Company Directors' Obligations and Liabilities in Relation to Insolvent Trading in Thailand: A Comparative Perspective
Inadequate provisions for dealing with corporate insolvency are a significant obstacle in the economic development of Thailand. Companies which continue to trade even after they are unable to pay their debts (insolvent trading), often experience meltdowns that result in deep insolvencies that severely impact their creditors. In the Asian Financial Crisis in 1997, the Thai economy was significantly impacted by the insolvent trading practices of Thai companies. The Pin Chakkaphak case, in which the Thai government unsuccessfully sought a UK court to extradite Pin Chakkaphak, the then CEO of Fin One, for providing uncommercial loans to insolvent subsidiary companies, is a leading example of how Thai laws are neither effective nor adequate to deal with the problem of insolvent trading. Nevertheless, in spite of the known problems, current Thai corporate and insolvency laws still do not provide specific provisions or measures to regulate insolvent trading. Developed countries, such as the United Kingdom, Australia, the United States and Germany, have specific statutory or common law provisions to control insolvent trading. In addition, the United Nations Commission on International Trade Law (UNCITRAL), provides the 'Legislative Guide on Insolvency Law' by recommending the imposition of specific obligations on company directors to take appropriate action in order to minimise potential losses in the period approaching insolvency. An essential component of good corporate governance frameworks, whether at the domestic or international level, is the specification of the director's obligations and liabilities with respect to insolvent trading.