proper implementation of the resolutions of the general meeting of shareholders. Should a director fail to comply with the duties as prescribed under the CCC, such director will be held criminally liable under the Act Prescribing Offences Related to Registered Partnerships, Limited Partnerships, Limited Companies, Associations, and Foundations B.E. 2499 (1956), as amended (the “Act on Offences of Partnerships and Companies”) which is different from the CCC where no criminal sanctions are prescribed.

In addition, the Act on Offences of Partnerships and Companies also prescribes criminal penalties for directors in an event the company fails to comply with the provisions of this Act. It is this issue which gives rise to the controversy in relation to the legal presumption that directors are to be jointly criminally liable when a company contravenes the provisions of this law by referring to several judgments of Constitution Tribunals which have laid down guidelines and reversed judgments of the courts of first instance forbidding the use of legal presumption used in other areas of law in the same manner such that the directors will be held jointly criminally liable with the company.

For this reason, the Act Amending Provisions of Laws Relating to Criminal Liability of Juristic Person Representatives B.E. 2560 (2017) (“Act Amending Criminal Liability of Juristic Person Representatives”) has been enacted becoming effective as of 12 February 2017 with the aim of removing legal presumption for directors on joint criminal liability with a company set out in 76 pieces of legislation, including the Act on Offences of Partnerships and Companies mentioned above.

The Act Amending Criminal Liability of Juristic Person Representatives has amended Section 25 of the Act on Offences of Partnerships and Companies with the aim of abolishing the legal presumption of absolute liability of directors when the company commits an offence under Section 7-24 whereby the director was barred from proving otherwise. This section of the Act on Offences of Partnerships and Companies has been amended in such a way that the directors will only be jointly criminally liable with the company if the wrongdoing of the company is caused by the orders or actions of the directors or in the case that those directors had a duty to order or act, but omitted ordering or acting against what caused the company to commit the offence.

This means that only the directors who give out orders or act or have the duty to order or act but omit to do so shall be jointly criminally liable with the company. Should the plaintiff wish to sue the directors to be jointly criminally liable with the company, the plaintiff will have the duty to attest that those directors’ ordered or acted in a way that committed the wrongdoing, or had the duty to order or act but omitted to do so, before criminal liability will be attracted. Therefore, the plaintiff will bear the duty to attest evidence, and at the same time, the directors will no longer bear the duty to prove their innocence that they are not involved in the wrongdoing pursuant to the international principle of the presumption of innocence.

As such, it can be stated that the Act Amending Criminal Liability of Juristic Person Representatives protects directors of the company who are not involved in or related to management of the company. Nonetheless, directors must not forget that even if they may not be jointly criminally liable with the company in an event the plaintiff cannot prove that they are involved in or have any duty in relation to such wrongdoing, the Act on Offences of Partnerships and Companies has prescribed criminal liability for all directors failing to specifically perform the following duties:

  1. The duty to send a copy of the list of all shareholders to the registrar at least once a year;
  1. The duty to summon an extraordinary general meeting of shareholders when requested by the shareholders or when the company suffers a loss up to half of the amount of capital;
  1. The duty to send a copy of balance sheet to the registrar within 1 month from the date such balance sheet is approved by the annual general meeting of shareholders;
  1. The duty to prepare the account showing the company’s income and expense, including the company’s assets and liabilities; and
  1. The duty to prepare the minutes of all meetings and the resolutions passed, and the duty to keep record at the company’s registered office.

The above duties are not the responsibility of the company but the specific duties of all directors. In case of non-compliance, all directors will be henceforth criminally liable pursuant to the Act on Offences of Partnerships and Companies. This is a different situation from where directors will be jointly criminally liable with the company under the Act Amending Criminal Liability of Juristic Person Representatives.

 

By Piyamarn Pongtornpipat (Partner), Saithip Mansri (Partner),
and Nicharee Dejakaisaya (Associate) © March 2017
Khun Piyamarn can be reached at Piyamarn@siampremier.com