Bankruptcy Law in Thailand

Bankruptcy Law in Thailand is governed by the Bankruptcy Act B.E. 2483 (1940) and its subsequent amendments. Administered by the Central Bankruptcy Court, the law aims to provide a structured process for resolving insolvency, protecting creditors’ rights, and allowing businesses or individuals to reorganize their debts or liquidate assets.

1. Overview of Bankruptcy Law in Thailand

1. Purpose:
   • Protect the rights of creditors.
   • Provide debt relief for insolvent individuals or entities.
   • Encourage business reorganization over liquidation when viable.
2. Jurisdiction:
   • Bankruptcy cases are handled exclusively by the Central Bankruptcy Court in Bangkok.

2. Types of Bankruptcy Proceedings

2.1 Personal Bankruptcy

• Applicable to individuals with debts exceeding 1 million THB.
• The debtor or creditors can file a petition if the debtor is unable to meet financial obligations.

2.2 Corporate Bankruptcy

• Designed for businesses with debts exceeding 2 million THB.
• The process can involve liquidation or reorganization, depending on the financial condition of the company.

2.3 Business Rehabilitation

• Focuses on restructuring debts for viable businesses to continue operations.
• Often initiated by large creditors, shareholders, or the debtor themselves.

3. Key Features of Bankruptcy Law

3.1 Filing a Petition

1. Eligibility:
   • Creditors or the debtor can initiate bankruptcy proceedings.
   • The debtor must demonstrate insolvency, defined as the inability to pay debts as they fall due.
2. Requirements:
   • Personal bankruptcy requires a minimum debt of 1 million THB.
   • Corporate bankruptcy requires a minimum debt of 2 million THB.

3.2 Automatic Stay

• Filing a bankruptcy petition triggers an automatic stay, halting all collection actions, lawsuits, and asset seizures.

3.3 Asset Liquidation

• A court-appointed Receiver manages the sale of assets to satisfy creditor claims.
• Certain assets, such as personal essentials and tools for work, are exempt from liquidation.

4. Business Rehabilitation Process

1. Petition for Rehabilitation:
   • Filed by the debtor or a creditor.
   • Must include a detailed rehabilitation plan.
2. Appointment of Planner:
   • The court appoints a planner to draft a rehabilitation plan.
   • Creditors vote on the proposed plan, requiring a majority vote for approval.
3. Execution of the Plan:
   • The planner implements the court-approved plan under supervision.
4. Discharge:
   • Upon successful completion, the company is discharged from bankruptcy and continues operations.

5. Rights and Obligations of Creditors

1. Secured Creditors:
   • Have priority over unsecured creditors in claiming proceeds from asset liquidation.
2. Unsecured Creditors:
   • Share remaining proceeds proportionally after secured claims are satisfied.
3. Voting on Plans:
   • Creditors participate in approving rehabilitation plans.

6. Penalties and Restrictions for Debtors

1. Bankruptcy Declaration:
   • Declared individuals are restricted from holding certain positions, such as company directors, until discharged.
2. Criminal Offenses:
   • Fraudulent concealment of assets or falsification of information can lead to criminal prosecution.

7. Advantages of Thailand’s Bankruptcy Law

1. Structured Debt Resolution:
   • Ensures equitable treatment of creditors and debtors.
2. Rehabilitation Options:
   • Encourages preserving viable businesses rather than liquidation.
3. Legal Protections:
   • Provides debtors with a reprieve from creditor harassment through automatic stays.

8. Challenges and Practical Considerations

1. Lengthy Processes:
   • Bankruptcy and rehabilitation proceedings can take years to resolve.
2. Court Jurisdiction:
   • Cases are centralized in Bangkok, posing logistical challenges for regional debtors and creditors.
3. Complexity of Rehabilitation:
   • Drafting and executing a viable plan requires legal and financial expertise.

Conclusion

Thailand’s bankruptcy law provides a robust framework for managing insolvency through liquidation or rehabilitation. By balancing the rights of creditors with the need for debt relief, the system facilitates economic stability while offering debtors an opportunity for recovery. Businesses and individuals navigating bankruptcy proceedings should engage experienced legal professionals to ensure compliance and maximize outcomes.