Thailand's amended Bankruptcy Act (No. 9) B.E. 2559 (2016) (the "Amendment") was published in the Royal Thai Government Gazette on 24 May 2016 and came into force on 25 May 2016. The Amendment is specifically aimed at small and medium-sized enterprises (SMEs). It introduces a new scheme which allows SMEs to enter into Court-supervised business rehabilitations.
Previously, only limited or public companies with debts of not less than THB 10 million were capable of entering a business rehabilitation process. The scheme is available for any individual, limited partnerships, registered or non-registered partnerships, groups of persons, private limited companies (or any other juristic person specified in the Ministerial Regulation) who conduct SME business pursuant to the laws in relation to promotion of SME business and are registered with the Office of Small and Medium Enterprise Promotion or other government agencies.
The scheme's objective is to assist SMEs temporarily lacking financial liquidity, but which have the potential and the ability to recover to continue its business operations. By entering into a Court-supervised business rehabilitation, a distressed debtor will be able to take advantage of an automatic moratorium, and any creditors at the time of the filing of the petition, will not be able to take any legal action to recover its debts until expiry or cancellation of the Plan.
By virtue of the Amendment, the new scheme for SMEs (totalling 38 sections) has been incorporated into the Bankruptcy Act B.E. 2483 (1940).
The key points of this new rehabilitation scheme for SMEs are summarised below.
New Debt Thresholds
- A petition to enter into a business rehabilitation may be filed with the Court by either the Debtor himself, or by one or more creditors together, in circumstances where the Debtor is insolvent, and where the amount of such debt is:
- a minimum of THB 2 million where the debtor is an individual; or
- a minimum of THB 3 million where the debtor is a limited partnership, a registered or non-registered partnership, a group of persons (or other juristic person specified in the Ministerial Regulation); or
- a minimum of THB 3 million up to a maximum of THB 10 million where the debtor is a limited company.
New Insolvency Test
- Lack of cash flow has now been introduced as a presumption of insolvency.
New Court Procedure
- A petition for business rehabilitation shall be lodged at the Court together with the proposed Plan for business rehabilitation.
- The Amendment prescribes the details necessary for inclusion in the petition and proposed Plan including, but not limited to, the circumstances of the Debtor's insolvency, list of names and address of the creditors, reason and means/method to recover the business, details of any assets, liabilities and obligations owed by the Debtor at the time of petition, details of planner, and the solution for temporary lack of liquidity.
- The proposed Plan must be approved by two-thirds of the creditors.
- Once the petition has been filed with the Court it cannot be withdrawn without the Court's permission.
- The moratorium, or automatic stay, will come into effect from the date the Court accepts the petition for consideration until:
- the expiration date of the Plan; or
- the date the Plan is successfully completed; or
- the date the Court approves the withdrawal of the petition; or
- the date the petition is dismissed; or
- the rehabilitation process is cancelled by the Court.
- The Plan implementation period is limited to three years from the Plan approval date and is not generally extended.
- The Bankruptcy Court has jurisdiction over the rehabilitation scheme for SMEs.