Do Directors And Shareholders Have Legal Status As An Employee ?

[Sunbelt Asia]

Memorandum

Official Dep.: Social Security Office, Legal Affair Division 1897

Ref. : Ror Ngor 0607/ Wor 2031

Sub.: Verifying the fact of the directors and shareholders whether or not they have legal status as an employer – employee

Att. : The Consultants of efficiency, Deputy General Secretary, Social Security Specialists, Director of Offices, Departments, Sections, Areas, Provincial Social Security Offices, branches and supervisors of all government agencies

As the Social Security Office has received several enquiries about the registration of the directors and shareholders of the companies as the Covered Persons and based on the final judgment of the Supreme Court on the case of Directors;

The Social Security Office has considered that according to the final judgment of the Supreme Court aforementioned, it has considered the definition of “The Employment Agreement” ,”Employer” and “Employee” as specified in the Civil and Commercial Code along with the Labor Protection Act 1998, (B.E. 2541). The term of “Employee” is a person who agrees to do work for an employer in return for a wage, under employer’s authorities and commands which means employee has to carry out employer’s order and follow employer’s rules and regulations concerning to the employment, if the employee violates it, he/she will have a punishment from employer. Therefore, the company founder or shareholder whose position is director doesn’t have to follow the employment rules and regulation of the company, his/her work descriptions differ from the employee, doesn’t have to apply for job, works freely regardless of working days and working hours and has no commander. Therefore, the director or the partnership is not considered an employee, so his/her work performance for the company or partnership is regarded as the director and shareholder who has to maintain benefits of such company and partnership which agree to unite for a common undertaking, with a view of sharing the profits which may be derived therefrom according to Section 1012 of the Civil and Commercial Code.

However, if a Director is not a founder or shareholder of the company, but he/she is hired by the resolution of the Meeting of Shareholders, such director must follow the employment rules and regulations or company’s order, if not the company can put a punishment and if his employment is terminated, he can call for compensation from the company, such Director is regarded as the “employee” in accordance with Section 5 of the Social Security Act B.E. 2533. Thus, the Officers have to verify the fact based on the final judgment of the Supreme Court attached hereto for making the consideration whether or not such person is an employer or employee.

Please be informed and pursue such matter further.

Signed SIGNATURE

(Mr.Sittiporn Rattanakorn)

Deputy Secretary General

Act in place of the Secretary-general of the Social Security Office

--------------------------------------------------------------------------------------------------------------

The short version is if you are a promoter/ shareholder of a company, you do not need to be in the social fund system and pay 750 Baht per month with the company matching this amt of 750 Baht (based on having a 15K month salary) Even if you have been paying for years, the company and you can stop paying your portion of 1,500 Baht. Only your employees must continue to do so (with the company matching this amount)

If however you are a paid director with no shares, you need to be in the social fund system.

www.sunbeltasiagroup.com

[d44]

So i'm not an employee.

Now, "Any person or entity who regularly supplies goods or provides services in Thailand and has an annual turnover exceeding 1.2 million Baht is subject to VAT in Thailand."

( http://www.rd.go.th/publish/6043.0.html )

Does that mean that when a MD pays himself, he has to charge himself VAT?

[Sunbelt Asia]

So i'm not an employee.

Now, "Any person or entity who regularly supplies goods or provides services in Thailand and has an annual turnover exceeding 1.2 million Baht is subject to VAT in Thailand."

( http://www.rd.go.th/publish/6043.0.html )

This is outdated info. It is now 1.8 million Baht.

Does that mean that when a MD pays himself, he has to charge himself VAT?

no

www.sunbeltasiagroup.com

[Cyberstar]

The short version is if you are a promoter/ shareholder of a company, you do not need to be in the social fund system

Does this apply to all promoters/shareholders employed by the company or only to directors? E.g. my wife is a promoter as well as current shareholder. She works fulltime (let's call her 'daily manager') in the company and is on the payrol, taxfiles, etc., but isn't a director. Does she have to be in the social fund system?

[Sunbelt Asia]

The short version is if you are a promoter/ shareholder of a company, you do not need to be in the social fund system

Does this apply to all promoters/shareholders employed by the company or only to directors? E.g. my wife is a promoter as well as current shareholder. She works fulltime (let's call her 'daily manager') in the company and is on the payrol, taxfiles, etc., but isn't a director. Does she have to be in the social fund system?

No

www.sunbeltasiagroup.com

[Sunny Valentine]

I assume this might also apply to Thai Nationals.

Thee seems to be no mention on the portion of shares held by the director. Am I right assuming that even with one share this rule applies?

Makes me wonder how this is handled with public listed companies? Imagine a director who buys one share of his company at the Stock Exchange, and sells it a few weeks later? Social Security waiver for two weeks?

Sunny

[Sunbelt Asia]

I assume this might also apply to Thai Nationals.

Thee seems to be no mention on the portion of shares held by the director. Am I right assuming that even with one share this rule applies?

It comes down more to management control or who you know.

Example: A wife of a MD, owns one share. She is not a director but is a Mgr. The husband will not fire her, if she is late for work.

On the other hand, if she owns one share. She is a director of a division but has no major mgmt control. She could be fired if she was late for work (she was not related to the MD.) Then they are an employee.

www.sunbeltasiagroup.com

[Sunny Valentine]

According to my lawyer, Chonburi Social Security refuses to register foreign directors to Social Security.....

As I read this memorandum, directors can be, but don't have to, take part in the scheme.

So I guess it is another example of Thai thinking "rules? Who cares? They are for foreigners only! Free people don't follow rules, they make them up on the go."?

[Sunbelt Asia]

According to my lawyer, Chonburi Social Security refuses to register foreign directors to Social Security.....

As I read this memorandum, directors can be, but don't have to, take part in the scheme.

So I guess it is another example of Thai thinking "rules? Who cares? They are for foreigners only! Free people don't follow rules, they make them up on the go."?

Depends on the office. Some will and some won't.

www.sunbeltasiagroup.com

[Sunny Valentine]

Thanks Sunbelt.

Just for clarification: Would it be possible that Social Security refuses to pay for services granted on the scheme for my wife, given she is codirector and shareholder, at a latter stage? Could they come up in a few years, telling us that she is not an Employee as to the standards set up in the document you posted?

Sunny

[Sunbelt Asia]

Thanks Sunbelt.

Just for clarification: Would it be possible that Social Security refuses to pay for services granted on the scheme for my wife, given she is codirector and shareholder, at a latter stage? Could they come up in a few years, telling us that she is not an Employee as to the standards set up in the document you posted?

Sunny

yes

www.sunbeltasiagroup.com

[lingling]

Ok, so no need to pay to the social security fund anymore? Both me and my wife are shareholders in our Co Ltd and we have been paying social security contributions since we started up the company. But if my interpretation of the above is correct, we should not pay for ourselves, just for other employees...?

[Sunbelt Asia]

Ok, so no need to pay to the social security fund anymore? Both me and my wife are shareholders in our Co Ltd and we have been paying social security contributions since we started up the company. But if my interpretation of the above is correct, we should not pay for ourselves, just for other employees...?

Correct as long as you are in control over the company. ( not just shareholders)

www.sunbeltasiagroup.com

[lingling]

Correct as long as you are in control over the company. ( not just shareholders)

I am the managing director with signing rights, my wife is office manager without signing rights. I guess that is enough for taking both of us out of the social security system.

Do you have that letter in Thai somewhere so I can have my accountant sort it out with the SSO...?

[Sunbelt Asia]

Correct as long as you are in control over the company. ( not just shareholders)

I am the managing director with signing rights, my wife is office manager without signing rights. I guess that is enough for taking both of us out of the social security system.

Do you have that letter in Thai somewhere so I can have my accountant sort it out with the SSO...?

Just have your accountant call the SSO. Ref. : Ror Ngor 0607/ Wor 2031

www.sunbeltasiagroup.com

[Blue1]

Very interesting. So, if you're not an employee in that sense, do you need a work permit?

Memorandum

Official Dep.: Social Security Office, Legal Affair Division 1897

Ref. : Ror Ngor 0607/ Wor 2031

Sub.: Verifying the fact of the directors and shareholders whether or not they have legal status as an employer – employee

Att. : The Consultants of efficiency, Deputy General Secretary, Social Security Specialists, Director of Offices, Departments, Sections, Areas, Provincial Social Security Offices, branches and supervisors of all government agencies

As the Social Security Office has received several enquiries about the registration of the directors and shareholders of the companies as the Covered Persons and based on the final judgment of the Supreme Court on the case of Directors;

The Social Security Office has considered that according to the final judgment of the Supreme Court aforementioned, it has considered the definition of “The Employment Agreement” ,”Employer” and “Employee” as specified in the Civil and Commercial Code along with the Labor Protection Act 1998, (B.E. 2541). The term of “Employee” is a person who agrees to do work for an employer in return for a wage, under employer’s authorities and commands which means employee has to carry out employer’s order and follow employer’s rules and regulations concerning to the employment, if the employee violates it, he/she will have a punishment from employer. Therefore, the company founder or shareholder whose position is director doesn’t have to follow the employment rules and regulation of the company, his/her work descriptions differ from the employee, doesn’t have to apply for job, works freely regardless of working days and working hours and has no commander. Therefore, the director or the partnership is not considered an employee, so his/her work performance for the company or partnership is regarded as the director and shareholder who has to maintain benefits of such company and partnership which agree to unite for a common undertaking, with a view of sharing the profits which may be derived therefrom according to Section 1012 of the Civil and Commercial Code.

However, if a Director is not a founder or shareholder of the company, but he/she is hired by the resolution of the Meeting of Shareholders, such director must follow the employment rules and regulations or company’s order, if not the company can put a punishment and if his employment is terminated, he can call for compensation from the company, such Director is regarded as the “employee” in accordance with Section 5 of the Social Security Act B.E. 2533. Thus, the Officers have to verify the fact based on the final judgment of the Supreme Court attached hereto for making the consideration whether or not such person is an employer or employee.

Please be informed and pursue such matter further.

Signed SIGNATURE

(Mr.Sittiporn Rattanakorn)

Deputy Secretary General

Act in place of the Secretary-general of the Social Security Office

--------------------------------------------------------------------------------------------------------------

The short version is if you are a promoter/ shareholder of a company, you do not need to be in the social fund system and pay 750 Baht per month with the company matching this amt of 750 Baht (based on having a 15K month salary) Even if you have been paying for years, the company and you can stop paying your portion of 1,500 Baht. Only your employees must continue to do so (with the company matching this amount)

If however you are a paid director with no shares, you need to be in the social fund system.

www.sunbeltasiagroup.com

[opalhort]

This is a very interesting topic since it also affects us.

Our company has been in the social security system for five years now.

I am the MD with signing rights and a shareholder and my wife is a Plant nursery manager, director with signing rights and a shareholder.

Considering our salaries we have paid a considerable amount to the SSO over the past 5yrs but have never made use of any benefits.

Why did the SSO not inform us accordingly at the time we registered with them?

Is there any chance that we could claim our previously made payments back?

opalhort

[Sunbelt Asia]

Very interesting. So, if you're not an employee in that sense, do you need a work permit?

Yes

This is a very interesting topic since it also affects us.

Our company has been in the social security system for five years now.

I am the MD with signing rights and a shareholder and my wife is a Plant nursery manager, director with signing rights and a shareholder.

Considering our salaries we have paid a considerable amount to the SSO over the past 5yrs but have never made use of any benefits.

Why did the SSO not inform us accordingly at the time we registered with them?

Is there any chance that we could claim our previously made payments back?

They just recently made this ruling and why we posted it. No chance in getting payments back, as you could have had claims before this ruling. Fortunately you were in good health or chose not to use the medical service.

www.sunbeltasiagroup.com

[opalhort]

Thank you very much Sunbelt for all the great advise you provide for free.

We have been searching through every page of the SSO website (SSO) but can't find any reference to the document รง0607/ว2031 . Does anybody know where this document could be found online in Thai?

opalhort

Edited February 5, 2007 by opalhort

[Sunbelt Asia]

Thank you very much Sunbelt for all the great advise you provide for free.

We have been searching through every page of the SSO website (SSO) but can't find any reference to the document รง0607/ว2031 . Does anybody know where this document could be found online in Thai?

opalhort

You are welcome.

I will scan the Thai version tomorrow. The Government normally does not put these announcements online.

www.sunbeltasiagroup.com

[opalhort]

Thank you very much Sunbelt for all the great advise you provide for free.

We have been searching through every page of the SSO website (SSO) but can't find any reference to the document รง0607/ว2031 . Does anybody know where this document could be found online in Thai?

opalhort

You are welcome.

I will scan the Thai version tomorrow. The Government normally does not put these announcements online.

www.sunbeltasiagroup.com

Sorry if this may be a lengthy post, but we have obtained some info today.

My wife went to our local SSO (branch 7, Bang Bon) to clarify what has to be done. Here is the result of her conversations with various officers:

If you fall into the category of directors who should not be in the system you have to submit the employment termination form (yellow, สปส 6-09), attach the company documents (memorandum and cover sheet stating the signing rights of directors). Important is the date of 'termination of employment' It has to be pre-dated to the same date when you joined the system!!! (in our case April 2545). And YES you can claim a refund but the officers were very vague about the amount you can claim (probably they themselves don't know the exact rules yet).

If you are a director and would like to remain in the system the following is required:

A letter explaining that you work full-time for the company, clearly stating your duties and have somebody above you in a position to terminate your employment. This has to be evidenced by an employment contract attached to your request to remain in the system, this contract has to state under what conditions the employment can be terminated.

Your request to remain in the system will be taken up for consideration by the 'higher-ups' of the SSO and may or may not be granted.

For example if you are the top person and your wife is a director/manager/shareholder, she could stay in the system but you can not. (NOTE: this is only my interpretation and was not specifically mentioned by any officer!!)

My wife asked for a copy of the รง0607/ว2031 document but was told they don't have one (strange???).

End of report-----

Now I have some questions because we actually would like to remain in the system:

our company set-up:

3 directors (father-in-law, my wife, myself), all shareholders, signing rights: any two out of the three.

father-in-law is Chairman of the board of directors but does not 'work' or receives any salary.

Am I correct in the assumption that my father-in-law is the top person with the authority to terminate our employment (with the consent of either one of us)?

As for employment contracts which will satisfy the SSO's requirements, are there any standard contracts available somewhere?

opalhort

[Sunbelt Asia]

My wife asked for a copy of the รง0607/ว2031 document but was told they don't have one (strange???).

Here it is...

our company set-up:

3 directors (father-in-law, my wife, myself), all shareholders, signing rights: any two out of the three.

father-in-law is Chairman of the board of directors but does not 'work' or receives any salary.

Am I correct in the assumption that my father-in-law is the top person with the authority to terminate our employment (with the consent of either one of us)?

No. You all have equal signing powers. As your wife or you are needed to fire each other. You or your wife should not be in the system as your father-in-law vote alone can not terminate either your wife or your contract. Plus odds are high, SSO will not buy the fact, he would want to fire his daughter or you in the first place.

www.sunbeltasiagroup.com

[opalhort]

My wife asked for a copy of the รง0607/ว2031 document but was told they don't have one (strange???).

Here it is...

our company set-up:

3 directors (father-in-law, my wife, myself), all shareholders, signing rights: any two out of the three.

father-in-law is Chairman of the board of directors but does not 'work' or receives any salary.

Am I correct in the assumption that my father-in-law is the top person with the authority to terminate our employment (with the consent of either one of us)?

No. You all have equal signing powers. As your wife or you are needed to fire each other. You or your wife should not be in the system as your father-in-law vote alone can not terminate either your wife or your contract. Plus odds are high, SSO will not buy the fact, he would want to fire his daughter or you in the first place.

www.sunbeltasiagroup.com

Thank you very much for your reply sunbelt.

Since applications to remain in the system are apperently handled on a case-by-case basis, I thought alraedy that our chances were close to nill due to the family relationship.

Which means we will have to get out of the system and just hope for a good refund.

opalhort

[opalhort]

Today we visited our local SSO again and got confirmation that a rund will be paid. The amount of the refund will be everything the 'employer' AND the 'employee' has paid LESS any payments made by the SSO to us (if we ever made use of the fund's benefits).

We received a complete print-out of all payments we made as employer and employee and were also given a number of forms to fill in.

It appears to be quite straight forward.

opalhort

[opalhort]

Today we visited our local SSO again and got confirmation that a refund will be paid. The amount of the refund will be everything the 'employer' AND the 'employee' has paid LESS any payments made by the SSO to us (if we ever made use of the fund's benefits).

We received a complete print-out of all payments we made as employer and employee and were also given a number of forms to fill in.

It appears to be quite straight forward.

opalhort

sorry had to edit because of a stupid typo.

[lingling]

Today we visited our local SSO again and got confirmation that a rund will be paid. The amount of the refund will be everything the 'employer' AND the 'employee' has paid LESS any payments made by the SSO to us (if we ever made use of the fund's benefits).

We received a complete print-out of all payments we made as employer and employee and were also given a number of forms to fill in.

It appears to be quite straight forward.

opalhort

We filed all paperwork last week and was told the same thing - it will take a few months but they will refund everything from day one. Cool stuff.

Although this must be bad for the social security fund. I don't think there are many directors/company owners who makes use of their social security contributions, so here they are getting rid of "free" money.

Edited March 15, 2007 by lingling

[Sunny Valentine]

Opalhort and Lingling, in what province did you apply? I was told that Chonburi does not follow this, and I want to make some pressure on the topic, as my wife (Codirector and shareholder of my company plus an Employee) is insured by Social Security, and it seems now that her contract is in Limbo. I rather include her in my private ensurance, but I refuse to pay double!

Sunny

[opalhort]

Opalhort and Lingling, in what province did you apply? I was told that Chonburi does not follow this, and I want to make some pressure on the topic, as my wife (Codirector and shareholder of my company plus an Employee) is insured by Social Security, and it seems now that her contract is in Limbo. I rather include her in my private ensurance, but I refuse to pay double!

Sunny

we applied in BKK, see address of our local SSO here:

It is our understanding that this regulation applies nationwide. Call the SSO HO to confirm.

opalhort

[Martin_F]

You have just got to say it......Amazing Thailand......

[Sunbelt Asia]

Memorandum

Official Dep.: Social Security Office, Legal Affair Division 1897

Ref. : Ror Ngor 0607/ Wor 2031

Sub.: Verifying the fact of the directors and shareholders whether or not they have legal status as an employer – employee

Att. : The Consultants of efficiency, Deputy General Secretary, Social Security Specialists, Director of Offices, Departments, Sections, Areas, Provincial Social Security Offices, branches and supervisors of all government agencies

As the Social Security Office has received several enquiries about the registration of the directors and shareholders of the companies as the Covered Persons and based on the final judgment of the Supreme Court on the case of Directors;

The Social Security Office has considered that according to the final judgment of the Supreme Court aforementioned, it has considered the definition of “The Employment Agreement” ,”Employer” and “Employee” as specified in the Civil and Commercial Code along with the Labor Protection Act 1998, (B.E. 2541). The term of “Employee” is a person who agrees to do work for an employer in return for a wage, under employer’s authorities and commands which means employee has to carry out employer’s order and follow employer’s rules and regulations concerning to the employment, if the employee violates it, he/she will have a punishment from employer. Therefore, the company founder or shareholder whose position is director doesn’t have to follow the employment rules and regulation of the company, his/her work descriptions differ from the employee, doesn’t have to apply for job, works freely regardless of working days and working hours and has no commander. Therefore, the director or the partnership is not considered an employee, so his/her work performance for the company or partnership is regarded as the director and shareholder who has to maintain benefits of such company and partnership which agree to unite for a common undertaking, with a view of sharing the profits which may be derived therefrom according to Section 1012 of the Civil and Commercial Code.

However, if a Director is not a founder or shareholder of the company, but he/she is hired by the resolution of the Meeting of Shareholders, such director must follow the employment rules and regulations or company’s order, if not the company can put a punishment and if his employment is terminated, he can call for compensation from the company, such Director is regarded as the “employee” in accordance with Section 5 of the Social Security Act B.E. 2533. Thus, the Officers have to verify the fact based on the final judgment of the Supreme Court attached hereto for making the consideration whether or not such person is an employer or employee.

Please be informed and pursue such matter further.

Signed SIGNATURE

(Mr.Sittiporn Rattanakorn)

Deputy Secretary General

Act in place of the Secretary-general of the Social Security Office

--------------------------------------------------------------------------------------------------------------

The short version is if you are a promoter/ shareholder of a company, you do not need to be in the social fund system and pay 750 Baht per month with the company matching this amt of 750 Baht (based on having a 15K month salary) Even if you have been paying for years, the company and you can stop paying your portion of 1,500 Baht. Only your employees must continue to do so (with the company matching this amount)

If however you are a paid director with no shares, you need to be in the social fund system.

www.sunbeltasiagroup.com

Just to give a update, after 6 months just did get a refund of 54k. So the Thai givernment does give refunds on this.

www.sunbeltasiagroup.com