On 29 July 2008 the Board of Legal Counsellors of the Department of Business Development, Ministry of Commerce (the "Legal Counsellors") resolved at meeting No. 5/2551 (2008) that boards of directors of private limited liability companies ("Private Companies") shall no longer pass resolutions without holding physical (actual) meetings or by way of circular resolutions. This interpretation is already in force and applies to all existing and newly incorporated Private Companies.
Previously, board of directors' meetings could be conducted by way of a written consent or a meeting in circulation or circular meeting if it was clearly authorised in the Articles of Association. The Legal Counsellors recently ruled that this practice defeats the spirit of the relevant provisions of the Civil and Commercial Code (the "CCC") governing the holding of meetings of the board of directors. The Legal Counsellors took the view that the physical presence of directors during the meeting aims to ensure a rich exchange of views and opinions by the directors regarding the operation and management of the company. This exchange of ideas is not possible with just "paper" meetings. Thus, the Legal Counsellors concluded that although private companies are free to stipulate the authority of their directors in the Articles of Association, the requirement for the holding of physical meetings cannot be waived by the Articles of Association.
The above Legal Counsellors' resolution was conveyed to the Director General of the Department of Business Development under the Memorandum No. PhorNor 0803.03/675 dated 13 August 2008 and to all company registrars under No. PhorNor 0805.02/1398 dated 26 August 2008. It has already been implemented affecting both existing and newly incorporated private companies as follows:
(i) the board of directors should approve and pass resolutions during physical meetings even if the current Articles of Association authorise them to pass their resolutions by circular resolutions or any other means; and
(ii) the provision of the Articles of Association regarding approval of resolutions even without the holding of a physical meeting of the board of directors will no longer be accepted for registration by the company registrar.
The two Memoranda also confirm that the directors of private companies must attend and vote at the board of directors themselves and not do so by proxies. Any contrary provision of the Articles of Association is not enforceable and should be amended.
From 26 August 2008, a physical meeting of the board of directors of private companies must be held and attended by the directors themselves, and not their proxies, to pass a valid resolution. Any resolution approved by way of written consent or a meeting in circulation or circular meeting will be deemed void and unenforceable.
Private companies in the process of incorporating should ensure that their proposed Articles of Association comply with these requirements. Private Companies whose Articles of Association allow "paper" meetings to pass resolutions and/or the appointment of proxies to attend and vote at board of directors meetings should consider amending their Articles of Association to comply with the new interpretation.
For further information, please contact:
Mr Utain Vichaipairojwong ( )
Ms Sirirat Kongkiattiwong ( )
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