The Thai Securities and Exchange Commission (SEC) now requires more independent directors to be appointed by listed companies by their 2010 annual general shareholders meeting.
The Thai SEC has issued a new regulation directing that one-third of all of the directors of a listed companies must be independent directors, provided that it shall be not less than three. This means that if a listed company has the minimum number of five directors required under Thai law, three out of the five must be independent directors. If a company has 15 directors, at least five must be independent directors.
This requirement will be mandatory from the 2010 general shareholders meetings of listed companies. Initially stated to take effect by the 2009 annual general meeting of shareholders, the regulation was delayed due to the economic downturn and to provide a "grace period" to listed companies which were not yet ready to comply with the requirement.
Independent directors are integral part of corporate governance. They provide unbiased views and opinions to the board of directors and protect the mutual interest of all shareholders. Independent directors foster accountability and integrity.
The characteristics of an independent director can be briefly described as follows:
a. holds less than one percent voting share of a company, its parent company, subsidiaries or affiliates (the "Company");
b. has not been involved in the management as an employee or advisor receiving monthly wages from the Company for at least two years;
c. not related, whether by blood or law (e.g. parents, spouse, siblings), with an executive or a major shareholder of the company or its subsidiaries;
d. does not have a business relationship with the Company or conflicting entity;
e. not a major shareholder, director or executive of a company who has a relationship with the Company for at least two years;
f. is not an auditor of the Company;
g. not a major shareholder, director, executive or managing partner of an audit firm which employs the auditor of the Company for at least two years;
h. does not work in a professional advisor under specified conditions;
i. is not a director appointed to manage the company, to represent a major shareholder or a shareholder related to a major shareholder;
j. is not engaged in a business similar to or competing with the company or its subsidiaries;
k. is not a substantial partner of a partnership or a director involved in management, an employee or an advisor receiving monthly wages or a shareholder holding more than 1 percent of voting shares of a competitor; and
l. does not have any other characteristics that will hinder an independent view on a company's operation.
Affected companies looking for independent directors may request a list from the Thai Institute of Directors specifying qualified persons for specific types of businesses. In complying with this regulation, companies will need to amend their corporate documents with the Ministry of Commerce to reflect the changes in the rules and requirements of the directorship.