Recent Caremark Claim and the Director's Liabilities Concept under Thai Law

Being the corporate attorney may, from time to time, in charge of training our client’s Board of Directors to acquainted with all related rules and regulations. The time and tide wait for no man, the law as well. Thus, a good counselor must help them point out what does matter. Being the director even if trying to perform in good faith but they need to equip the knowledge to be able to understand their function and what law expects from them.

CAREMARK CLAIM

In Marchand v. Barnhill, No. 533, 2018 (Del. Jun. 18, 2019) (“Blue Bell”). The stockholders brought the claim against the executive and director of one of the largest ice cream manufacturer in the USA. The ground is that the defendant breached the fiduciary duty of care and loyalty under the Caremark Doctrine in which the director had failed to perform his duty by not action the Company’s food safety operation that leads to the death of consumers and many sickening. The highlight questions that the Supreme Court brought are not whether the problem has been detected but that the director did not have enough “Good Faith Effort” by not having a reasonable board level monitoring and reporting system.

 (more detail in the link: https://casetext.com/case/marchand-v-barnhill-1)

THAI LAW PERSPECTIVE

Speaking of the director’s general duty, Section 1168 of Thai Civil and Commercial (“CCC”) stipulates that the directors are expected to exercise the diligence of the careful business person. In general, if the directors cause damages, which is out of his scope of work and without shareholders ratification, to the Company, he/she may personally liable for such an act. (Section 1169, CCC)

There are court decisions to determine the level of diligence of the careful business person such as 2191/2541: The directors must have enough knowledge, especially about the Company’s core business; otherwise, the directors may not be able to provide the Diligence of a Careful Business Person.

The Supreme Court Decision No. 977/2545: The directors of the Company who signed and acknowledged the orders of Bank of Thailand’s must follow such instructions and be responsible for the said matters even if the Company has separate responsible internal divisions.

WRITOR’s SIDENOTE

Therefore, directors liabilities are essential, and the solution such as Director’s Insurance should be considered as a preventive method. Moreover, from the Blue Bell Case, It is important to highlight that the court looked at the minute of the director meeting whether to exercise such duty of care or not. The Company Secretary or any appointed retainer Company Secretary (if any) to carefully taken the minutes is truly important.