Shareholder Disputes and Director Liability in Thailand

Who Actually Controls a Thai Company
A private limited company is managed by one or more directors, who act under the company's articles and remain subject to the control of the general meeting of shareholders. This is the structural point that decides most disputes. Directors run the business day to day, but ultimate authority sits with the shareholders in general meeting, which is why control of meetings, and of the shareholder register, is what disputes are really fought over.

What Directors Owe
In conducting the company's business, directors must apply the diligence of a careful business person. Beyond that general standard, the Civil and Commercial Code makes directors jointly responsible for specific matters: that share capital was genuinely paid, that the statutory books and documents are properly kept and maintained, that dividends and interest are distributed lawfully, and that resolutions of the general meeting are properly carried out.

There is also a statutory non-compete. A director may not carry on any business of the same nature competing with the company, whether for their own benefit or for another's, and may not become an unlimited partner in another firm carrying on a competing business, without the consent of the general meeting. The same restrictions extend to a person acting as a director's representative.

The bookkeeping duty is the one foreign investors most often overlook. When a dispute begins, the side holding proper books and minutes almost always holds the stronger position.

Suing a Director: What the Law Actually Allows
Where a director causes damage to the company, the company may sue that director for compensation. If the company will not sue, any shareholder may take up the claim. Creditors of the company may also enforce such a claim to the extent their own claims against the company remain outstanding.

This is the closest Thai equivalent to a derivative action, and it is genuinely useful. But Thai courts have drawn its boundaries very tightly, and this is where most shareholder claims fail.

Case in point — Supreme Court Judgment No. 1426/2542 (1999): A shareholder sued to have a transaction between the company and outside parties declared void, relying on the shareholder's power to take up a claim the company would not bring. The Supreme Court held that a shareholder suing under this provision must sue on behalf of or for the benefit of the company, only where the company itself does not sue, and only to claim compensation. A claim to void a transaction is not a claim for compensation, so the shareholder had no standing. The outside parties were not directors, so no claim lay against them either. The court added that standing is a question of public order which it may raise on its own initiative.

Case in point — Supreme Court Judgment No. 2481/2552 (2009): Shareholders sued to cancel a land transfer between the company and an outsider, alleging that the outsider and a director had colluded fraudulently, and asked for the land to be transferred back. The Supreme Court again held this was not a claim for compensation from the director and dismissed it for lack of standing. It also addressed the minutes: because no meeting had actually taken place and the director had fabricated the minutes unilaterally, the document was not an irregular resolution of a general meeting at all, so the provision allowing cancellation of irregular resolutions did not apply, and the shareholders could not use it.

Case in point — Supreme Court Judgment No. 3193/2558 (2015): The same principle was applied again where a shareholder sought cancellation of a land registration between the company and a third party. Not being a claim for compensation against a director, it failed for want of standing, and the third party was not a director in any event.

The practical consequence is important, and it is the opposite of what many foreign investors assume. If a Thai director has improperly transferred an asset, a shareholder generally cannot sue in their own name to undo the transfer. The shareholder's statutory route is a claim for compensation against the director for the benefit of the company. Recovering the asset itself normally requires action by the company, which in turn requires getting control of the company. That is a strategy question, and it should be settled before proceedings begin rather than after a claim has been dismissed.

The Approval Defence and the Six-Month Bar
Where the general meeting has approved what a director did, that director is no longer liable for it to the company or to the shareholders who gave the approval. Shareholders who did not approve are not bound in the same way, but they must sue within six months from the date the general meeting gave its approval.

Six months is short. A shareholder who suspects wrongdoing and waits to gather more evidence can find the claim barred while still preparing it.

Challenging a Resolution
Where a general meeting has been convened, held, or has passed a resolution in breach of the Code or the company's articles, a director or any shareholder may apply to the court to cancel the irregular resolution. The application must be made within one month from the date of the resolution.

One month is the tightest deadline in Thai company law, and missing it usually ends the challenge. Note also the limit identified in the 2009 decision above: this remedy addresses irregular resolutions of meetings that took place. Where minutes were simply fabricated and no meeting occurred, the remedy does not fit, and a different approach is needed.

Forcing a Meeting
Minority shareholders are not powerless when directors refuse to convene meetings. Shareholders holding not less than one fifth of the company's shares may sign a written request for an extraordinary meeting, stating the purpose for which it is to be called. On receiving that request, the directors must convene the meeting without delay. If they fail to do so within thirty days of the request, the requesting shareholders, or other shareholders together holding the required proportion, may convene the meeting themselves.

This is one of the most practical tools available to a minority holder, and it is significantly underused. It is also why the one-fifth threshold matters when a shareholding structure is first designed.

The Right to Inspect
Directors must ensure that minutes and resolutions of shareholder and board meetings are properly recorded in a book kept at the company's registered office. Once signed by the chairman of the relevant meeting or of the following meeting, those entries are presumed to be correct evidence, and the proceedings recorded are presumed to have been properly conducted.
Any shareholder may inspect these documents during business hours. This right is the usual starting point in a dispute: it costs little, it is difficult to refuse lawfully, and refusal is itself evidence of a problem. Note the flip side of the presumption, though. Signed minutes are presumed correct, so a shareholder who does not review and challenge them promptly is fighting uphill later.

When the Company Cannot Continue
Where a business relationship is beyond repair, dissolution may be the realistic outcome. A limited company is dissolved on the grounds set out in the Code, including where the articles so provide, on expiry of a fixed term, on completion of the single purpose for which it was formed, by special resolution, or on bankruptcy.

Separately, the court may order dissolution where there was default in filing the statutory report or in holding the statutory meeting; where the company does not commence business within one year of registration or suspends business for a full year; where the business can only be carried on at a loss with no prospect of recovery; where the number of shareholders falls to one; or where any other circumstance makes it impossible for the company to continue.

That last ground is the one that matters in deadlock cases, and a court-ordered dissolution is a serious lever in negotiations. It is also a blunt one, since it ends the business for everyone.

Special Points for Foreign Shareholders
Three issues recur. First, control of the company's documents usually sits with whoever holds the registered office and the corporate books, which is often the Thai side, and recovering copies takes time. Second, share transfers must be properly recorded to be effective against the company, so the register is frequently where a dispute is won or lost. Third, arrangements designed to give a foreign investor practical control beyond their shareholding need careful legal review, since structures that misuse Thai nominees carry their own serious exposure.

Practical Steps When a Dispute Starts
Exercise the inspection right early and in writing, and keep proof of the request. Diarise the one-month deadline for challenging any resolution and the six-month deadline where the meeting has approved a director's act. Consider whether the one-fifth threshold to requisition a meeting is available to you, alone or with allies. Decide at the outset whether your objective is compensation, control, or exit, because the legal route differs sharply for each. And gather the corporate records, correspondence, and bank evidence before the other side knows a dispute has begun.

Frequently Asked Questions
Can I sue to reverse a transaction the director made?
Usually not in your own name as a shareholder. The statutory shareholder claim is limited to compensation for the company's benefit, and Thai courts have repeatedly dismissed claims seeking to void or reverse transactions for lack of standing.

How long do I have to challenge a shareholders' resolution?
One month from the date of the resolution. This is strictly applied.

The directors refuse to hold a meeting. What can I do?
Shareholders holding at least one fifth of the shares can requisition an extraordinary meeting, and if the directors do not convene it within thirty days, the requesting shareholders may convene it themselves.

Am I entitled to see the company's minute book?
Yes. Minutes of shareholder and board meetings must be kept at the registered office, and any shareholder may inspect them during business hours.

Can I force the company to be wound up?
The court may order dissolution on specified grounds, including that the business can only be carried on at a loss with no prospect of recovery, or that circumstances make it impossible for the company to continue.

Speak to a Thai Corporate Litigation Lawyer
Shareholder disputes in Thailand are won by the side that understands the narrow shape of the statutory remedies and moves before the deadlines close. Our bilingual lawyers advise on director duties and liability, resolution challenges, meeting requisitions and inspection rights, negotiated exits and share buyouts, and dissolution where a business relationship cannot be saved. Contact us as soon as a dispute emerges, not after the next meeting.

Disclaimer
This article provides general legal information only and does not constitute legal advice. Shareholder and director rights depend on the company's articles and the facts of each case. Please consult a licensed Thai attorney before taking action.