In the usual circumstances, Thailand’s Annual General Meeting (“AGM”) is required to be held within 4 months from the end of the company’s fiscal year as per the , Thailand Civil and Commercial Code (“CCC”).
In light of the ongoing COVID-19 outbreak the recent announcements issued under the Emergency Decree on Public Administration in Emergency Situation B.E. 2548 (2005) (“EPAES”) and Communicable Diseases Act B.E. 2558 (2015) (“CDA”) have caused postponement to the routinely held AGM so that the latest COVID-19 preventative protocols are to be complied with by everyone
This article will provide FAQs regarding AGM arrangement for both Public Company Limited and Private Company Limited.
Should AGM be postponed?
Short answer is “YES”. Due to the enactment of the EPAES, many public venues are ordered to be closed, as well as, restrictions on large public gathering. These two regulations alone justify the postponement of a large public gathering such as the AGM. The EPAES is effective national wide, meaning that it applied to all AGM scheduled to be held in other provinces (beside Bangkok metropolitan). Thailand Department of Business Development (“DBD”) and Thailand Ministry of Commerce(“MOC”) have confirmed that the AGM can be postponed to a later date (after COVID-19 outbreak subsided) by submitting a letter to the DBD’s registrar after the AGM has been held.
Under this new regulation, companies are required to notify the shareholders of the AGM postponement either via typical announcement, online announcement or SETLink. Moreover, holding the AGM via electronic conference should be avoided as there are certain conflicting regulations (i.e. 1/3 of the quorum is required to be in the same place) that may violate the EPAES or CDA. Overall, AGM postponement is recommended.
AGM Important Requirements
With this being said, the AGM will still have to comply with the rules and regulations set forth by the TCCC, which are:
Consider and approve the previous minutes of shareholders’ meeting;
Consider the company’s operating results of the previous year;
Consider and approve the audited annual financial statements;
Consider and approve the distribution of dividends
Consider and approve the appointment of directors whose term expires by rotation;
Consider and approve the remuneration of directors;
Consider and approve the appointment of external auditor and auditing fee;
In case there are other significant agendas, the company must ensure the information provided to shareholders is sufficient and complete.
Special Requirements (if any):
Annual dividend may be changed into interim dividend payment with the approval and announcement from the Board of Directors. The dividend must be distributed within 1 month from the approval date;
Election/rotation of the Board of Directors may be postponed until the COVID-19 outbreak has ended and the AGM has been held, the current Board of Directors may retain the position until then;
Companies may appoint a new or retain the current external auditors approved by the Securities and Exchange Commission (“SEC”) until the COVID-19 outbreak has ended and the AGM has been held. New appointment of an external auditor should be proposed for approval at the AGM.
Document Submission Deadlines
List of Shareholders:
For Private Company Limited – 14 days from the new AGM date
For Public Company Limited – 1 month from the new AGM date
Annual Financial Statements:
1 month from the new AGM date
Submission Route:
Due to the current COVID-19 protocol, all related documents should be submitted via DBD e-Filing portal (http://efiling.dbd.go.th/). Nonetheless, companies should also keep paper copies for backup purposes.
For further assistance on AGM related rules and regulations during COVID-19 outbreak, please contact us at law@ilct.co.th.
Due to the on-going COVID-19 crisis which has affected the upcoming annual general meeting (AGM). The Thai Securities and Exchange Commission (“SEC”) had announced a few changes to the related regulations for the listed companies as set out below.
Regulation Changes:
Temporary appointment of an external auditor – A listed company may appoint a temporary external auditor without holding an AGM. In this instance, the Board of Directors can select an external auditor approved by the SEC or allow the previous external auditor to audit the financial statements for the 1st quarter of 2020. Once the AGM can be held, the usual appointment of the external auditor shall then be officially proposed for the shareholders’ approval.
Submission of reports concerning the financial condition and the business operation – Taken effect from March 31, 2020, the SEC has allowed an extension of the deadline for the submission of (1) quarterly financial statements (2) annual financial statements and (3) annual registration statement with an ending period from January 1, 2020 – May 31, 2020. To be eligible for an extension, the company must:
Submit a request for an extension to the SEC Office before the due date of such period along with explanations (COVID-19 impacts) and proposed the new submission date of the reports.
The company must make an extension announcement via SETLink or other medium that the shareholders can access.
Financial statements extension period – If granted an extension, the new timeframes are as follows:
Submission of quarterly financial statements must not exceed the end period of the next quarterly statements;
Submission of annual financial statements and annual registration statements must not exceed 4 months from the end of the fiscal year.
Dividend payment – In the absence of an AGM, the Board of Directors may approve the dividend in the form of an interim dividend payment instead. For dividend payment in the form of an asset or share, the company must still undergo a normal AGM process and obtain shareholders’ approval, thus payment of dividend in this form is not advisable until an AGM can be held.
Shareholders announcement – The company is required to keep shareholders updated on any change to the regulations and rules during COVID-19 outbreak (i.e. AGM postponement). Related announcements should be posted on SETLink.
For further assistance on Thai company registration process during COVID-19 outbreak, please contact us at law@ilct.co.th.
Starting on September 1, 2021, Thailand will be imposing new VAT requirements on foreign e-Service providers and e-Platform operators rendering e-Services to non-VAT clients in Thailand (the “e-Service Amendment”). The details are explained below.
1). Definition of e-Service and e-Platform
The Thai Revenue Code has been amended to include the following definitions:
e-Service is any services or intangible assets that can be transferred via the internet or other electronic networks. In another word, these are such as: downloadable software, gaming application, online advertisement service or online media streaming service (e.g. Genshin Impact, Netflix, Spotify, Facebook Ads or Google Ads).
e-Platform is a marketplace, channel or any other means that enable multiple service providers to provide e-Services to clients (e.g. Amazon, Shopee, Google Play or PSN).
2). New VAT Requirements
Under the e-Service Amendment, a foreign e-Service provider or e-Platform operator (excluding those registered in Thailand) with an annual revenue over THB 1,800,000 deriving from e-Service rendered to non-VAT clients in Thailand shall now apply for VAT registration and be liable for VAT payment.
Previously, foreign e-Service providers and e-Platform operators were not responsible for the VAT payment in Thailand. With the new changes, foreign e-Service providers and e-Platform operators will now be responsible for the VAT payment (calculated from output tax only and not allowed to issue tax invoice).
3). To Sum Up
In conclusion, this e-Service Amendment will subject foreign e-Service providers and e-Platform operators to value added tax (VAT) from e-Services provided to non-VAT clients in Thailand.
If your business is considered as an e-Service or e-Platform, you will now be responsible for the VAT payment. In the first instance, e-Service provider bares the VAT burden for all e-Services rendered to non-VAT clients in Thailand made via its own online channel/website. With this being said, if the same e-Service provider offers the services via an e-Platform, the VAT burden will be shifted to that e-Platform operator instead.
This e-Service Amendment is rather new and requires an in-depth understanding of both the tax code and related technology to determine local VAT liabilities. To read an in-depth version of the same article, please click here.
If you have any question or require further assistance on this matter, you are welcome to contact: law@ilct.co.th.
To alleviate financial burdens for individual insurance policy holders (“Policyholder”) during COVID-19 pandemic, Thailand Office of Insurance Commission (“OIC”) had issued several Registrar Orders to insurance companies (“Company”) for the purpose of providing additional reliefs during this difficult time. The Registrar Orders covered various types of insurances and provide reliefs such as: extensions, exemption and expansion to the usual policy. The summary of Registrar Orders is stipulated below.
1). Life Insurance
Payment Grace Period Extension
1st Extension: For life insurance policy with a grace period to pay the insurance premium falling between 27th February – 30th April 2020 shall be granted a 60-days extension from the end date.
2nd Extension: For life insurance policy with a grace period to pay the insurance premium falling between 1st May – 30th June 2020 shall be granted a 60-days extension from the end date.
Policy Coverage Restoration Waiver
1st Waiver: For life insurance policy that ended between 27th February – 30th April 2020, the Policyholder may request for a restoration within 6 months from the end date and any interest fee shall be waived.
2nd Waiver: For life insurance policy that ended between 1st May – 30th June 2020, the Policyholder may request for a restoration within 6 months from the end date and any interest fee shall be waived.
Use of Insurance Surrender Value
1st Reduction: In the event that the insurance surrender value is automatically used to pay the insurance premium or a loan according to the insurance policy between 27th February – 30th April 2020, the Company may waive or reduce the interest rate for 6 months.
2nd Reduction: In the event that the insurance surrender value is automatically used to pay the insurance premium or a loan according to the insurance policy between 1st May – 30th June 2020, the Company may waive or reduce the interest rate for 6 months.
Payment by Installations
If the Policyholder had changed the premium payment period or had paid the premium installments for less than 1 year (without changing the installation payments), the Company may waive the interest rate for each installation for 6 months.
Policy Coverage Expansion
1st Expansion: Any health insurance policy with an additional health coverage that was contracted between 27th February – 30th April 2020, the Company may not charge more than 10% of original premium rate (rate as approved by the Registrar).
2nd Expansion: For health insurance policy with an additional health coverage that was contracted between 1st May – 30th June 2020, the Company may not charge more than 10% of original premium rate (rate as approved by the Registrar).
2). Non-Life Insurance
Payment Grace Period Extension
1st Extension: Any health insurance or disaster insurance of the same with a grace period to pay the insurance premium falling between 27th February – 30th April 2020 shall be granted a 60-days extension from the first end date.
2nd Extension: Any health insurance or disaster insurance of the same with a grace period to pay the insurance premium falling between 1st May – 30th June 2020 shall be granted a 60-days extension from the first end date.
Payment by Installments
1st Condition: For fire insurance and miscellaneous insurance (as listed by the OIC), those who have entered into the insurance policy or have paid the insurance premium between 27th February – 30th April 2020, the Company may allow the insurance premium payment by installments.
2nd Condition: For fire insurance and miscellaneous insurance (as listed by the OIC), those who have entered into the insurance policy or have paid the insurance premium between 1st May – 30th June 2020, the Company may allow the insurance premium payment by installments.
Policy Coverage Expansion
For travel insurance that became effective between 1st May – 30th June 2020, during which the Policyholder was unable to travel during the said period. The Company may change the effective date of the said policy, provided that the Policyholder has notified the Company before the effective date.
3). Automobile Insurance
For automobile insurance (excluding travel agents or transportation operators) that became effective between 27th March – 30th June 2020, the Company may waive the payment on the insurance premium for the maximum of 180 days from the effective date.
4). Additional COVID-19 Coverage
The Company shall not use COVID-19 related matters to deny any policies or responsibilities during the period of COVID-19 public health countermeasures.
This additional coverage clause shall not apply to the Policyholder that (1) contracted COVID-19 during the 14-days waiting period from the insurance policy’s effective date or (2) contracted COVID-19 before making the insurance policy.
In this age of disruptive technologies where artificial intelligence is displacing many conventional human behaviors, including the manner in which international trade and other business transactions are conducted, the method of resolving commercial disputes must adapt to these changes. The traditional way of litigating commercial disputes in court may still remain the primary way of resolving them, but sooner or later the court will become forumnonconveniens to try these disputes. With their flexibility to quickly adapt to changes, mediation and arbitration are gaining popularity in filling this void left by the court. It is more compelling to resolve disputes via mediation in which the parties reach mutual agreement even though they come away with less than what they expected. If mediation does not succeed, arbitration is the other alternative. A distinct advantage of arbitration over litigation is that the parties can appoint neutrals to settle their dispute. What is more, they have the flexibility of choosing the rules to govern their arbitration proceedings instead of submitting themselves to the rigid rules of court procedure.
Overview of Arbitration Law
The current law on arbitration is the Arbitration Act B.E. 2545 [A.D. 2002] (“AA”), which mostly follows the UNCITRAL Model Law on International Commercial Arbitration. Pursuant to the AA, the Thai courts will enforce foreign arbitral awards to the extent of Thailand’s commitment under international agreements.
Thailand became a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) without any reservation. The New York Convention enables (through AA) foreign arbitral awards to be enforced in Thailand and for arbitral awards issued in Thailand to be enforced in 164 member states (as of June 2020), subjected to the reservations made by those states.
The ability to enforce arbitral awards issued in Thailand among the member states of the New York Convention provides a marked advantage of arbitration over litigation in Thailand. For the reason that a Thai court judgment is not enforceable as a matter of right outside Thailand, as there is no treaty or international agreement to enable it to be done. Therefore, it is up to the courts in the countries where the Thai court judgments are sought to be enforced, and whether to enforce them on the basis of reciprocity, comity or otherwise. For the same reason, it is not possible to enforce a foreign court judgment in Thailand. In practice, a foreign court judgment can be submitted as evidence of the claim which must be litigated denovo.
Unlike the old Arbitration Act of 1987, the AA does not make any distinction between domestic and international arbitration. Arbitrability under the old act was limited to civil disputes whereas the AA does not contain such limitation, but covers all disputes whether or not arising from contractual relations. Of significance, the AA also covers all disputes arising from contracts between the state and private parties. Unfortunately, the administrative branch of the government discourages the insertion of arbitration clauses in state contracts, requiring government agencies and state enterprises to request permission from the council of ministers before doing so. The reason behind this is because government agencies and state enterprises have lost many arbitration cases against private parties resulting in substantial awards against them.
Thailand has concluded investment treaties with many countries both on a bilateral and multilateral basis. Many of the treaties contain arbitration clauses whereby the private investors or host states can institute arbitration proceedings to resolve their disputes under the respective treaties.
Facilitating Regulations
In order to promote Thailand as the venue for international arbitration, visa and work permit laws have been relaxed to facilitate foreign arbitrators and those acting as party representatives in arbitration proceedings in Thailand. ‘Smart visas’ and special work permits are generally granted to foreign arbitrators to enable them to carry out their duties until the closure of the proceedings. Foreign lawyers who are normally prohibited from practicing in Thailand are permitted to receive special dispensation from the law to act as party representatives in the arbitration proceedings.
Local Arbitration Institutions
There are three main arbitration institutions in Thailand:
The Office of the Arbitration Tribunal of The Board of Trade of Thailand;
The Thai Arbitration Institute of the Office of the Judiciary (TAI), and;
The Thai Arbitration Centre (THAC) under the auspices of the Ministry of Justice.
The Office of the Arbitration Tribunal of The Board of Trade of Thailand
By far the oldest institution, is the arbitration centre operated by The Board of Trade of Thailand (a federation of Thai and foreign chambers of commerce in Thailand), also where the office of the ICC Thailand is situated. The Board of Trade of Thailand has been administering the Thai Commercial Arbitration Rules since the ’60s. The centre is supported by the Board of Trade of Thailand and, detached from governmental agencies.
Thai Arbitration Institute (TAI)
Established in 1990, TAI is a successful attempt by the judiciary to promote alternative dispute resolution. It has the highest number of ongoing cases. Although the institute is a part of the Office of the Judiciary, which is administrative arm of the courts and is overseen by it. Neither the Office nor the courts interfere with the deliberations or decisions of the arbitrators. TAI is the main forum where disputes arising from contracts between state and private parties are arbitrated.
The Thai Arbitration Centre (THAC)
Not to be confused with TAI, The Thai Arbitration Centre or THAC was established by an act of parliament in 2007, but started operation in 2015. THAC has been in the forefront of promoting arbitration in general and in presenting itself as an international arbitration centre. It has modernised facilities and conveniently situated in a buzzling part of Bangkok, within minutes of famous hotels and shopping centres. Although THAC is partly funded by the Ministry of Justice, the latter does not interfere with the arbitration proceedings under the centre’s rules. THAC’s connection with the Ministry of Justice provides it with the unique opportunity to initiate changes in the laws and regulations to make Thailand a more friendly place for arbitration.
Other Arbitration Centres
Apart from the three main arbitration centres there are four more centres which administered their own arbitration rules relating to specific areas. These include the following.
(I). The Arbitration Centre of the Office of the Insurance Commissioner
The Centre administers its arbitration rules to resolve disputes between the insureds or beneficiaries and the insurance companies.
(II). The Arbitration Centre of the Office of the Securities Commission
The Centre administers its arbitration rules to resolve disputes between investors in the capital market and securities companies.
(III). Office for the Prevention and Resolution of Disputes regarding Intellectual Property, Department of Intellectual Property
As its name suggests, this centre is attached to the Department of Intellectual Property and administers its arbitration rules to resolve disputes regarding intellectual property matters (e.g. trademark, patent and copyright, etc.), as well as disputes arising from licensing and other agreements relating to intellectual property.
(IV). The Arbitration Centre of the Thai General Insurance Association
The Centre administers its arbitration rules to resolve disputes arising from among its members.
Final Thoughts
For a long time, arbitration has been promoted as an alternative mean of dispute resolution, its increasing popularity is mainly attributable to its flexible nature which enables it to keep pace with the rapidly changing business landscape. Thailand is a long -standing member of the New York Convention, thereby allowing foreign arbitral awards to be recognized and enforced within its territory. Conversely, awards made in Thailand can be enforced in 164 member states across the world, subject to the reservations made by those states. The Thai arbitration law follows the UNCITRAL Model Law in the most part, further strengthening Thailand as an international arbitration forum.
Further efforts have also been made to relax certain laws and regulations to facilitate the participation of foreign arbitrators and counsel to in Thai arbitration proceedings.
Presently, there are a number of arbitration institutions in Thailand which can cater to the needs of the parties seeking to resolve their disputes. Thailand has been a long-recognized venue for ICC and ad hoc arbitration under the UNCITRAL Rules. It is now asserting itself to become the hub of international arbitration.
View podcast of the article below.
https://www.youtube.com/watch?v=KFT5jm7MaOE&t=18s
Podcast Version
Article written by: Prof. Jayavadh Bunnag, Managing Partner
Due to the impracticality made by the Announcement of National Council for Peace and Order No. 74/2557 on Electronic Media Conference, B.E. 2557 (2014), which imposed restrictions including: (1) 1/3 of the quorum must be present in the same place and (2) participants/attendants must be in the Kingdom at the same time. These restrictions were found to be conflicting with the current social distancing guideline imposed by the Emergency Decree on Public Administration in Emergency Situation B.E. 2548 (2005) and Communicable Diseases Act B.E. 2558 (2015) along with the WHO’s health guideline. As a result, many businesses had no option but to postpone their annual general meeting (AGM) until the crisis is mitigated.
To resolve the impracticality, the Thai government made an additional announcement on the Emergency Decree on Electronic Media Conference, B.E. 2563 (2020) which came into effect on April 19, 2020. The new announcement effectively lifted the previously mentioned (1) and (2) restrictions. Under this new regulation, 1/3 of quorum is no longer required to be at the same venue nor within the Kingdom during the AGM. Hence, meeting via video conferencing will now be valid.
Nonetheless, corporate entities must comply with the regulations issued by the Ministry of Information and Communication Technology on Security Standards for Electronic Media Conference, B.E. 2557 (2014). This announcement encompasses various regulations including meeting’s technical requirements and security guideline.
Technical Requirements
Participants/attendants must have both video and audio access to the conference.
Participants/attendants must be able to tele-communicate at all times during the conference.
There must be basic video conferencing equipment/function available, such as: microphones, video cameras, projectors or shared-screen function etc.
There must be equipment/function to reduce interference during the video conference, such as: noise-filtering and video buffering.
The meeting administrator has the ability to halt, pause or modify the video conference as appropriate.
Security Guideline
There must be a sufficient identification, verification and authorization protocol for the participants/attendants.
Record all audio and visual contents of the meeting (except confidential matters).
Record all video traffic information of the meeting.
The recorded media must be in non-editable format and stored in a secure server/medium.
The recorded media must correctly display crucial information, such as: time, date, and IP address, etc.
The meeting administrator has the ability to display all related documents via video conference.
For now, corporate entities wishing to hold an AGM may refer to the guideline issued by the Ministry of Digital Economy and Society. The full guide can be downloaded via this link (http://dmsic.moph.go.th/index/detail/8076). As long as the video conference follows the guideline, it will be a valid evidence under the laws.
On February 10, 2021, the Thai Government Gazette published an amendment to the Thai Revenue Code subjecting foreign e-Service providers and e-Platform operators rendering e-Service to non-VAT clients in Thailand to value added tax (the “e-Service Amendment”).
The e-Service Amendment added new definitions to the Revenue Code, as well as, imposing new VAT requirements; all of which will become effective on September 1, 2021 onwards. The details are explained below.
1). Key Amendments
First up, the e-Service Amendment included new definitions to the Revenue Code, which are:
Goods means tangible and intangible assets, having a value, for sale or other uses, including imported goods, but does not include intangible assets that are transferable or deliverable via the internet or other electronic networks.
e-Service means any service, including intangible assets which are transferred/delivered via the internet or other electronic networks, which can be essentially automated, and not achievable without the use of information technology.
e-Platform means a marketplace, channel or any other means that enable multiple service providers to provide e-Service to recipients (e.g. Amazon, Shopee, Google Play or PSN).
2). Definition of e-Services and e-Service Providers
In short, this e-Service Amendment re-defined the meaning of e-Service, the key takeaways are:
e-Service is any intangible goods that can be delivered/transferred via the internet or other electronic networks, such as: downloadable software, gaming application, films or music.
e-Service is any services that can be delivered/transferred via the internet or other electronic networks, such as: online advertisement service or online streaming service.
Under the above definition, examples of e-Service providers are:
Downloadable or online gaming services, such as: Genshin Impact, League of Legends: Wild Rifts or World of Warcraft.
Downloadable or online media streaming services, such as: Netflix, Disney Plus or Spotify.
Online advertisement services such as: Facebook, Line, YouTube or Google Ads.
3). New VAT Requirements
Under this e-Service Amendment, a foreign e-Service provider or e-Platform operator (excluding those registered in Thailand) with an annual revenue over THB 1,800,000 deriving from e-Service rendered to non-VAT clients in Thailand, shall now apply for VAT registration and be liable for VAT payment under the following conditions:
If the client in Thailand is a VAT registrant, the VAT client shall be responsible for VAT payment; or
If the client in Thailand is not a VAT registrant, the foreign e-Service provider or e-Platform operator shall apply for VAT registration and be responsible for the said VAT payment and file a tax return on a monthly basis.
Previously, foreign e-Service providers or e-Platform operators were not responsible for (2). However, with this e-Service Amendment, foreign e-Service providers or e-Platform operators will now be responsible for the VAT payment as specified in (2), with the said VAT payment calculated from output tax only (without deducting input tax), and are not allowed to issue tax invoice(s).
4). Conclusion
In summary, this e-Service Amendment will subject foreign e-Service providers and e-Platform operators to value added tax.
It is important that businesses clearly understand whether they are an e-Service provider or an e-Platform operator, and determine their source of revenue to duly comply with the new VAT requirements. With this being said, the key VAT requirements are:
If a foreign e-Service provider renders an e-Service to non-VAT clients in Thailand via its own online channel/website, the said e-Service provider shall be responsible for VAT payment; or
If the foreign e-Service provider renders its services via a foreign e-Platform, the foreign e-Platform operator shall be responsible for VAT payment on behalf of that e-Service provider.
This e-Service Amendment is rather new and requires an in-depth understanding of both the tax code and related technology to determine local VAT liabilities. If you have any question or require further assistance on this matter, you are welcome to contact: law@ilct.co.th.
With the ongoing COVID-19 pandemic, businesses face many new challenges, whether in connection with the working condition, financial stability or management of their human resources. With the implementations of several announcements under the Emergency Decree on Public Administration in Emergency Situation B.E. 2548 (2005) (“EPAES”), Communicable Diseases Act B.E. 2558 (2015) (“CDA”) on top of the new social distancing guideline and hygiene protocol, businesses are forced to make unconventional changes to their usual operation. Transitions can be messy with multiple legal implications, thus, below are some of the possible paths allowable under the Thai Labour Protection Act B.E. 2541 (“LPA”).
Path 1: Financial Cutbacks
Seeing the current COVID-19 situation in addition to the new social distancing guideline. It can be difficult for businesses to operate under these new conditions. Business sectors such as: restaurants, airlines or hotels are only some of those heavily affected. Understandably, some businesses may be forced to tune their financial stability by various means. A pay-cut policy is possible only if the workers consented to it, but in reality, it will not be that easy. The LPA protects the payment of salary under the “Condition of Employment”, a pay-cut would mean a decrease in the Condition of Employment, therefore, not allowed by law.
On one hand, businesses may make a plea to the Labour Department (Inspector) that the business is suffering financially from COVID-19’s impacts. Under this method, businesses may cut up to 25% (maximum) from the usual worker salaries. Currently, the Thai Labour Department is providing an online portal to make the said plea (https://s97.labour.go.th/pub_m75/M75Form.php). Note that the company must notify the workers and Labor Inspector at least three days prior to implementing such measure.
On the other hand, business may also invoke “force majeure” to temporary close its business operation and not pay the salaries at all. With this being said, force majeure should not be taken lightly, it has potential legal backlashes. At this point, it is unclear whether COVID-19 pandemic will be considered as force majeure by the Thai Court.
As a viral outbreak is uncommon in Thailand and there are no clear interpretations whether neither of the two above measures are legally correct. To avoid a messy lawsuit, it is best to obtain consent from the workers and seek legal advices.
Path 2: Layoffs
For layoffs, businesses must pay severance payments. The LPA stipulated that the severance payment must be calculated based on each worker’s length of service. Intentionally withholding the severance payment has real legal consequences. Nonetheless, there are exceptions that would excuse businesses from paying the severance payment. Termination from embezzlement, willful misconduct or severe disobedience breaching the company’s work rules would be examples of such. Nonetheless, there must be evidence to support these severe termination claims.
With this being said, layoffs due to COVID-19 does not fall under the exceptions. Terminations from financial loss or bad economy does not warrant for withholding the severance payment. Unwarranted actions are likely to bring about the “unfair termination” lawsuit that could escalate to a court battle. If true, businesses will have to prove to the court that there are no other alternatives except layoffs and withholding the severance payment.
The simplest approach would be to negotiate with the workers and come to a mutual termination agreement. This way the severance package can be negotiated leaving both parties satisfied while also minimizing legal backlashes.
Path 3: Social Distancing
The so called “social distancing” is undoubtably one of the most popular options in the digitized world. Working remotely has never been easier, many new applications such as: Skype, Microsoft Team, Zoom or Google Hangouts have enabled businesses to continue their operation without the workers being physically present on site. If full digitization is not possible, businesses may also consider separating workers into teams and create a rotating shift system, thereby minimizing unnecessary contacts.
Bear in mind that any change to the work rules must comply with the law and fully consented by the workers. Again, the LPA protects the “Condition of Employment”, this is including: working hours, salaries, working environment and so on. Simply put, businesses are not allowed to implement any new working rules that would be “worst or less favourable” than the usual working rules. Nevertheless, incorporation of social distancing guideline into the work rules is likely to be viewed as a “better or favourable” working rules, provided that the workers are still entitled to the usual salary and benefits along with a formal consent. Still, businesses should be wary that the change of working rules must not create unnecessary hardship for the workers (less favourable working condition). To this end, the social distancing switch is not easy but will allow continuous business operation, as well as, minimizing financial impacts from the COVID-19 pandemic.
Ultimately, it is undeniable that businesses across the globe are feeling the impacts of COVID-19. In preparation of a pro-longed pandemic and shutdown, businesses must adapt and evolve to conform with the new global norms. Regardless of the path chosen, businesses should come to a mutual understanding with their workers before taking further actions. Factors such as: legal, financial, economic, social and ethical are all crucial and should be considered. With no end in sight, businesses are advised to tread lightly as there is no one-size-fit-all path.
