As the Covid Pandemic continues on, most countries are starting to see the move into the easing of restrictions with the goal of stimulating fragile economies. There is hope on the horizon and lots of reasons to start to feel positive about kick starting your business into this
One thing is, however, clear. Global travel will not be the same for a while yet. Borders are closed while countries try and deal with protecting their people and the associated health systems.
What does this mean as a Foreign Director of a Company in Thailand?
Foreign Directors will not be able to physically attend operations with the likes of local Board meetings done online. The ability of a foreign director to engage local stakeholders and keep a finger on the pulse is ultimately harder. More and more businesses will be having cash flow and solvency problems either now or looming.
Directors obligations have not changed.
If a business continues to trade after it has entered insolvency, this is known as trading whilst insolvent as the business is unable to meet financial obligations and repay creditors. If the company is consistently unable to meet its financial obligations and/or its liabilities exceed its assets, it is currently operating in a state of insolvency.
As the director of a company that is trading insolvent you have certain duties and responsibilities, as required by section 1144 of the commercial and civil code. If you fail to uphold these responsibilities, you could be accused of wrongful trading and held personally liable for the repayment of certain company debts.
The risk now for Directors is high and especially if you are overseas and cannot access local operations.
Ten tips for foreign Directors to help mitigate risk:
- Ensure management accounts are kept up to date and available for review with commentary on the operations and trading patterns.
- Be inquisitive and ask questions if the numbers do not make sense based on industry and business knowledge.
- Ask to see rolling cash flow forecasts for the next 4-12 weeks. Enquire into the process of how these are produced and whether downsize sensitives are run. Ask to see these sensitivities.
- Ensure Board meetings are held regularly. Consider the need for more frequent meetings than normal depending on the business position.
- Ensure that multiple key executives are invited in and presenting on the various business units to ensure that the messages received from executive are consistent. Home in and focus on critical areas.
- Consider the benefit of your local advisors attending meetings to provide context to the overall market and provide outside context.
- Ensure you have a process for circular resolutions to happen outside meetings and stress the need for support from management for these key decisions. Encourage more frequent and timely resolutions if things are critical.
- Communicate to management the need for more frequent updates outside of Board meetings if critical matters occur.
- Keep up to date with the local regulatory environment including government stimulus measures to both employees and companies.
- Stay focused. Your company needs your skills and expertise more so then ever. Hopefully you find these tips useful and remember we are here to help if needed.