Corporate Criminal Liability is imported from corporate civil liability by holding the company responsible for criminal acts.
A recent news headline has been the use of slave labor on Thai fishing boats. During the course of the investigation, CP Foods has been implicated for purchasing fish meal from these Thai fishing boats and that the use of slave labor has been known for several years. We will not look into the merits of the charge but a question of interest is whether a corporation can be charged with criminal liability in Thailand.
There is no definition of corporate crime in the Thai Criminal Code. Corporate Criminal Liability is imported from corporate civil liability by holding the company responsible for criminal acts. Corporate Crime is generally defined as crimes committed by individuals acting within the scope of their employment with the intention to benefit the corporation. If the employee purchased items made from slave labor with knowledge of the goods illegality for the company, the employee can be charged with the crime of accessory to a crime.
The Thai Supreme Court has declared that as a legal person, a corporation can be subject to criminal law. As such, the Corporation can be charged with a crime if all the elements of the crime have been met. The difference is that a Corporation cannot be incarcerated but the company can be dissolved (death penalty) or required to pay fines.
Company directors or managers may be criminally liable for offenses made by the company’s employees and could be incarcerated for crimes made for the company. The director or manager is not liable for passive act such as the lack of adequate instruction. The director or manager’s actions must be deliberate with intent or knowledge of the illegality of the action.
Returning to the original question, could CP Foods be criminally charged with a crime? How about the Company Directors and Managers, could they be charged from the actions of a purchasing agent? There must be evidence that the Company or Directors knew of the slave labor and with intent continued purchase the fishmeal even with knowledge of the product source.
If you happen to be standing on this same situation, please contact Law Firm in Thailand or leave a message.
The Thai Department of Special Investigations (DSI) has recently announced plans to crackdown on foreign companies using Thai nominee shareholders to bypass Thai laws and control Thai companies. The foreign nationals use Thai nominee shareholders to run business operations that are restricted to foreigners or to purchase land and property. The procedure is currently prohibited by the Foreign Business Act and the Land Act.
A nominee shareholder is an individual or entity that his holding shares on behalf of the actual owner. There is a confidential agreement between the nominee shareholder and the actual owner for the management of the shares. The nominee shareholder is listed on the shareholder agreement instead of the actual owner. The actual owner is provided complete anonymity in relation to the ownership of the shares in the company.
Under Thai law, a foreign national can only be majority owner of business operation that is not prohibited by the Foreign Business Act, a business that has been prioritized by the Board of Investments, or allowed by bilateral treaty agreements.
Some foreign nationals have used Thai Nominee Shareholders to bypass the restrictions on business ownership. The used of Thai Nominee Shareholders to bypass the Foreign Business Act has been criminalized. The foreign national and any Thai nationals who aids in hiding the true ownership of a Thai company is liable for up to three years in prison and 1 million baht fine.
Under the Thai Land Code Act, foreign nationals are prohibited to acquire and own land in Thailand. There is an exemption if a foreign national invests 40 million baht into specific assets or Thai government bonds which allows them to purchase up to 1 rai of land. However, the foreign national is not allowed to transferable by inheritance so it is just a life estate and not full ownership.
Some foreign nationals have transferred purchased property and transferred the property to their Thai family members such as their spouse or children. Other attempt to use Nominee Shareholders to form a Thai company and purchase property under the Thai company.
However this has been curtailed since companies will now have to demonstrate the source of the funds that is used to purchase property effectively preventing foreign nationals from purchasing property through nominee companies or shareholders. Under the Land Code Act, a company is considered "foreign" if more than 49% of its capital owned by foreigners or more than half of its shareholders are foreigners.
The use of shareholder nominees is not allowed to circumvent Thai law to form a company or to purchase land. There are some unscrupulous individuals who will push shareholder nominees as a way to bypass the legal restrictions on foreign ownership. The problem is that foreign nationals have difficulty to protect their property rights since they are illegal entities.
Foreign nationals can form and own a company in Thai by obtaining a foreign business license or by filing for a Board of Investments exemption. There are a wide varieties of business that are available to foreigners in Thailand. If the foreign national wants to part of a business that is restricted by the Thai government, they can form a true partnership with a Thai national.
Thailand allows companies formed under the Board of Investments to own land for the purpose of conducting the BOI business operation. Other options include a long term lease with rights of renewal for the land. If the foreign national is interested in a condominium, there are provisions in the law that allow them to own condominium units.
Before forming a business or purchasing property in Thailand, it is important to consult with an experienced business and property attorney. In Thailand, real estate agents and business agents are not licensed. They only have a self-interest in selling you the property or business.
It is a great challenge for a foreigner to open and operate a business in Thailand. It is difficult to get the business up and running. The arcane bureaucratic rules in Thailand makes the process to create the company, establish utilities, and hiring workers demanding. This requires the completion of forms in a foreign language and hiring Thai employees to may not be able to communicate in English. The differences in culture can generate conflicts and disagreements between the employer and employees. Sometimes all of these issues will create problems in maintaining the business. This may end in the business having to close down. The process is lengthy and needs to be done properly to minimize the risks of future lawsuits on the business owner or managers. So what needs to be done.
First, file for dissolution with Department of Business Development (DBD) and begin the process of legally shutting down the company. If the company is solvent, the company must liquidate its assets. If the company is insolvent, the shareholders can put additional capital into the company or the liquidator must start bankruptcy proceedings. The company’s debts needs to be legally cleared before it is closed.
Then the Company must file its tax return and pay all taxes due. Employees should be paid their salary and any severance that is due to them .A bankruptcy will not discharge a tax debt or employee salaries. If there are any foreign employees, the work permits need to be returned to the Ministry of labor within seven days of employment.
Suppliers and customers need to be legally notified of the termination of business operations. Arrangements should be made to terminate any existing contracts for services. Banks and financial accounts should be closed down and settled. The landlord of the business should be sent notice of the end of business operations and the lease should be properly terminated. If the taxes and debts are paid, any surplus is paid out to the shareholders.
It is necessary to ensure the business is properly closed down. Outstanding debts or legal issues can lead to lawsuits against the directors, managers, and owners of the business. It would be prudent to contact a licensed Thai business attorney to ensure that the business closed down. The business that is properly shutdown will reduce the potential of continued liability after the business is closed.
See also Company Liquidation: Closing a Thai Limited Company.
There is no definition of corporate crime in the Thai Criminal Code. Corporate Criminal Liability is imported from corporate civil liability. Corporate Civil Liability is when a company is sued in civil court for a wrongdoing by the company or in the name of the company.
Corporate Crime is defined as crimes committed by individuals acting within the scope of their employment with the intention to benefit the corporation. An example is if an employee bribes government officials to ensure that a company’s project is approved. The employee is committing an illegal activity for the benefit of the corporation. The purpose of criminal liability is to place the corporate assets at risk as a deterrent to criminal activities.
A Corporation is a juristic person which is legal person under the law. The Thai Supreme Court has declared that as a legal person, a corporation can be subject to criminal law. As such, the Corporation can be charged with a crime if all the elements of the crime have been met. The difference is that a Corporation cannot be incarcerated. However, the company can be dissolved (death penalty), have their assets seized, or required to pay fines.
In addition, the company directors and managers can be removed from the company and individually charged with the crime. They can be criminally liable for offenses made by the company’s employees and could be incarcerated for crimes made for the company. The director or manager is not liable for passive act such as the lack of adequate instruction. The director or manager’s actions must be deliberate with intent or knowledge of the illegality of the action.
The burden of proof for corporate criminal liability is higher than in corporate civil liability. The prosecution must prove all of the elements of the crime beyond a reasonable doubt which can be difficult for corporate crimes. The parties to the crime and the company directors have a right to refuse to testify if the testimony will assist in incriminating them. A company can raise the defense that they have taken all reasonable actions to prevent the crime.
