Bankruptcy in Thailand
In several instances, either the plaintiff or the defendant may be concerned about the protection of their rights, interests, security, or whether they will No individual or company wants to be severely in debt to the point of bankruptcy. However, the economic downturn and global recession in recent years has spurred business bankruptcies and closures in many countries around the world. Thailand is no exception.
Faced with major financial crises in the past, Thailand’s legal infrastructure has proven resilient enough to handle a vast increase in bankruptcy cases. Reformations in Thailand’s bankruptcy laws oversaw the establishment of the Central Bankruptcy Court. Significant revisions of the law were made over time to facilitate the settling of debts and insolvency proceedings. This has also allowed for the reorganization of companies, enabling businesses to continue operating despite the disruptions.
Commencing a bankruptcy case in Thailand is not a simple process, and several conditions must be fulfilled prior to filing a case. Whether you are in the position of a debtor or creditor, assistance from legal experts is necessary to ensure the procedures are adhered to according to the law.
Bankruptcy Law in Thailand
Bankruptcy refers to a legal status in which an individual or a corporate entity is declared by the court to be incapable of repaying outstanding debts. If a debtor is proved to be insolvent and a bankruptcy case is submitted to the court, the court may order the debtor’s assets to be allocated to the creditors by the procedures prescribed in the law.
The laws in Thailand associated with bankruptcy include the Bankruptcy Act and the Act on Establishing Bankruptcy Courts and Bankruptcy Case Procedures.
Procedures for Bankruptcy Cases in Thailand
The bankruptcy process carried out in Thailand is outlined in the Thai Bankruptcy Act.
1. Filing a Bankruptcy Case
A bankruptcy action can be initiated by any creditor under the condition that the amount owed by an individual debtor must not be less than 1 million baht and in the case of a debtor being a juristic person, the amount owed must be at least 2 million baht.
A bankruptcy claim can be filed by both secured and non-secured creditors. However, under Thai law, secured creditors are given priority in the event that the assets and property owned by the debtor are distributed.
A bankruptcy claim can only be taken to court on the condition that the debtor is proven insolvent. The bankruptcy law stipulates circumstances in which the creditors may presume the debtor is insolvent. Some of these circumstances include the debtor transferring his or her assets or the rights to the assets management to others for the creditors’ interests; the debtor attempting to delay or avoid the payment by leaving the country; or the debtor failing to make payment after receiving the letter of demand by the creditor twice with at least 30 days between each attempt. Once the prescribed conditions are satisfied, the bankruptcy case can proceed to court.
2. Issuing Absolute Receivership Order (ARO)
Upon the court’s approval to proceed, an order for absolute receivership will be declared. This is an order assigning a government officer to be a “Receiver” to manage and control all the assets belonging to the debtor that may be used to repay the creditors.
Once officially appointed, the Receiver will need to ensure that the order is published in the Government Gazette, and in at least one newspaper, so that the debtor’s insolvency case can be acknowledged by the creditors. The creditor must submit a request with evidence to the Receiver within a specified period in order to receive the payment.
The Receiver will arrange a meeting with all creditors to decide whether they agree to accept the composition proposed by the debtor, and to discuss the debtor’s asset management as deemed necessary.
The debtor must be aware that no action can be taken against the property, assets or business after the receivership order is issued. The debtor shall deliver all the property and other relevant documents, such as account books and company seals, to the Receiver.
3. Debtor’s Assets Allocation
In the event that the court pronounces the debtor to be formally bankrupt, the debtor’s assets will be distributed among the rightful creditors under the arrangement of the assigned Receiver. The outstanding debts shall be paid in full or until there are no remaining assets to distribute.
Composition in a Bankruptcy Case
A composition is considered an alternative to bankruptcy action where the debtor and the creditors can avoid lengthy and confrontational proceedings. The debtor can choose to undertake a composition by submitting a written request to the Receiver that they intend to settle their debt with the creditors.
The Receiver will then organize a meeting among the creditors to decide if the composition proposed should be accepted. Upon the agreement of the creditors to accept the proposal, the composition will be permitted by the court to carry out the debt settlement partially or in another manner as proposed. Once the court approves, all creditors will be bound by the composition.
The debtor who successfully pursues the composition will regain control in managing their debts and, as a result, the bankruptcy action will be terminated.
In case the debtor is a company or other form of juristic person entity, besides the creditors, the liquidator of such company has a right to file a bankruptcy case. The liquidator may request the court to declare the company bankrupt if it is found that the company’s assets are insufficient to settle its liabilities and the composition of all the shares has been fully paid up.
After the court issues the Absolute Receivership Order, the company’s assets will be under the Receiver’s control and a plaintiff creditor will be appointed. The Receiver and the plaintiff creditor are given the right to initiate a motion for the adjudication of bankruptcy. This motion can be made against the unlimited partners of the registered ordinary partnership or limited partnership without having to file a new legal action.
The debtor who is a juristic person is given the option to apply for business reorganization before the issuing of the Absolute Receivership Order to prevent the company from being adjudicated as bankrupt.
Discharge from Bankruptcy
The bankruptcy case can be discharged either automatically or by filing a motion to the court. The discharge is normally granted after a specified automatic discharge period; or if the debts have been settled in full; or at least half of the assets have been liquidated to pay off the creditors. In any case, the debtor must not be deemed dishonest, such as continuing to operate the business while acknowledging that he or she is incapable of repaying the debts.
Undergoing bankruptcy proceedings can be distressing for individuals and companies. The procedures are complex, especially for businesses that wish to apply for restructuring and reorganization.
The team at Siam Legal specializes in bankruptcy and reorganization cases, and will be able to advise you on suitable legal measures for your particular case. We attempt to mitigate the potential damage for you and your business as much as possible by carefully analyzing all aspects involved and exploring all options available. Contact us for a consultation on the practical strategies we can offer you to defend your financial interests.