Bankruptcy procedure in Thailand

Bankruptcy procedure in Thailand

Source : www.insolvencyreg.org

News
1. The Bankruptcy Act (No.7) 2004 has come into effect since July 2004 and provided the following modifications to the existing provisions:
The automatic three-year discharge for individual bankrupt is extended to the period of ten years, with the evidence of dishonesty or fraud, and five years on grounds of the person’s previous bankruptcy within five years prior to the current proceedings.
A bankrupt with no proof of fraud is enabled to pay not less than fifty percent of her debts to apply for an earlier discharge.
The Court may, upon the request of the official receiver, temporarily suspend the three-year discharge period of a bankrupt who is found unreasonably failing to assist the receiver in collecting properties.
Several bankruptcy administrative fees are modified. For example, the fee on asset collection is reduced from five percent to three percent.
2. The system for licensing private insolvency practitioners is currently under consideration.

Key Legislation

Bankruptcy Act 1940, as latest amended in July 2004,
Civil and Commercial Code, Sections 1247-1273.

Insolvency Procedures
Bankruptcy procedure in Thailand is always triggered by insolvency, legally defined as the state in which the amount of liabilities exceeds that of assets. The objective of Bankruptcy law is, therefore, to organise fair distribution of debtor's properties, either by full or pro rata payment, to all creditors.

Personal Insolvency
Personal bankruptcy in Thailand exclusively commences with the creditor’s petition filed to the Bankruptcy Court. Provided that the petitioning creditor can verify the debtor’s current state of insolvency and there are no reasons why the debtor should not be adjudged a bankrupt, the Court will issue an order of receivership. This order automatically prompts the authority of the official receiver in tracking and collecting the debtor’s assets while ceasing the debtor’s power over her properties.
Before being adjudicated a bankrupt, the debtor is given the opportunity to avoid bankruptcy through the composition proposal. If the composition is approved by the required amount of votes by creditors, the debtor will be off the bankruptcy hook. By contrast, if the plan fails to receive the sufficient support by the creditors, the Court must adjudicate the debtor a bankrupt.
The individual debtor can be released from bankruptcy by:
Post-bankruptcy composition,
Discharge from bankruptcy under the Bankruptcy Act No. 7 2004,
Termination of bankruptcy on any of these 4 grounds:
1.No creditor assists the receiver in the collection of properties;2.The debtor should not be adjudged a bankrupt;3.The debts of the bankrupt have been paid in full;4.During the 10-year period after the closure of bankruptcy actions, the receiver has not been able to collect any further asset of the bankrupt person.

Corporate Insolvency
There are three types of procedures for corporate debtors:
Creditor-initiated bankruptcy, where the successful verification by the creditor of the corporate debtor’s insolvency leads to the Court order of receivership. This procedure is under the judicial supervision.
Debtor-initiated bankruptcy with the petition for bankruptcy filed by the debtor’s liquidator, once it is found that the debtor’s liabilities exceed its assets.
Reorganisation procedure, either debtor-initiated or creditor-initiated, aimed at rehabilitation the financially troubled business. The reorganisation planner or plan administrator primarily operates this procedure, under some judicial oversight.
The reorganisation procedure operates in successive orders as follows:
The process commences with the filing of a petition for reorganisation to the Bankruptcy Court. The debtor, creditor or a regulatory agency overseeing the debtor’s business is able to file the petition. The amount of outstanding debt required for filing is not less than ten million Baht.
A stay automatically comes into effect when the Court accepts the petition for consideration. The stay will last throughout the procedure until the successful completion of the reorganisation, the passage of five years or the Court’s termination of the reorganisation process or revocation of its order for reorganisation.
The stay can be lifted on either of these two grounds:
a) The stay is not necessary for the reorganisation or;
b) The right of the secured creditor is not adequately protected.
The person nominated by the debtor may win the post of the reorganisation planner. However, the competing nomination for the other person as planner, backed by the claim-based supermajority of creditors, can defeat the debtor’s nomination.
The planner is charged with running the business while given three months to prepare the reorganisation plan.
The plan is voted on by creditors and, if approved by the creditors, put to the Court for confirmation.
The creditors can form a committee to oversee the proper implementation of the plan.
The plan administrator, who is an independent licensed practitioner, takes over once the plan has been judicially confirmed.

Roles

Role played by Government

In recent years, the role of the government in relation to insolvency procedures was to propose and implement bankruptcy law reform.
The official receiver, a government official, administratively facilitate both bankruptcy and reorganisation procedures.

Role played by private sector practitioners

Currently, only the official receiver, who is a government official, is authorised to administer the bankruptcy procedure. To be a receiver, a person must be Thai, earn a law degree and pass a qualification examination. The only occasion where a private practitioner is allowed to participate in bankruptcy is in the reorganisation process where a private practitioner can be appointed a reorganisation planner or plan administrator. It is not necessary that a private reorganisation planner be a licensed practitioner. In fact, a professional insolvency practitioner may be reluctant to act as a reorganisation planner in cases involving litigation. However, it is mandatory that, to be a plan administrator, a private practitioner be licensed.

Role played by the Court

The Court supervises the entire bankruptcy and reorganisation process.

At a Glance

Does the insolvency system in Thailand allow for:
1.Different procedures for the insolvency of individuals and the insolvency of companies? x

2.Creditors to accept an arrangement outside of formal bankruptcy/liquidation proceedings? /

3.Priority payment for employee creditors? /

4.Priority payment for taxation debts? /

5.Automatic disqualification of directors of failed companies from managing other companies? x

6.Recognition of insolvency proceedings being conducted in another jurisdiction? x

7.A government agency to undertake insolvency administration work? /

8.Some form of licensing of private sector practitioners? x

9.A review of the remuneration claimed by an insolvency practitioner by either a court or other government regulator? -


10.A mandatory scale of fees applicable to insolvency practitioner remuneration? /

11.Surveillance of the work of private sector practitioners by a government regulator? x

12.Collation of insolvency statistics by a government regulator? /

Updated 13/06/07

More Informations : www.led.go.th