Thailand’s approach to corporate governance

• Thailand is enhancing its corporate governance framework with a proactive approach led by the National Corporate Governance Committee ,and collaboration with the Stock Exchange of Thailand, aiming to increase both transparency and investor confidence.
• The framework aligns with international standards, emphasizing ethical business practices, sustainable growth, and incorporating environmental, social, and governance factors.
• Key regulations include the Public Limited Company Act and the Securities and Exchange Act, with guidelines on leadership, risk management, and stakeholder engagement through the Corporate Governance Code introduced by the Stock Exchange of Thailand in 2017.

Recent events have shone a spotlight on Thailand’s approach to corporate governance. With lacklustre performance on the Stock Exchange of Thailand (SET) and the increasing fraudulent activities of listed companies, the governmental authorities have started to take a more proactive approach to corporate governance.

To ensure investor confidence, Thailand is aiming for its corporate governance framework to act as a pillar of stability and transparency in the rapidly evolving global business landscape. It is evident that those economies that have lax corporate governance oversight are unlikely to perform as well as those economies with strong corporate governance frameworks.

An overview

With the National Corporate Governance Committee (NCGC) at the helm, the country is attempting to make strides in promoting ethical business practices and sustainable economic growth.

Partnering with the SET, Thailand’s Corporate Governance Code demonstrates strong guidelines that align with international standards. The key aim of the Code is ensure that both local and foreign investors can confidently engage with Thai enterprises.

With an ever-growing focus on environmental, social, and governance (ESG) factors in Thailand and across the globe, companies in Thailand are also having to embed ESG factors into their approach to corporate governance.

General principles of corporate governance

Thailand’s legal system is based on the civil law concept, which regulates relationships between all stakeholders in a company, i.e., the board of directors, management, chief executive, and shareholders.

Unregistered ordinary partnerships, registered ordinary partnerships, limited partnerships and limited liability companies approach to corporate governance is governed by Thailand’s Civil and Commercial Code and relevant regulations that have been issued by the Ministry of Commerce (MOC). Furthermore, to strengthen corporate governance frameworks in public limited companies, the Public Limited Company Act B.E., 2535 (1992) (PLCA) was introduced to enhance rules and compliance regulations on public limited companies.

Public limited companies listed on Thai stock markets must adhere to the requirements of the PLCA, as well as comply with the Securities and Exchange Act B.E. 2535 (1992) and the various regulations issued by the Capital Market Supervisory Board of the SEC and the SET.

If a company lists on either the SET or the MAI, they are still bound by the same corporate governance requirements.

Corporate Governance Code

Furthermore, in 2017 the Corporate Governance Code (CG Code) was introduced by the SEC. The CG Code details voluntary guidelines introduced by the Thai Investors Association for listed companies.

The CG Code for listed companies provides guidelines on leadership roles, sustainable value creation, risk management, and stakeholder engagement.

Final thoughts

With a growing commitment to corporate governance, which will ensure a stable and attractive business environment for local and international investors, it is envisaged that the relevant authorities in Thailand will continue to focus on developing the country’s approach to corporate governance.

As a leading law firm for corporate and commercial law in Thailand, WSR International is well positioned to work with a variety of companies on their corporate governance frameworks.

If you would like further information, please contact the team at WSR International.