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In recent advice posted on its website, the company places particular importance on directors ensuring that their company is not trading while insolvent.

The company's advice takes the form of a restatement of the legal obligations applying to company directors.

Under the Thai Civil and Commercial Code, a director must apply the diligence of a "careful businessman", and in particular is responsible for the actual payment of shares by the company's shareholders; the existence and regular preparation and maintenance of proper financial accounts and other documents as are prescribed by law; the proper distribution of dividends and the payment of interest; and the proper enforcement of resolutions adopted by general meetings of the shareholders.

Additionally, directors may not, without the consent of the shareholders at a general meeting, undertake commercial transactions of the same nature as and competing with those of the company, either for his own account or that of a third person. As well, directors may not be a general partner in another commercial concern carrying on business of the same nature as and competing with that of the company.

Under the Public Company Act (BE 2535), a director has additional powers and duties, including making sure that meetings of directors are held at least once every three months and conducting the business of the company in a manner that complies not only with the law, but also with the company's objects and articles of association and the resolutions of shareholders.

A director assumes liability to the company for any damages resulting from violations of these responsibilities. Claims may be filed either by the company itself or by a certain number of shareholders.

Directors must also be honest and careful in their dealings; pay particular attention when the company is handling other people's money; and act in the company's best interests, even if this is not in their own interests.

Any information obtained by a director through his or her official status must be used properly and in the best interests of the company. Using that information to gain, directly or indirectly, an advantage for themselves or for another person, or to harm the company, may be a crime or may expose directors to other claims. This information need not be confidential; if it is used wrongly and dishonestly, it may still be a crime.

Grant Thornton said that if directors had personal interests that might conflict with their duties, they should generally disclose these at a directors' meeting.

Since directors are responsible for overseeing a company's business, they should understand the company's articles of association, as well as relevant shareholder resolutions, all of which set out the directors' powers and functions.

The professional services firm said the best way for directors to protect themselves was to be fully up-to-date on what the company was doing. To achieve this, they should be actively involved in directors' meetings and understand how any proposed action, project or strategy will affect the company's business, particularly if it involves placing a substantial amount of the company's capital at risk.

It recommends that directors get professional advice when they do not have the expertise to make an informed decision.

They should question managers and staff about how the business is going, to ensure that appropriate polices, procedures and delegations have been established, and make sure they are satisfied that information received prior to directors' meetings is timely, reliable and relevant.

This should include cash flow forecasts, operating statements, balance sheets and business performance summaries

Finally, they should confirm that risks and legal compliance obligations are understood and being acted upon.

To protect themselves, people should only become company directors if they are willing, able and have enough time, Grant Thornton said.

This article was provided by professional services company Grant Thornton. It was authored by a partner of the firm, Edward K Strauss, who may be contacted at edward.strauss@gt-thai.com. A copy of his advice can be downloaded from www.grantthornton.co.th/publications.