Insolvency Law at Thailand
In Thailand, insolvency law is primarily governed by the Bankruptcy Act B.E. 2483 (1940), which provides the framework for the liquidation or rehabilitation of insolvent individuals and companies. There are two main types of procedures under this law: liquidation and rehabilitation.
Here’s a breakdown of how insolvency law operates in Thailand:
1. Types of Insolvency Procedures
Liquidation (Bankruptcy) This is the process where a debtor's assets are sold off to pay creditors. The process is typically initiated when the debtor is unable to pay debts, and a court appoints a trustee to handle the sale of assets and the distribution of funds.
Personal Bankruptcy: In Thailand, individuals can file for personal bankruptcy under the Bankruptcy Act, but they must meet certain conditions such as owing more than 1.5 million baht or having at least 3 creditors.
Corporate Bankruptcy: Corporations can file for bankruptcy if they are insolvent. The company will cease operations, and its assets will be liquidated to pay creditors.
Rehabilitation The Rehabilitation Process is an alternative to liquidation, where an insolvent company may attempt to restructure and continue operating. In this process, the company proposes a rehabilitation plan to its creditors and the court, aiming to reorganize its financial obligations.
The company must file for rehabilitation and prove its ability to restructure and pay off its debts over time. If the plan is accepted, the court appoints a rehabilitator to oversee the implementation.
If the rehabilitation plan is successful, the company can emerge from insolvency, though this is less common than liquidation.
2. Filing for Bankruptcy
A debtor (whether individual or company) can file for bankruptcy at the Central Bankruptcy Court (part of the Thai judicial system).
A creditor may also file a petition for the debtor’s bankruptcy if they are owed money and believe the debtor is unable to pay.
The debtor or creditor must submit detailed documentation supporting the claim of insolvency. If the court finds that the debtor is indeed unable to meet obligations, it will issue a bankruptcy order.
3. Creditor Protection
Once the bankruptcy process begins, creditors are generally prohibited from taking further legal action against the debtor. All claims are processed under the court’s supervision.
A trustee is appointed to manage the debtor’s assets and debts. The trustee handles the liquidation of assets or the implementation of a rehabilitation plan.
Creditors are classified into categories (secured creditors, unsecured creditors, etc.), and they receive payments according to the priority of their claims.
4. Company Rehabilitation Procedure
If a company applies for rehabilitation, it is protected from creditor actions while the rehabilitation process takes place.
A rehabilitation plan must be submitted to the court, and creditors must vote on its approval. The court must then confirm the plan.
The company must attempt to meet the rehabilitation objectives, including debt restructuring, reorganizing its operations, and potentially raising new funds to fulfill obligations.
5. Legal Reforms
Thailand has undergone significant reforms in its insolvency laws in recent years, including the Bankruptcy Act Amendments. These changes aim to make the legal process more efficient, to improve the protection of creditors, and to encourage corporate restructuring over liquidation.
6. Other Relevant Laws
Civil and Commercial Code: The general framework for contract law and obligations in Thailand.
Enforcement of Foreign Judgments: Thailand may enforce foreign bankruptcy judgments through the courts under certain conditions, though the process is complex and requires legal expertise.
7. Alternative Dispute Resolution (ADR)
In some cases, mediation or settlement may be a preferred option to bankruptcy. Thailand encourages alternative dispute resolution mechanisms as a way to settle insolvency issues without going through the court system.
8. Recent Developments
Thailand’s insolvency and bankruptcy laws have been evolving to support distressed businesses and encourage the continued operation of viable companies. As of recent reforms, the Thai government has worked to make the bankruptcy process faster and more efficient to reduce the long-term impacts on businesses and the economy.
9. Cross-Border Insolvency
Thailand is not a signatory to the UNCITRAL Model Law on Cross-Border Insolvency, but foreign creditors can file petitions with the Thai court for bankruptcy or insolvency proceedings if assets are located in Thailand.
Conclusion:
Insolvency law in Thailand offers mechanisms for both individual and corporate debtors to manage their insolvency situations, either through liquidation or rehabilitation. With the country’s legal reforms, it is possible for companies to undergo a structured recovery process rather than face an automatic shutdown. For creditors, the process provides a clear structure for debt recovery under judicial supervision.
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