Falsification of Company Accounts in Thailand
In Thailand, company law involves serious criminal penalties, which may be different from some foreign investors are used to in their home countries. For example, Section 42 of the Company and Partnerships Offenses Act of B.E. 2499 (1955), it’s unlawful for a company director to falsify company accounts and books as follows:
- “In the case where a [managing partner or company director], acts or consents to act, with an intention to deceive [the] partnership, company, each partner of [the] partnership, or shareholders about their benefits, whereby such acts:
- cause damage, destroy, change, cut off, or falsify of the accounts, documents, or securities of the partnership or company or in relating to the partnership or company;
- make false statements or omit to record important substances in the accounts or documents of partnership or company or in relating to partnership or company, shall be liable to imprisonment for a term not exceeding seven years, or to a fine for not exceeding one hundred and forty thousand Baht, or to both.”
As evident in the above clause, an intention to deceive the partners (of a partnership) or the shareholders (of the company) is an important element of the offense. The mere physical act of falsifying company accounts and books in and of itself is not sufficient to make the act a criminal offense according to Section 42. An illustrative case is Thai Supreme Court Decision No. 4451/2530. In that decision, Company X had falsified its balance sheets that were submitted to the Revenue Department and the Department of Business Development in order to commit tax evasion. The Plaintiff, a shareholder of the company, sued the company directors pursuant to Section 42 on the grounds that the falsification of the company accounts had caused the Plaintiff to suffer damages to his rights as a shareholder. However, at trial, the facts revealed that the falsification of the company balance sheets was done with Plaintiff’s knowledge. The Court held that in order for falsification of company balance sheets to be an offense under Section 42, there had to be an intention to deceive the shareholders, which was not present in this case due to the fact that the Plaintiff was aware of the act in question. The Court dismissed the proceedings against the company directors.
In any case, it should be noted that the falsification of company documents are nevertheless criminal offenses on the grounds of submitting false documents to the government and tax evasion. Company law in Thailand is complex. Foreign investors are advised to consult with competent legal counsel before doing business in Thailand.