Insolvency 2024 Comparisons

Insolvency matters in Thailand are principally governed by the Bankruptcy Act AD 1940 (the “Bankruptcy Act”). The Central Bankruptcy Court is the competent body responsible for exercising judicial power is these matters. The main insolvency proceedings available under the Bankruptcy Act are:

• bankruptcy proceedings; and
• business rehabilitation proceedings.

As mentioned in 1.1 Legal Framework, two types of proceedings are available under the Bankruptcy Act.

Bankruptcy Proceedings

Bankruptcy proceedings are court-supervised proceedings aimed at realising the debtor’s assets and distributing the proceeds among its creditors. In such proceedings, if the court, after taking evidence, is of the opinion that a debtor is insolvent and owes THB2 million or more (in the case of a corporate debtor) to one or more creditors, an absolute receivership order will be issued against the debtor. As a result, all business operations of the debtor will cease.

Following the issuance of an absolute receivership order, the court will appoint an official receiver (who is a government official from the Legal Execution Department, Ministry of Justice) to oversee and manage the debtor’s assets, including collecting and gathering the debtor’s assets from the debtor and any possessors, as well as managing and liquidating those assets. Under the Bankruptcy Act, the debtor is not allowed to submit a petition for voluntary bankruptcy proceedings, as these proceedings may only be initiated by creditors.

Business Rehabilitation Proceedings

Business rehabilitation proceedings are formal, court-supervised efforts to restructure distressed enterprises, during which a moratorium (automatic stay) is applied to protect the debtor from its creditors. The automatic stay serves as a broad defence that provides debtors with “breathing room” from creditor pressure and prevents creditors from filing separate legal claims. A fundamental principle of an automatic stay is to prevent the debtor from:

• selling, distributing or transferring its assets;
• paying or incurring debts; or
• taking any other actions that may encumber its assets without court approval or outside the ordinary course of business.

Liquidation Proceedings

In addition to the foregoing, a solvent liquidation process (winding-up) may be undertaken by a dissolved company on its own, out of court, in accordance with Thai company law. In contrast, an insolvent liquidation may only be carried out through court proceedings (ie, bankruptcy proceedings). If in the liquidator’s view the company’s assets are less than its liabilities, the liquidator must apply for bankruptcy with the court. In this regard, the court has the authority to issue an absolute receivership order against the company without the need for the examination of witnesses.

Bankruptcy Proceedings

In bankruptcy proceedings, an official receiver is appointed under the Bankruptcy Act to oversee the realisation and distribution of the debtor’s assets. The official receiver is granted full authority to manage the debtor’s assets and to enforce any rights related to the debtor’s assets, including:

• disposing of assets; and
• collecting and receiving money and assets that belong to the debtor or that the debtor is entitled to receive from others.

The official receiver is also responsible for settling, filing or defending legal actions concerning the debtor’s assets, and for assessing the merits of claims for debt repayment filed by creditors.

An official receiver is a government official (ie, an official from the Legal Execution Department of the Ministry of Justice) assigned to monitor bankruptcy and business rehabilitation proceedings. The rights and duties of the official receiver are provided under the Bankruptcy Act.

Business Rehabilitation Proceedings

In business rehabilitation proceedings, the official receiver is appointed to supervise and monitor the proceedings, and to assess the merits of all debt repayment applications filed by creditors.

In addition, the Bankruptcy Court appoints a planner – based on the proposal of the petitioner(s) for the debtor’s rehabilitation or by decision of the creditors’ meeting, as the case may be – to prepare the rehabilitation plan (the “Plan”) and to assume responsibility of the debtor’s executive management during the Plan’s preparation. After the creditors approve the proposed Plan, the court must confirm the Plan and issue an endorsement order. At that point, control of the debtor’s business transfers from the planner to a plan administrator, who is responsible for implementing the approved Plan.

The planner and the plan administrator (except when the debtor itself or its management takes on these roles) must be registered and meet the qualifications set out under the Ministerial Regulations Regarding Registration and Qualifications of the Plan Preparer and Plan Administrator BE 2545 (2002) and its amendments BE 2558 (2015). The planner assumes duties upon appointment by the Bankruptcy Court, while the plan administrator assumes duties upon acknowledgment of the court’s approval of the Plan.

In both bankruptcy proceedings and rehabilitation proceedings, there are two main types of creditors:

• secured creditors (which include preferential claims); and
• unsecured creditors.

In bankruptcy proceedings, assets are distributed to creditors in the following order of priority.

• Secured creditors.
• Unsecured creditors, for the following costs and debts:
1. estate administration fees;
2. official receiver’s costs and expenses for the administration of the debtor’s assets;
3. funeral expenses;
4. fees for collecting and gathering the debtor’s assets;
5. petitioning creditor’s fees and counsel’s fees as prescribed by the court or official receiver;
6. taxes due within six months prior to the receivership order and the wages owed to the debtor’s employees for up to four months prior to the receivership order (but capped at THB100,000 per employee); and
7. any other debts.
• Creditors who, by law or contract, are entitled to repayment only after other creditors have been fully repaid.

In business rehabilitation proceedings, all creditors will receive repayment in accordance with the Plan. The planner is responsible for determining how each creditor is repaid, taking into consideration equal treatment for creditors within the same class, while following the order of priority prescribed for bankruptcy proceedings.

See 2.1 Types of Creditors.

As for new money in business rehabilitation proceedings, such funds may be injected for use in the ordinary business operations, and creditors providing such financing should be entitled to a certain priority/ranking over other creditors. A debtor may not take any action that causes encumbrances to be created over its assets in response to obtaining priority new money, except where such action is essential for the debtor to continue normal business operations, or as otherwise ordered by the court.

Under Thai law, three major types of security can be granted over assets:

• mortgage;
• pledge; and
• business security.

It is important to note that secured creditors under the Bankruptcy Act also include creditors who are vested with the rights of retention or those with preference rights similar to that of a pledgee.

Mortgage

A mortgage is a non-possessory security, meaning the mortgagor places immovable assets (eg, land, buildings) or certain types of movable asset (eg, registered machinery, vessels, floating houses) as security in favour of a creditor to secure the performance of an obligation by the mortgagor or a third party, without having to deliver the secured asset to the mortgagee. A mortgage agreement must be made in writing and registered with the competent authority.

Pledge

A pledge is a possessory security where a pledgor places a movable asset as security in favour of a creditor to secure the performance of an obligation. A pledge can also be created over rights represented by instruments such as shares, bills of exchange, promissory notes and cheques. For a pledge to be perfected, the pledged property must be delivered to the pledgee. For pledges over rights represented by instruments, the instrument must be delivered to the pledgee, with notice sent to the debtor of those rights.

Business Security

A business security is a non-possessory security under the Business Security Act 2018. Under this act, claims, movable property used in the ordinary course of business (such as machinery, inventory, raw materials), immovable property (for real estate business operators), intellectual property and accounts can be placed as business security.

A business security agreement must be made in writing and registered with the competent authority. With limited exceptions, only Thai and foreign financial institutions that syndicate financing with Thai financial institutions, as well as entities with business objectives related to lending, leasing and financial leasing, are entitled to be security receivers under a business security agreement.

Pre-judgment Attachments

An interim injunction may be issued to prevent the debtor from transferring assets. The criteria and requirements under the Civil Procedure Code (CPC) apply mutatis mutandis (with necessary modifications). Interim injunctions under the CPC include:

• seizure;
• attachment or restraining orders; and
• physical arrest or detention.

The court typically grants an interim injunction if the petitioner can satisfactorily prove that damages will continue to accrue if the interim injunction is not granted. The applicable criteria and requirements depend on the type of interim injunction requested.

Retention of Title

Under Thai law, it is possible for a creditor to take possession of the debtor’s assets (currently held by the creditor) or to retain legal ownership of an asset (which is set to be transferred to the debtor) until specific conditions (usually full payment) are satisfied.

Set-Off

Set-off is permissible for mutual debts between parties under certain conditions. It can be invoked by notifying the other party once the obligations are of the same kind, enforceable and due.

An out-of-court restructuring does not require any specific formalities or a formal process, as it is based entirely on commercial discussions between the creditors and the debtor. Unlike in an in-court restructuring, the parties can formulate their own restructuring plan that offers some flexibility in terms of the conditions and timeline of the restructuring process. Thai law does not require that debtors and creditors pursue an out-of-court restructuring prior to initiating statutory proceedings.

There is no specific law or regulation governing out-of-court restructurings, as these are carried out by mutual agreement between debtors, creditors and other relevant stakeholders, subject to the application of general laws.

Basis for Commencing the Proceedings

Under the Bankruptcy Act, traditional business rehabilitation proceedings can be initiated by either the debtor or the creditor. These proceedings can be commenced if it appears that the debtor owes a definite amount of not less than THB10 million to one or more creditors, regardless of whether such debt is due immediately, and if there are reasonable grounds and the potential for successfully rehabilitating the business of the debtor.

The objectives of business rehabilitation proceedings are to ensure the continued operation of the debtor’s business and to allow creditors to receive a repayment amount that is not less than the amount they would receive if the debtor were subject to bankruptcy proceedings.

Subject of the Proceedings

Only certain types of corporate debtors are eligible for traditional business rehabilitation proceedings as defined by law. Under Thai law, the debtor and other parties, even within a corporate group, are treated as separate entities. As a result, if different entities within a corporate group seek business rehabilitation, each must initiate separate proceedings.

Overview of the Proceedings

Business rehabilitation proceedings are led by the official receiver, the planner and the plan administrator, under the supervision of the court. Once the creditor(s) or debtor lodges a petition with the Bankruptcy Court, the court will schedule a hearing to consider the petition. If the court finds that the debtor is insolvent and owes not less than THB10 million, and there are reasonable grounds and prospects for successfully rehabilitating the debtor’s business, the court will grant such petition and appoint the planner, who is responsible for formulating and preparing the Plan for the debtor. The Plan has to be approved by the creditors’ meeting and the court before it can be implemented. Once approved, the Plan will be implemented and executed by the plan administrator.

An expedited process is currently available only for business rehabilitation proceedings involving small and medium-sized enterprises (SMEs).

Binding Effects on Creditors

Once the court approves the rehabilitation plan, the procedures under the Plan will be binding on all creditors, regardless of whether they voted for or against the Plan or abstained. Unknown creditors or creditors with contingent claims, or those who have not filed an application for debt repayment, will lose their rights to repayment unless otherwise stated in the rehabilitation plan, or unless the court cancels the order for business rehabilitation.

Determining the Value of Claims and Creditors

During business rehabilitation proceedings, creditors must provide the grounds supporting their debt repayment application and present evidence to the official receiver to determine the value of the claims. However, they may be subject to objections by the debtor, the planner or other creditors. In the event of a dispute, the official receiver or the Bankruptcy Court, as the case may be, will decide the value of the claims that the creditors are entitled to receive under the business rehabilitation proceedings.

In addition, the claims of creditors may be crammed down (resulting in a haircut) without their consent, under the proposed business rehabilitation plan prepared by the planner. 

A dissenting creditor may file a petition to appeal the decision of the official receiver or object to the accepted Plan in court. The court will then consider whether any amendments are necessary.

Roles of Creditors in Business Rehabilitation Proceedings

Creditors who file an application for debt repayment within the prescribed period will be put into separate classes, typically secured and unsecured creditors. However, each class of creditors can be further divided into several subgroups.

A creditors’ meeting may adopt a resolution to appoint a creditors’ committee empowered to monitor the implementation of the Plan. Members of the creditors’ committee are selected from the creditors or representatives of the creditors, and the committee must consist of no fewer than three and no more than seven members.

No Effect on Third Parties’ Liabilities

The fact that a debtor has entered into business rehabilitation proceedings will not affect the liabilities of non-debtor parties – eg, guarantors, security providers or other entities within the corporate group.

Effects on Shareholders

Business rehabilitation proceedings will limit shareholders’ rights to access certain information for the purpose of business operational oversight (excluding the right to receive dividends), as these rights are transferred to the planner or the plan administrator, as the case may be. Furthermore, if the Plan involves issuing new shares or restructuring the debtor’s capital, existing shareholders may experience a dilution of their ownership percentage.

Automatic Stay

In business rehabilitation proceedings, when the court officially issues an order accepting the business rehabilitation petition for consideration, a moratorium (automatic stay) takes effect. Any ongoing actions or litigation against the debtor are suspended, no new actions or civil lawsuits can be initiated against the debtor, and secured creditors are prevented from enforcing their security outside the business rehabilitation proceedings.

Priority New Money

New money may be injected for use in ordinary business operations, and creditors providing the financing should be entitled to a particular priority/ranking over other creditors. However, a debtor may not take any action that causes encumbrances to be created over its assets in response to obtaining priority new money, except where such action is essential for the debtor to continue normal business operations, or as otherwise ordered by the court.

Termination of Business Rehabilitation

The executives of the debtor, the plan administrator or the official receiver may submit to the court a petition to terminate the business rehabilitation proceedings. If the court determines that the business rehabilitation has been successfully carried out and completed in accordance with the terms and conditions of the business rehabilitation plan, the court will terminate the business rehabilitation proceedings. Upon termination, the debtor will be discharged from all debts unless otherwise stipulated in the Plan. Moreover:

• the authority to manage the debtor’s business will return to the debtor’s executives without court or official receiver oversight;
• the rights of the debtor’s stakeholders will be reinstated; and
• the automatic stay will no longer be in effect.

Cancellation of the Business Rehabilitation Order

If the business rehabilitation has not been successfully implemented within the time frame specified under the Plan, the executives of the debtor, the plan administrator or the official receiver must submit a report to the court within 14 days after the expiry of the Plan’s implementation period. Following a proper investigation of the evidence and statements from the official receiver and the creditors, as well as arguments issued by the debtor, the court may issue an order annulling the rehabilitation or issue an order for absolute receivership against the debtor if it determines that the debtor should be declared bankrupt.

Disapproval of the Business Rehabilitation Plan

If the Plan is disapproved by the creditors’ meeting, it will lead to the termination of the rehabilitation proceedings. Once the Plan is disapproved, the official receiver will have to notify this matter for the attention of the court. In this regard, the court may issue an order annulling the rehabilitation or dismissing the rehabilitation petition, and may proceed with the bankruptcy proceedings if the proceedings were initiated prior to the rehabilitation proceedings.

Key Considerations for the Business Rehabilitation Plan

The Plan is prepared by the planner and proposed to the creditors’ meeting for approval, after which the Bankruptcy Court will assess whether the proposed Plan is in line with the Bankruptcy Act. In addition to satisfying other requirements under the Bankruptcy Act, key factors considered by the court in endorsing the Plan include:

• ensuring equal treatment among creditors within each class;
• demonstrating that creditors will receive more under the Plan than they would if the debtor were adjudicated bankrupt; and
• the overall fairness.

Failure to Observe the Terms of the Business Rehabilitation Plan

If the terms of the approved Plan cannot be adhered to, the Bankruptcy Court may issue an order to cancel the rehabilitation order, or may issue an absolute receivership order against the debtor. This does not affect any actions previously conducted in good faith and in accordance with the Plan. In addition, the rights and duties of the creditors will remain as they were prior to the issuance of the rehabilitation order.

Position of the Debtor

An automatic stay begins when the court accepts the petition for business rehabilitation. While the company can continue operating its business, it is prohibited from:

• disposing of or transferring assets;
• paying or creating debts; or
• performing any actions that create unnecessary encumbrances over its assets without court approval or outside the ordinary course of business.

Once the court orders business rehabilitation and appoints the planner, the authority to manage the business and assets of the debtor will transfer to the planner.

Restrictions on the Debtor’s Use of Its Assets

The Bankruptcy Act prohibits the debtor’s assets from being disposed of, distributed or transferred, unless:

• otherwise specified in the Plan;
• the debtor obtains court approval; or
• these actions are within the ordinary course of business.

Seeking New Money

After the petition for business rehabilitation is granted, the company may borrow new money to continue its business operations. Creditors who lend money to the company for such purpose are entitled to request repayment without having to file an application with the official receiver for debt repayment.

In business rehabilitation proceedings, a planner is appointed by the Bankruptcy Court to prepare the rehabilitation plan and to assume the powers and duties of the debtor’s executive management. An official receiver is also appointed to supervise the proceedings. Once the creditors’ meeting adopts a resolution approving the proposed Plan, it is the court’s responsibility to confirm the Plan and to issue an order to approve the Plan. At that point, the authority to manage the debtor’s business will transfer from the planner to a plan administrator, who will implement the approved Plan.

Official Receiver

In business rehabilitation proceedings, the official receiver is appointed to supervise the proceedings and to review the merits of the debt repayment applications filed by creditors.

Planner

The planner is appointed by the Bankruptcy Court based on the proposal from either the debtor or the creditors’ meeting (as the case may be). They are responsible for preparing the Plan and have the authority to manage the business of the debtor once appointed.

Plan Administrator

The plan administrator is appointed under the Plan to implement the approved Plan, once such Plan has been approved by the Bankruptcy Court.

Position of Shareholders

During business rehabilitation proceedings, the authority to manage the debtor’s business, assets and all legal rights of the debtor’s shareholders will be vested in the planner and the plan administrator, as applicable. Shareholders are not entitled to vote on the business rehabilitation plan, as voting rights are reserved for creditors. As a result, shareholders typically have a limited role in the rehabilitation process, unless they contribute new funds to support the debtor’s business rehabilitation. In such cases, shareholders may have some influence over the direction of the business rehabilitation.

Existing shareholders, however, will retain their equity based on their ownership interests. However, they will be entitled to receive dividends only after the debtor has fully repaid the debts owed to all the creditors under the Plan.

Rights of Set-Off

A creditor may exercise the right of set-off at any time before the Plan is approved by the court, provided that the debts arose before the issuance of the rehabilitation order.

Trading of Claims

Under the Bankruptcy Act, the Plan must include details regarding the assignment of rights. Therefore, the assignment of rights is permitted and must be in accordance with the Plan.

Security Enforcement

Once the court accepts the rehabilitation petition, an automatic stay comes into effect immediately. Secured creditors are not entitled to enforce their security unless the court orders otherwise or until one year (or up to two years subject to the court order) has passed since the court accepted the rehabilitation petition.

Under the Thai legal framework, only bankruptcy proceedings initiated by a creditor or statutory bankruptcy proceedings commenced by the liquidator (during a voluntary winding-up) are permitted. The Bankruptcy Act does not allow debtors to submit a petition for voluntary bankruptcy proceedings.

Under the Bankruptcy Act, if a creditor is owed more than THB2 million by a debtor company, the creditor may initiate bankruptcy proceedings against the insolvent debtor by filing a petition or claim with the Bankruptcy Court. The Bankruptcy Court will then schedule a hearing to examine witnesses; if, by the end of the hearing, the Bankruptcy Court issues an absolute receivership order, it will be published in the Government Gazette.

The main objective of bankruptcy proceedings is to place the debtor into receivership, and to appoint an official receiver to liquidate the debtor company and distribute the proceeds to creditors. As a consequence, the debtor will be prohibited from managing its assets, except by order of the Bankruptcy Court or with the approval of the official receiver or the creditors’ meeting.

The official receiver is also responsible for:

• settling claims;
• filing or defending actions related to the debtor’s assets; and
• reviewing the merits of the claims for debt repayment filed by creditors.

Composition

Bankruptcy proceedings can be terminated through a composition. After the deadline for filing debt repayment applications has passed, the official receiver will arrange a creditors’ meeting to consider whether to accept the debtor’s proposal for a composition (if any) or whether the debtor should be declared bankrupt. If the composition is approved by the creditors’ meeting, it will be submitted to the Bankruptcy Court for endorsement. Once approved, the approved composition becomes legally binding on all creditors, irrespective of whether they voted in favour of or against, or abstained from voting on, such composition. Notwithstanding, dissenting creditors retain the right to lodge an appeal with the higher court against the court’s endorsement of the composition within one month (with possible extensions).

Discharge of Bankruptcy

A debtor may be discharged from bankruptcy proceedings either by court order or automatically upon the expiry of the period prescribed by the Bankruptcy Act. To obtain a discharge, the debtor must file a motion demonstrating that at least 50% of the assets have been distributed to creditors and that the debtor has not engaged in dishonesty. This discharge releases the debtor from most debts, with certain exceptions, such as debts related to taxes, duties, or goods taxes owed to the government authority, as well as debts arising from dishonesty or fraud.

Notably, a discharge order by the court does not release partners, joint debtors or guarantors from their obligations. The court also retains the authority to revoke the discharge if the debtor fails to co-operate with the distribution of assets, misses required appearances or otherwise obstructs the bankruptcy proceedings.

Creditors’ Claims for Repayment

All creditors must file an application for debt repayment within two months from the date the absolute receivership order is published, unless an event of force majeure has occurred and/or is ongoing.

Secured creditors are also entitled to file an application for debt repayment if they agree to waive the security for the benefit of all creditors.

Non-resident creditors (foreign creditors) may be granted an additional two-month extension. However, they must demonstrate that Thai creditors would generally have reciprocal rights to participate in similar proceedings in their respective countries, and they must agree to relinquish any of the debtor’s property outside Thailand for the benefit of all creditors.

A creditor cannot file an application for debt repayment if such creditor knew that the debtor was insolvent at the time the debt was incurred, unless the debt was incurred in order to enable the debtor’s business to continue operating.

Attending Court Hearings

Creditors and other parties in interest may attend court hearings and oppose the petition for bankruptcy proceedings. They may also request that the court dismiss the petition if the debtor is disqualified under the Bankruptcy Act or if the petition was filed in “bad faith”.

Claim Inspection

Creditors are entitled to inspect the debt repayment applications submitted by other creditors in order to challenge the legitimacy of such claims, ensuring the fair distribution of the asset pool.

Security Enforcement

Secured creditors are entitled to enforce their security without having to file a claim for debt repayment. It is important to note that an official receiver is entitled to inspect the secured assets; if the official receiver is of the view that the value of such secured assets exceeds the secured debts, the official receiver is entitled to seize and sell the secured assets through a public auction. The proceeds will be used to settle the debts, with any remaining funds returned to the asset pool of the debtor.

However, for secured creditors to be eligible to vote in the creditors’ meeting under bankruptcy proceedings, a secured creditor is required to file a claim for debt repayment.

Blocking Bankruptcy Proceedings

Creditors cannot block or disrupt the bankruptcy proceedings. Bankruptcy proceedings can only be dismissed by a court judgment or by a withdrawal petition filed by the creditor who submitted the petition for bankruptcy proceedings, and the court approves such withdrawal petition.

The Bankruptcy Act and the Act on the Establishment of the Bankruptcy Court and the Procedures for Bankruptcy Cases BE 2542 (1999) are the key pieces of legislation governing court jurisdiction and procedural rules for insolvency proceedings in Thailand. These Thai laws are influenced by the United Kingdom Insolvency Law as well as by Chapter 11 of the United States Code, which serve as the model for Thailand’s legal framework for business rehabilitation.

Thailand has taken a neutral stance on adopting the UNCITRAL Model Law on Enterprise Group Insolvency, the UNCITRAL Model Law on Cross-Border Insolvency or the UNCITRAL Model Law on the Recognition and Enforcement of Insolvency-Related Judgments. The Thai government, through the Ministry of Justice’s Legal Execution Department, is currently studying the potential impact of implementing the relevant principles in the Model Law on local bankruptcy and rehabilitation laws. However, their adoption or enactment is not expected in the near future.

In principle, bankruptcy proceedings are only available for Thai debtors; however, under certain circumstances, a foreign debtor may also be subject to bankruptcy proceedings under the Thai Bankruptcy Court, provided that:

• the foreign debtor is domiciled in Thailand or operates a business there, either directly or through a representative, at the time of filing a petition for bankruptcy proceedings or within a year preceding the filing for bankruptcy proceedings; and
• such debtor is either a natural person and is indebted to one or more creditors for an amount of not less than THB1 million, or is a juristic person indebted to one or more creditors for an amount of not less than THB2 million.

Business rehabilitation proceedings are not available to foreign debtors as they are restricted to certain types of domestic debtors, as defined by the Bankruptcy Act.

See 6.1 Sources of International Insolvency Law. The Bankruptcy Act and the Act on the Establishment of the Bankruptcy Court and the Procedures for Bankruptcy Cases BE 2542 (1999) are the key pieces of legislation governing court jurisdiction and procedural rules for insolvency proceedings in Thailand.

Thai bankruptcy law does not recognise insolvency proceedings (whether bankruptcy or business rehabilitation proceedings) initiated in other countries, nor do insolvency proceedings or court orders regarding absolute receivership or moratoriums under the laws of other countries have any effect on a debtor’s assets in Thailand. Parties must initiate a de novo trial (a new or fresh trial that is not bound by the findings or decisions made in previous proceedings in another country) before the competent courts in Thailand, where such foreign judgments or orders may serve as supportive evidence in the Thai proceedings.

Thai bankruptcy law does not provide the Bankruptcy Court with any specific means of enforcing its orders in foreign jurisdictions. Enforcement of its orders abroad are based on reciprocal arrangements between Thailand and the relevant countries.

Under the Bankruptcy Act, foreign creditors are defined as “creditors who are domiciled outside Thailand.” Both foreign and Thai creditors enter bankruptcy and business rehabilitation proceedings in a similar manner.

However, foreign creditors in bankruptcy proceedings are required to comply with additional requirements. A foreign creditor is entitled to file a claim for repayment of the debt within two months from the date the absolute receivership order is published, provided that:

• such foreign creditor can prove that any creditor in Thailand would be similarly entitled to claim repayment in bankruptcy proceedings under the laws of the foreign creditor’s home country; and
• such foreign creditor reports the value of the assets or distributions they have received, or are entitled to receive, from the same debtor’s estate located outside Thailand, if any (should such assets or distributions exist, the foreign creditor must agree to deliver the assets or distributions from the debtor’s said estate outside Thailand to the debtor’s estate in Thailand).

The general rule of directors’ fiduciary duty applies. No specific duties are imposed on directors of distressed or insolvent companies. In general, directors are required to conduct the business of the company with the diligence of a prudent businessman.

If a director causes a loss to the company through non-compliance with fiduciary duties, the company or its shareholders can bring a claim against the director for the loss suffered.

No specific duty is imposed on the officers of a distressed debtor. They can be held liable to the company for any damage they are personally responsible for.

Directors and officers must also act in good faith and with due care to preserve the interests of the company. If a director fails to discharge these duties, the company or its shareholders can bring a claim against the director under the Thai Penal Code for fraud or under the Corporate Offences Act. 

Bankruptcy Proceedings

The official receiver may file a petition with the Bankruptcy Court to cancel or revoke:

• the transfer of the debtor’s assets made within three months before the petition for bankruptcy proceedings was filed, if it has been proven that the debtor intended to give undue preference to a certain creditor or creditors; or
• any fraudulent acts committed by the debtor within one year after the date that such fraudulent acts became known to the official receiver.

The Bankruptcy Act also provides for the presumption that, if the debtor received compensation below a reasonable amount, this was intended to prejudice the rights of the creditors to be repaid.

Business Rehabilitation Proceedings

The planner, the plan administrator or the official receiver may file a petition with the court to cancel or revoke:

• the transfer of the debtor’s assets made within three months before the rehabilitation proceedings petition was filed, if it has been proven that the debtor intended to give undue preference to a certain creditor or creditors; or
• any fraudulent acts committed by the debtor, where the debtor received any amount which was below a reasonable amount in a transaction within one year before or after the filing of the business rehabilitation petition, which is presumed to prejudice the rights of the creditors to be repaid. 

The Bankruptcy Act also provides that the cancellation or revocation of certain transactions in accordance with the foregoing will not affect the rights of third parties who acquired the assets in good faith and for valuable consideration before the proceedings started.

See 8.1 Circumstances for Setting Aside a Transaction or Transfer.