It is common for corporate ownership structures to comprise a mix of non-Thai company interests with holdings in a Thai entity which conducts business domestically, employs staff and there may be cross border commercial relationships between the Thai subsidiary and the foreign parent.
When disputes occur in this context, the foreign aspect of the arrangement may clash with the principles of domestic Thai law. Foreign investors may have made incorrect assumptions about their rights within the Thai jurisdiction based on ‘common law’ principles, whereas Thailand has a civil code and is a codified legal jurisdiction. The rules relating to issuing shares, recapitalization of companies, and the damages that can be claimed for violations of law – can differ greatly to other jurisdictions.
Hughes Krupica has assisted with many joint venture disputes. One such case involved a foreign CEO of a foreign parent of a Thai company. The foreign CEO was responsible for policy, financial well being of the business and also in Thailand for the Thai entity. The Managing Director was not an authorized director of the business – not registered as a director. Both were shareholders entitled to profits of the business. The foreign CEO created debt for the foreign and Thai entities and leveraged monies from a third party. The foreign CEO signed the loan agreement, and the other party merely acknowledged it.
When it became apparent the business was no longer viable after years of trading it also became apparent the loan could not be repaid. The foreign CEO then colluded with the third party to sue the company and the Managing Director.
In such circumstances, a litigation team that properly understands the dynamics between the local Thai entity, the foreign parent and interplay between shareholders; directors and senior management of the company is essential. Not only is an understanding necessary, but a team that can base a defense on solid foundations and then counterclaim as appropriate is invaluable to clients who suffer difficult litigious circumstances.
