Two procedures
Bankruptcy is liquidation. A creditor, or several, petitions the court. If the court grants an absolute receivership order, the Official Receiver at the Legal Execution Department (LED) takes control of the company’s assets. Creditors file claims, meet, and may accept a composition: a settlement offered by the debtor. If none is approved, the court declares the company bankrupt, and its assets are sold and shared out.
Business rehabilitation is reorganisation. The company keeps trading under a plan. The court appoints a plan preparer, creditors file claims and then vote on the plan. While it runs, most legal action against the company is frozen.
Both are governed by the Bankruptcy Act B.E. 2483 (1940).
Deadlines
| Bankruptcy | Rehabilitation | |
|---|---|---|
| The clock starts at | Publication of the absolute receivership order in the Royal Gazette | Publication of the order appointing the plan preparer |
| Time to file a claim | Two months (section 91) | One month (section 90/26) |
| Creditors outside Thailand | The Official Receiver may extend by up to two more months. Ask before the deadline. | The one-month period is strict. Act at once. |
| If you miss it | A late claim only for force majeure, through the court (section 91/1) | The claim is usually lost, unless the plan provides otherwise |
Don’t wait to be told. Companies in trouble often do not inform their investors, and foreign investors are the least likely to hear. The clock runs from publication, not from the day you find out.
Filing your claim
- The claim, a debt repayment application, is filed with the Official Receiver in Thai, with supporting documents translated into Thai.
- Calculate it as at the date of the order: principal, unpaid returns, contractual penalties and interest, citing the contract clause for each item.
- Creditors abroad may be asked to show that Thai creditors would have similar rights in insolvency proceedings in their country, and to declare anything they have recovered from the debtor abroad.
- The Official Receiver examines each claim and may ask for more documents. The debtor and other creditors can object. If you disagree with the Official Receiver’s decision, you can challenge it in court, but only within 14 days of learning of it.
- A Thai lawyer who knows the LED will usually charge a fixed fee for preparing and filing the claim, and a smaller fee for each creditors’ meeting. Agree it in writing.
Creditors’ meetings and the vote
The Official Receiver calls the creditors’ meetings. The debtor may propose a composition: for example a percentage of each claim, paid in instalments, or shares in a new company instead of cash.
- A composition needs a special resolution: a majority in number of the creditors present and voting, who together hold at least three-quarters of the debt voted. The court must then approve it. Once approved, it binds the creditors it covers, including those who voted against it.
- If you are absent, your vote is not counted, but your claim remains.
- Read the proposal closely: how much is paid in cash, and when; what security backs it; what any shares are worth and whether you can sell them; and whether it releases anyone else who owes you, such as a guarantor, a related company or a director who signed a cheque. Ask your lawyer before you vote.
- Management may collect proxies, powers of attorney or signed forms to support its plan. You don’t have to give them. You can appoint your own representative.
Who gets paid first
Secured creditors, such as a bank or contractor with a mortgage over the land and buildings, are paid from the assets pledged to them. What is left goes first to the costs of the procedure and to preferential debts such as certain taxes and wages, and then to unsecured creditors, who share it in proportion to their claims.
A buyer who holds only a contract, with no registered title, is usually an unsecured creditor. That is why the gap between paying for a unit and registering it in your name matters so much. A unit already registered in your name is yours, not the company’s, although income from a hotel may still depend on the company running it.
Claims outside the bankruptcy
A bankruptcy freezes claims against the company in it. It does not automatically protect others who may owe you: a related company that signed your contract and is not in bankruptcy, a guarantor, or a director who personally endorsed a cheque (an aval). Those claims have their own deadlines, and they can run out while you wait for the bankruptcy.
How to keep track
- The Royal Gazette publishes receivership and rehabilitation orders.
- The Legal Execution Department holds case information, meeting dates and asset auctions.
- Ask your lawyer for a short written note after every meeting.
For a real case, see the CISSA Group bankruptcy and Wyndham Grand Nai Harn.