You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

August 30, 2016

Business Reorganization in Thailand: Steps and Procedures

Informed Counsel

In order to repay debts, many flailing companies allocate additional resources to uncover new sources of income. In turn, these companies incur more debt, and this can lead to a vicious downward spiral ending in bankruptcy.

Despite this bleak outlook, these companies still have the potential to recover and become profitable. One way is through reorganization, which provides relief to debtors that allows them to survive a crisis while ensuring that their creditors receive fair repayment.

To initiate the reorganization process, debtors, creditors, or government agencies can submit a reorganization petition to the Bankruptcy Court.

Once the Bankruptcy Court accepts a reorganization petition, all of the debtor’s outstanding debts are automatically stayed or “frozen.” The automatic stay ensures that the debtor will be protected by the Bankruptcy Act, which shields the debtor from creditors’ debt collection efforts.

During an automatic stay, a debtor is obligated not to dispose of, distribute, transfer, pay debt, create debt, or act in any way which may encumber its property, except those necessary for conducting its ordinary business or as otherwise provided by court order.

In the trial phase, the Bankruptcy Court will review all documentary evidence and hear all witnesses. If the Court agrees with the petitioner, it will allow the debtor to reorganize. If it disagrees with the petitioner, the Court will dismiss the case. The petitioner can submit an appeal to the Supreme Court and request a review of the Court’s decision.

Once the Court approves the debtor’s petition to reorganize, it will appoint a planner with the duty to prepare and submit a business reorganization plan for the debtor and operate the debtor’s business. This is usually someone nominated by the petitioner. If there are objections from any creditor or debtor as to the identity of the planner, the official receiver—by court order—will hold a creditors’ meeting to elect a suitable planner.

At the creditors’ meeting, the planner will be approved by the creditors that are owed no less than two-thirds of the total debts, failing which the person proposed by the debtor will be chosen as the planner. Once the planner is appointed, the rights and duties of the debtor will immediately transfer to the planner. In addition, all legal rights of the debtor’s shareholders, with the exception of the right to receive dividends, will be vested in the planner.

After the planner is appointed, the official receiver will publish the Bankruptcy Court’s reorganization order in the Government Gazette and in two widely circulated daily newspapers. All creditors must submit a repayment application with a copy to the official receiver within one month from the publication date. Creditors that are owed debts incurred prior to the Court’s issuance of the reorganization order are entitled to submit an application.

Once all applications have been submitted, the debtor, all creditors, and the planner will have the right to review and object to applications which they deem as invalid. The official receiver will evaluate the matter and render a decision as to voting rights in approving the reorganization plan. During this process, the planner is tasked with drafting the reorganization plan, which must include details such as the reasons why the debtor requires reorganization, principles and methods of business reorganization, redemption of collateral if there are secured creditors or liabilities of a guarantor, ways to resolve problems if there is a temporary lack of liquidity during implementation of the plan, and the time period for the plan which must not exceed five years, among other details. In addition, the planner is empowered to refinance, restructure, and hair-cut the debts as he or she deems necessary.

The planner must submit the plan to the official receiver within three months from the publication date of the Court’s order appointing the planner. After receiving the plan, the official receiver will hold a creditors’ meeting to discuss whether the plan should be accepted in its current form or revised. If a decision is rendered to approve the reorganization plan, a special resolution to that effect must be passed, either: (1) by a majority of the creditors owed three-fourths of the total debts of creditors present at the creditors’ meeting; or (2) by at least one group of creditors who are not already presumed to have approved the plan, provided that the total debt owed to the creditor group represents at least 50 percent of the total debt owed to the creditors present at the creditors’ meeting.

Regardless of whether a resolution accepting the plan is passed, the official receiver will report the outcome of the creditors’ meeting to the Court. If a resolution accepting the plan is passed and the Court determines that the resolution is not illegal and agrees with the outcome, it will issue an order approving the plan. Once the Court approves the plan, the rights and duties of the planner will immediately transfer to the plan administrator. Not only will the plan administrator have the right to manage the debtor’s business under the plan, but in some cases, it will have additional rights not previously available to the planner.

Once the reorganization plan has been operational for some time and proves to be successful, the debtor’s executives, plan administrator, or the official receiver are entitled to report the successful outcome to the Bankruptcy Court and request for termination of the business reorganization. If the Court agrees, it may cancel the business reorganization order, at which point the debtor’s directors and authorized director will regain their full rights to manage the business operations and assets of the debtor, unless the plan had altered these rights. Shareholders of the business will also regain their legal rights. This is the point which flailing companies in reorganization hope to attain, and this is the main reason to engage in the reorganization process.

RELATED INSIGHTS​ 

March 6, 2025
On February 18, 2025, the Thai Senate approved an amendment to the Act on the Establishment of and Procedures for the Tax Court. This follows the July 2024 approval by the Thai cabinet and subsequent preparation of supporting secondary legislation. This important amendment to procedural law, once it takes effect, will extend the exclusive jurisdictional powers of the Tax Court to all criminal tax, customs, and excise tax claims in addition to the court’s existing jurisdiction over all such civil claims. The amendment, while now formally approved by the legislature, is awaiting the king’s signature and will take effect 180 days after its publication in the Government Gazette. Based upon its projected publication date, the amendment will likely take effect by the end of the third quarter of this year. This development is set to offer a more sophisticated Tax Court litigation process for highly specialized and often complex criminal tax and customs claims, something with which Thailand’s traditional criminal courts have struggled. It also ensures that all tax and customs matters are adjudicated before the same court, saving time, party costs, and judicial resources. This appears likely to result in more consistent adjudication of criminal tax and customs disputes, a benefit for the Thai government and party litigants alike. Any ongoing criminal tax and customs claims already commenced with the respective criminal courts on the date on which the amendment becomes effective will remain under the exclusive jurisdiction of those criminal courts. The Tax Court will have exclusive jurisdiction over all other claims. This important legislative change offers those managing or otherwise facing civil and/or criminal Thai tax or customs disputes the opportunity to more effectively plan and execute a uniform defense strategy before a single, qualified forum.
February 26, 2025
Thailand ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards on December 21, 1959, with the Convention coming into force on March 20, 1960. This ratification was a significant step in aligning Thailand’s arbitration framework with international standards, facilitating the recognition and enforcement of foreign arbitral awards in the country. In Thailand, the enforcement of both domestic and international arbitral awards is governed by the Arbitration Act B.E. 2545 (2002), which is based on the first version of the UNCITRAL Model Law on International Commercial Arbitration of 1985 (as opposed to the latest version from 2006). However, unlike Australia, Hong Kong, and Singapore, Thailand is not an UNCITRAL Model Law country. While Thailand’s Arbitration Act is influenced by the UNCITRAL Model Law, it incorporates certain local contexts that require interpretation alongside Thai court rulings. The Arbitration Act also confirms the authority of arbitral tribunals to grant interim measures, reinforcing tribunals’ power in managing disputes effectively. Additionally, the act incorporates principles from the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). This article explores the key procedural steps, timeframes, and practical challenges associated with the enforcement of arbitral awards under Thailand’s legal framework. Procedures for Enforcement of Arbitral Awards in Thailand The enforcement of arbitral awards in Thailand follows the procedures outlined in the Arbitration Act: Application to the competent court: Under the Arbitration Act, parties seeking enforcement must submit a petition to the Thai courts within three years of the award having become enforceable. The application must include the original or certified copies of the arbitral award and the arbitration agreement, along with translations if necessary. In Thailand, the choice of court for filing the arbitral award depends on the nature of the disputed contract. If the contract concerns
February 25, 2025
On February 4, 2025, Thailand’s Board of Investment (BOI) issued Announcement No. Por. 3/2568, introducing updated qualifications, criteria, and conditions for long-term resident (LTR) visas. The updated requirements took effect immediately upon issuance of the announcement. The LTR program is intended to stimulate the economy and attract high-potential foreign nationals to Thailand, and these latest updates aim to expand access to a wider range of experts, investors, and executives to reinforce Thailand’s foreign talent pool and enhance its competitiveness. The recent updates primarily affect three categories under the LTR visa program: work-from-Thailand professionals, wealthy global citizens, and high-skilled professionals, as detailed below. Work-from-Thailand Professionals The updated LTR visa program includes some changes to the eligibility criteria for visa applicants in the work-from-Thailand professionals category: The revenue requirement for visa applicants’ employers is now USD 50 million over a three-year period, down from USD 150 million previously. Eligible foreign employers now include wholly owned subsidiaries of: companies listed on any stock exchange in any country; or private companies that have been in operation for at least three years and have generated a combined revenue of at least USD 50 million over the past three years. There are no longer work experience requirements. The other requirements remain the same. Wealthy Global Citizens For the wealthy global citizens category, the latest updates remove the requirement to have an annual personal income of USD 80,000, while the other criteria remain. Highly Skilled Professionals For the highly skilled professionals category, the latest updates expand eligibility to include lecturers in vocational or higher education, and remove work experience requirements. Other categories The updated LTR visa program does not introduce any changes for the wealthy pensioners category. However, the announcement does expand the scope of eligible dependents of LTR visa holders to cover parents and a
February 23, 2025
On January 6, 2025, the government of Vietnam issued Decree No. 05/2025/ND-CP amending and supplementing Decree No. 08/2022/ND-CP detailing the Law on Environmental Protection (“Decree 05”). Decree 05 came into effect immediately upon issuance and provides several changes to the regulations governing extended producer responsibility (“EPR”) for applicable manufacturers and importers, outlining their obligations concerning the recycling and treatment of discarded products and packages. (See our previous article on Vietnam’s EPR regulations here.) Outlined below are some critical amendments in Decree 05. Entities Subject to EPR Regulations Previously, Decree 08 limited the responsibility for recycling to manufacturers and importers of products and packaging specified in statutory lists. Decree 05 expands this scope by also including entities responsible for the quality and labeling of the regulated products and goods in Vietnam. Decree 05 inherits the regulations from Decree 08 that manufacturers and importers, if they produce and import products and packaging as stipulated by law, must fulfill their responsibility to recycle or support waste treatment activities. However, Decree 05 amends the lists of products/packaging that must be recycled or undergo waste treatment, and new products/packaging and recycling methods. Notably, rechargeable batteries (including those used in vehicles or for electrical and electronic devices) have been added to the list of regulated products and self-propelled vehicles and construction machinery have been removed from the list. Decree 05 also not only streamlines the recycling methods required for each type of product/packaging, but also removes the minimum requirement on the mass of products/packaging that must be recovered when recycling. Manufacturers and importers now have more flexibility in selecting recycling methods that are more suitable for actual recycling conditions in Vietnam. Decree 05 has revised the cases of exemption from recycling and waste treatment obligations, clarifying that both packaging manufacturers and importers with annual product