Both Director and Employee of the Company: If Removed From One Role, Does the Other End Too?

The core answer

No. When one role ends, the other does not end by itself. Being a director, an employee, a shareholder and an authorised signatory are four statuses with different sources and different procedures. One person can hold all four at once, but each is changed on its own track.

Removing a director needs a general-meeting resolution (Civil and Commercial Code section 1151). Dismissing an employee follows labour law: notice, severance, and no unfair dismissal. Shares stay with the holder until they are transferred. Signing authority changes at the registry and at the bank.

The first thing to check each time is whether the person is a legal "employee" at all, because some directors draw a salary yet answer to nobody. The consequences of dismissal differ greatly.

1. The four statuses, kept apart

A common confusion is internal job titles such as managing director, director of operations or department head. Some are only titles in the work structure and not directors in law. Check the register to see whether the person is named as a director.

2. How is a director removed?

Section 1151 reads: "only the general meeting may appoint or remove a director". In Supreme Court Decision 12046/2547, the articles let the general meeting appoint directors but were silent on removal. The Court applied section 1151 and held that the general meeting could remove the director even though an earlier resolution had appointed him indefinitely. Because the law gives the power to remove to the general meeting alone, the remaining directors cannot remove one by their own vote. It goes to the shareholders' general meeting.

• Check what the articles say about quorum and majority.
• Give a correct meeting notice, and list the removal as its own agenda item. In Decision 3413/2560 the Supreme Court held that removing a director is an important matter shareholders must know about in advance. A resolution to remove a director under "other business", when the notice did not mention it, was outside the agenda and unlawful.
• If the person to be removed holds a large block of shares, check first whether the votes are there and whether a shareholders' agreement limits the right to remove.

Resignation is another route. Section 1153/1 requires a director to submit a resignation letter to the company, and the resignation takes effect from the date the letter reaches the company, without waiting for registration. Even before that provision, in Decision 2203/2547 the Supreme Court treated a resignation as effective when the intention is expressed to the company, applying agency principles. The company must still register the change of directors under section 1157 so the register matches reality.

3. Dismissal is a separate step

If the person is an employee, dismissal follows the Labour Protection Act B.E. 2541.

Notice (section 17). For a contract with no fixed term, either side may terminate by written notice given on or before a pay day, taking effect on the next pay day, and no more than three months of notice is required. The employer may instead pay wages up to the termination date and let the employee leave at once. If the employer dismisses without notice, section 17/1 requires payment of the wages that would have been earned until the date termination would have taken effect.

Severance (section 118). A dismissed employee who has worked continuously for the stated period receives severance based on the last wage rate.

No severance (section 119). Dishonest performance of duty or an intentional criminal offence against the employer; intentionally causing damage; gross negligence causing serious damage; breach of lawful and fair work rules or orders after a written warning (unless the case is serious); abandoning duty for three consecutive working days without good reason; or a final prison sentence. The employer must state the facts of the cause in the dismissal letter or tell the employee at dismissal, otherwise it cannot rely on that cause later.

"We disagree with the director now" is not a section 119 ground. If dismissal is on that basis, severance is still owed, and the employee may claim unfair dismissal in the Labour Court under section 49 of the Act establishing the Labour Court and labour case procedure B.E. 2522, where the court may order compensation instead of reinstatement or order reinstatement.

4. Is the director really an "employee"?

A contract of employment under section 575 is one where the employee agrees to work for the employer and the employer agrees to pay wages throughout the work. Courts look at the facts, not at the title of a document:

• Command. Does anyone give orders, set hours or assess performance? If the person sets company policy with nobody above them, the weight leans toward director rather than employee.
• Wages. Is there a regular salary with payslips, tax and social security, or merely money the owner draws from the company?
• Contract and rules. Is there a contract, work rules, leave and attendance records?
• Role in the company. A director who manages the company is often seen as acting for the employer.

The Supreme Court has decided several cases where a party who was a director claimed employee rights such as severance. In some the person was treated as an employee, in others the director was treated as acting for the employer, so outcomes turn on the facts. This guide does not state a fixed rule. Do not assume "a director is never an employee" or "anyone on a salary is an employee".

5. Salary versus director remuneration

The two rest on different bases. Salary follows the employment contract. Director remuneration depends on the articles and company resolutions. When a director is removed, director remuneration stops in line with the resolution, but the employee's salary must still be paid until the employment ends properly.

• Check what has been paid as "salary" and what as "director remuneration". If they were paid as one lump with no split, it is hard to explain in a dispute.
• Take tax and social security advice from an accountant before restructuring (accounting and tax).

6. Shares do not go anywhere

Ceasing to be a director or being dismissed does not transfer or forfeit shares. If the company or the other shareholders also want the person out as a shareholder, there must be a sale or transfer under the articles, a shareholders' agreement or a new agreement, recorded in the shareholder register. Conversely, a large shareholder keeps a vote at the general meeting and could re-appoint themselves as a director, so assess this before voting to remove.

For family companies and companies with several co-owners, read Family business: dividing roles, pay and decision rules.

7. Signing authority: change it at the registry and at the bank, separately

Authority to bind the company is shown on the company affidavit at DBD. Section 1157 of the Civil and Commercial Code requires the company to register a change of directors within fourteen days of the date of the change. In Decision 1328/2535 the general meeting had resolved that two directors leave office, but the company affidavit still named them and their removal was never registered, so the Supreme Court treated them as still directors.

Banks do not update from the register automatically. Notify the bank with a resolution or letter appointing new signatories and new specimen signatures, on each bank's own form. Retrieve or cancel the company seal (if any), online-banking tokens and earlier powers of attorney.

8. What to hand over

For the full list see A director resigns: what to hand over. In short:

• Bank signatories, tokens, cards, online banking.
• Company seal (if any), registers, key documents, live contracts.
• Company email, accounting system, cloud, domain, website, ad platforms.
• Powers of attorney granted to the person and by the person.
• Assets they hold: computer, phone, vehicle, company card.
• Creditors and debtors they handled, and a notice to counterparties.
• If they guaranteed company debts, negotiate with the creditor separately. See Director resigned and sold shares: still liable on a personal guarantee?

9. Three company types, different issues

Companies run by professional managers. The manager may be a director as well, or only an employee. If both, state in the employment contract and resolutions how ceasing to be a director affects the employment, whether it is a ground for termination, and which pay stops. Without that, removing the directorship alone does not end the contract.

Family companies. A founder or relative is often director, shareholder and salary earner all at once. Keep the documents and payments for each separate and agree on exit from each role in advance in a shareholders' or family agreement. Once a conflict starts, family ties make a fair dismissal harder.

Thai subsidiaries of foreign companies. A foreign director or executive may have been appointed by the parent and may hold a work permit tied to a position and an employer. On leaving the position or the job, check whether the permit and visa must be notified or amended (see Changing employer, position or work location) and whether the parent must appoint a replacement under group documents. Where an executive is paid by both entities, confirm who the actual employer is.

10. Common mistakes

• Removing a director by board resolution when section 1151 gives the power only to the general meeting.
• Assuming dismissal removes the person as director, or that removing the director means no severance.
• Not registering the change of director within 14 days, or registering but not telling the bank.
• Dismissing orally with no letter stating the cause, which prevents relying on a section 119 cause later.
• Leaving the person with access to systems, email or bank accounts after the role ends.
• Mixing salary with money the owner draws from the company. See Owner salary, dividends and shareholder loans.

11. Checklist before changing a role, dismissing or handing over

• State which statuses the person holds: director, employee, shareholder, authorised signatory, and any internal title.
• Read the articles, any shareholders' agreement and the employment contract for what they say on leaving a role.
• Assess whether the person is an employee under section 575, from wages, command and actual work.
• To remove a director, prepare a complete general-meeting notice and resolution.
• To dismiss, check for a section 119 cause, work out notice under section 17 and severance under section 118.
• Issue a dismissal letter that states the facts of the cause.
• Register the change of director within 14 days (section 1157).
• Notify the bank of new signatories, specimen signatures and online credentials.
• Recover assets, seal and documents, and cut system access.
• Settle the shares if the person is also to leave as shareholder, and any guarantee.
• For a foreigner, check the work permit and visa.
• Tell counterparties, customers and staff who takes over.

Further reading

• A director resigns: what to hand over so the company keeps running — handover of documents, signing authority, banks, systems
• How much severance pay am I owed in Thailand? — severance rates and calculation
• Dismissed, what to do — the employee's side and when a lawyer is needed
• Family business: dividing roles, pay and decision rules — family companies
• Changing employer, position or work location — work permits of foreign executives

Removing a director, dismissing an employee, transferring shares and changing a signatory are four separate steps, and each one you intend must be decided and documented on its own rather than expected to carry the others along.

We help review the person's status on all four fronts, sequence the director removal and the dismissal, draft the meeting notice, resolution and dismissal letter, and handle registration and handover. For an initial consultation, call +66 92 254 2045 or send us the details. See also corporate secretarial work, labour compliance and legal retainer.

This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.