In Thailand, in-court business rehabilitation is a legal proceeding that enhances a debtor’s chance to restructure business operations for corporate debtors who are unable to repay their debts. The purpose of this proceeding is to allow the debtor to continue operating the business and generate income to repay creditors. The amounts that creditors receive in the rehabilitation proceeding are greater than the amounts creditors would receive if the debtor went bankrupt. The law is not designed to allow debtors or creditors to use the business rehabilitation process in bad faith for their benefit or to defraud another party. Accordingly, the Business Rehabilitation Law, which is included in the Thai Bankruptcy Act B.E. 2483 (1940), provides criminal liability for actions taken before or during the process. This article addresses the key points regarding criminal liability for safeguarding debtors and creditors in business rehabilitation proceedings from any parties who act in bad faith.

Criminal Liability in Business Rehabilitation

The following provisions establish the framework for criminal liability in business rehabilitation cases, ensuring that all parties act with integrity throughout the process.

The Bankruptcy Act of Thailand B.E. 2483 (1940) provides the relevant provisions regarding the business rehabilitation process. Additionally, if a company debtor or its authorized directors are found to have committed fraud or malfeasance under the Bankruptcy Act, they can also be held criminally liable under the Penal Code or related criminal statutes.

The rehabilitation process aims to help a business recover financially under the supervision of the court. When the court approves the rehabilitation plan, the court appoints a business rehabilitation plan administrator to manage and implement the process.

However, if it is discovered that the debtor, its executives, or even the plan administrator engaged in illegal activities prior to or during the rehabilitation process—such as tax evasion, embezzlement, fraud, or bribery—criminal charges may arise against them under the Penal Code.

The Bankruptcy Act also establishes several criminal activities that may occur before or during the rehabilitation process. Thus, if a criminal act is committed, such as asset concealment, fraudulent transfers, or false financial status representation, the penalties portion of the Bankruptcy Act would be applicable to the case. The potential penalties could be a fine, imprisonment, or both.

Examples of Criminal Liabilities during Business Rehabilitation

Several specific criminal liabilities may arise during the business rehabilitation process.

• Fraudulent bankruptcy: If company executives intentionally misrepresent the company’s financial situation in a manner that could cause damage to creditors, the executives could be subject to criminal liability under the Bankruptcy Act and the Penal Code.
• Debt repayment in violation of automatic stay: After the court accepts a business rehabilitation petition for consideration, an automatic stay prevents the debtor from repaying creditors, though there are some limited exceptions. Violation of the automatic stay could be subject to criminal liability under the Bankruptcy Act.
• Obstruction of rehabilitation: Any efforts to mislead the plan administrator or official receiver or hinder the court’s orders could lead to criminal charges, including contempt of court, and could result in criminal charges under the Bankruptcy Act.
• Bribery to manipulate the rehabilitation process: Any person who gives, offers to give, or agrees to give property or any other benefit to a creditor or any other person, and any person who demands, accepts, or agrees to accept property or any other benefit for himself or for any other person with the intent to gain support or approval from creditors in the election of the plan preparer or the plan administrator or the approval or revision of the plan shall be subject to criminal liability under the Bankruptcy Act.

Criminal liability for these actions could lead to a fine of THB 100,000–500,000 (approx. USD 3,070–15,350), imprisonment for 1–5 years, or both.

Plan Administrator’s Liability

Plan administrators bear significant responsibility for the proper conduct of rehabilitation proceedings. Plan administrators who fail to perform their duties honestly or with the intent to cause loss to the debtor or creditors shall be liable for a fine of up to THB 500,000 (approx. USD 50,350), imprisonment for up to five years, or both.

Criminal Liability of the Directors or Executives

Directors of a company undergoing business rehabilitation can be held personally liable if the company is found to have committed criminal acts.

Under the Bankruptcy Act, executives of a debtor company are liable for a fine of up to THB 200,000 (approx. USD 6,140), imprisonment for up to two years, or both if they commit any of the following acts:

• Failing to explain material information in connection with the debtor’s business or property to the court, the official receiver, the plan preparer, the plan administrator, or a meeting of creditors, unless it is proved that the act was committed with no fraudulent intent.
• Failing to notify the official receiver within 15 days upon learning that an allegation of false indebtedness has been made for electing a plan preparer or applying for repayment of debt in accordance with the plan.
• Submitting materially false lists of property, liabilities, and creditor information, or providing false explanations about the debtor’s business and property, when such falsity is likely to cause damage to creditors.

Conclusion

Criminal liability under business rehabilitation in Thailand highlights that those engaged in unlawful or fraudulent actions are subject to punishment, even during times of financial difficulty and restructuring. Regardless of the company’s rehabilitation status, fraudulent conduct is punishable by law, and individuals who engage in it could suffer significant criminal penalties.