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July 13, 2016

Thailand: Amendments to Bankruptcy Act Provide Greater Protection for SMEs

Recent amendments to Thailand’s Bankruptcy Act which came into force on May 25, 2016, will provide SMEs with greater protection against bankruptcy.

Prior to the amendments, the Bankruptcy Act B.E. 2483 (1940), which governs the rehabilitation process for debtors, only protected debtors which were private limited companies, public limited companies, or other juristic persons as defined by Ministerial Regulation. It excluded natural persons, juristic bodies, and partnerships. In addition, to be eligible for rehabilitation, debtors had to meet a minimum threshold of insolvency, with an amount of debt not less than THB 10 million. These requirements hampered SMEs’ access to rehabilitation, which is necessary for business survival during hard times.

The amendments open the rehabilitation process to natural persons, juristic bodies, and partnerships, while also lowering the minimum threshold of debt that debtors, who are not in a position to make repayment, must meet to be eligible for protection. The minimum thresholds vary depending on the type of debtor, as follows:

Type of Debtor Amount of Debt Required for Protection
Natural persons Not less than THB 2 million
Juristic bodies, registered or unregistered ordinary partnerships, or limited liability partnerships Not less than THB 3 million
Private limited companies Not less than THB 3 million, but not more than THB 10 million

In order to apply for rehabilitation, a debtor or a creditor of the debtor must file a petition to rehabilitate, along with an approved rehabilitation plan for at least two-thirds of the total amount of debt, to the Central Bankruptcy Court and comply with other procedural requirements.

The Court then considers whether or not to accept the petition. If the Court issues an order to accept the petition to rehabilitate, an automatic stay goes into effect. This stops the creditor(s) from claiming or seizing the debtor’s assets, and it stops the ongoing seizure process and the auctioning off of the debtor’s assets.

Under these amendments, SMEs should be able to withstand temporary liquidity problems more effectively.

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