Thailand has continued to face economic challenges since the COVID-19 pandemic, and some businesses have struggled to survive. One of most important measures that indebted businesses in Thailand can take is to file a business rehabilitation petition with the Bankruptcy Court.

The Bankruptcy Act B.E. 2483 (1940) provides “automatic stay” measures to protect the debtors that have entered the business rehabilitation process, and during this time creditors have duties and rights under the Bankruptcy Act as well. Once Thailand’s Bankruptcy Court accepts a rehabilitation petition and issues an order for rehabilitation, the debtor is under this automatic stay protection against actions from the creditor to seek debt repayments, and the creditors are only allowed to pursue their debt repayments by submitting a debt repayment application to the official receiver within one month of publication of the plan preparer’s appointment in the Government Gazette. These are general conditions specified in the Bankruptcy Act.

However, there are several practical precautions that are not specified in the Bankruptcy Act but that creditors should take during rehabilitation. Below are several steps creditors need to consider taking at various stages of the rehabilitation process.

1. Appointing a local Thai representative to act on behalf of the creditor in the rehabilitation

The rehabilitation process requires much more than just submitting the debt repayment application within the fixed one-month period and then waiting for the result. It also involves contacting, meeting, and discussing with the official receiver, plan preparer, other creditors, or debtor representative to investigate or settle any arguments on the debt. Moreover, the language used in all the processes and documents is usually Thai.

In practice, creditors—especially foreign creditors—should authorize a Thai attorney or representative through a valid power of attorney (POA) to represent them during all the rehabilitation proceedings. This includes the investigative hearing by the official receiver, the creditors’ meeting, the Bankruptcy Court hearing, and any appointments requested by the official receiver, plan preparer, other creditors, or representative of the debtor regarding the debt repayment.

A valid POA is essential in the business rehabilitation proceeding. Thai law requires foreign POAs to undergo additional formalities, including being notarized by a local notary public and authenticated by the Thai embassy or consulate where the POA is executed. An invalid POA could lead to the creditor’s representative not having the authority to submit the debt application, attend the investigative hearing, and give statements to the official receiver, which could lead to the rejection of the submitted debt repayment application, among other adverse consequences.

2. Following the status of the rehabilitation process closely

The Bankruptcy Act sets a number of deadlines regarding potential objections and other actions. For instance, it allows other creditors and the plan preparer to object to the creditor’s debt application within fourteen days of the deadline for the application’s submission. It also stipulates that the plan preparer must submit the proposed plan to the official receiver within three months of the publication of the plan preparer’s appointment in the Government Gazette, and it allows the creditor to object to the official receiver’s order for debt repayment within fourteen days of the creditor receiving it. However, the Bankruptcy Act does not specify some deadlines and requirements, such as the deadline for the official receiver to schedule the investigative hearing or to issue the debt repayment order.

In practice, the official receiver or the debtor may contact the creditor to request more documents or statements to support the debt application. Creditors need to instruct their local representative to follow the status and provide necessary requests to the official receiver or the debtor to protect their rights as creditors in the rehabilitation proceedings.

3. Reviewing the plan preparer’s proposed business rehabilitation plan and following up on the status of the creditor’s meetings

In practice, once the rehabilitation plan is prepared by the plan preparer and submitted to the official receiver, they will need to have their local representative summarize any relevant parts of the plan (such as stipulations on the percentage of the debt repayment, the creditors group, payment terms and conditions, information on the creditors under the plan, and other important clauses). Corrections, objections, or amendments to the plan by either the creditors or the plan preparer must be submitted to the official receiver at least three days before the creditors’ meeting.

Creditors can vote on the proposed plan and the plan administrator in advance by submitting a petition to the official receiver or instructing their local representative to attend the creditors’ meetings and vote on the creditor’s behalf. The creditors’ meetings can be conducted by the official receiver either physically or virtually. Creditors who request amendments to the plan must present supporting arguments at a creditors’ meeting. The creditors will then meet to adopt a final resolution on the proposed plan, any amendments, and the plan administrator.

In practice, the creditors will have several meetings before producing a final resolution. The plan preparer and debtor can still submit a request to revise the plan, while other creditors can also submit their amendments. Creditors who voted for the plan in advance will know what is happening in the creditors’ meetings through the official receiver’s meeting minutes, which will be in Thai and will usually be distributed to the creditors three to five days after the meeting. Once the creditors approve the plan, it will be submitted for the Bankruptcy Court’s consideration of whether to approve the plan.

4. Following up on the Bankruptcy Court order on the business rehabilitation plan

The plans approved by the creditors’ meetings are not always approved by the Bankruptcy Court. The Bankruptcy Court can review the terms and conditions under the plan and determine whether they are fair and lawful, whether the plan can be implemented successfully, and whether the payment terms and conditions allow for creditors to receive higher repayments from the plan than if the debtor went bankrupt. Depending on whether the plan is found to meet the legal requirements, the Bankruptcy Court may then approve or reject the plan in part or in full.

Creditors are not required to attend Bankruptcy Court hearings. However, the creditors should instruct their local representative to follow up closely with the relevant court officer regarding the case status and Bankruptcy Court order. The official Bankruptcy Court order will be available for creditors to obtain a copy within ten business days. The plan will be implemented by the plan administrator based on the version the Bankruptcy Court approves.

5. Contacting the debtor, plan administrator, or official receiver on the status of plan implementation

Once the plan administrator begins to implement the plan, creditors should instruct their local representatives to follow up on the debt repayment under the plan. The plan administrator may also contact the creditors or their representatives before the repayment date to request bank information or other necessary payment details. Debts will only be repaid by the debtor under the terms and conditions of the plan.

However, there are a few cases where the debtor cannot pay the debt under the plan to creditors. This could cause the debtor to default on the debt repayment under the plan and could potentially result in the Bankruptcy Court canceling the rehabilitation process and ordering absolute receivership against the debtor, which could lead to bankruptcy.

Failure to Repay Debts under the Plan Terms

Generally, if the debtor does not repay the debts according to the terms and conditions of the business rehabilitation plan, the official receiver will notify the Bankruptcy Court of the situation. This includes information about the debtor’s default, which generally will have been disclosed in the debtor’s report to the official receiver. Creditors can request a copy from the Legal Execution Department.

If the debtor defaults on repayment, creditors should immediately contact a local representative to contact the official receiver regarding the event. During this period, the plan administrator can also submit a request to the Bankruptcy Court to amend any part of the plan that relates to payment amounts, terms, or period. In reviewing the request, the Bankruptcy Court may schedule an investigation hearing.

If the court allows the amendment, the plan administrator will have to inform the creditors about the amendment and conduct a creditors’ meeting to seek their approval before requesting that the Bankruptcy Court approve the plan again. However, if the Bankruptcy Court views that the plan administrator’s request to amend the plan is not reasonable, the court could, in the worst-case scenario, cancel the rehabilitation process and order absolute receivership against the debtor.

Importance of Local Representation

In conclusion, creditors should seek local expert consultants to assist them by explaining the details of the process and securing their benefits and rights. Local experts can also provide strategic analysis and recommendations for the creditor if things are not going well under the business rehabilitation plan—a crucial concern because any mistake could cause the creditor to forfeit payment under the rehabilitation plan.