Services / Bankruptcy and rehabilitation
Rehabilitation below the ten million threshold
The ten million baht figure people remember is the threshold for the main track, not the only threshold there is. The Bankruptcy Act carries a second route for debtors below it, and that is the one most Thai businesses actually fit.
The main track, under section 90/3
Section 90/3 of the Bankruptcy Act B.E. 2483 (1940) provides that where a debtor is insolvent or unable to pay debts as they fall due, and owes one or more creditors a definite sum of not less than ten million baht, whether payable immediately or in the future, then if there is reasonable cause and a channel through which the business can be rehabilitated, a person named in section 90/4 may petition the court for rehabilitation.
The channel through which it can be rehabilitated
The requirement of reasonable cause and a channel to rehabilitate is separate from the debt figure, and it is where petitions most often run thin. Section 90/6 requires the petition to show clearly the insolvency or inability to pay on time; the creditors totalling not less than ten million baht; the reasonable cause and the channel for rehabilitation; and the name, qualifications and written consent of the planner. The planner may be a natural person, a juristic person, a group of persons, a creditor, or the debtor's own management — which leaves existing management able to put itself forward, a point creditors commonly contest.
The track for smaller debtors
Section 90/92 sets the bar much lower. For debts arising from carrying on business, a debtor who is a natural person needs a definite debt of not less than two million baht. A group of persons, an unregistered ordinary partnership, a registered ordinary partnership, a limited partnership or another juristic person prescribed by ministerial regulation needs not less than three million. A limited company needs not less than three million but under ten million.
When the debtor is presumed unable to pay
The second paragraph of section 90/92 lays down five presumptions: that the debtor's assets are less than its liabilities; that it failed to pay within time and, having received a demand letter, still did not pay within thirty days; that it has no property that can be executed against under a judgment, or execution produced too little; that it defaulted to one creditor with circumstances showing it has or may default to others; and that its cash flow is insufficient to pay. The last is wider than many expect, because it is not tied to the balance sheet.
On this track the plan comes with the petition
The most important difference lies in section 90/95, which requires the petitioner to attach the plan to the petition together with evidence that creditors holding not less than two-thirds of the total debt have approved it. This track is therefore not a matter of filing and then negotiating; the negotiation has to be finished first. The hard work sits before the filing date rather than after it.
PREPARE
What to bring
- Current accounts and a statement of assets and liabilities
- All creditors, their addresses and the amounts owed
- A cash-flow projection showing the route back
- The proposed planner, their qualifications and consent
- Demand letters received and any pending proceedings
QUESTIONS
Questions this raises
Can a creditor petition to rehabilitate our business?
Yes. Section 90/4(1) names first a creditor, alone or together with others, holding a definite debt of not less than ten million baht, and on the smaller-debtor track section 90/93(1) gives creditors the same right. What a debtor should prepare for is therefore not only whether to petition itself, but the case where a creditor petitions and puts forward its own planner.
How does this differ from a bankruptcy petition?
The starting points differ at the phrase channel to rehabilitate, which section 90/3 makes a condition. Rehabilitation proceeds on the footing that the business can continue if its debts are restructured, whereas bankruptcy under section 9 proceeds on gathering and distributing assets. Where the business still has a route forward, petitioning for rehabilitation first is an option to weigh at the outset, not after a receivership order has been made.
LAW
The legislation
- Bankruptcy Act B.E. 2483 (1940), sections 90/3 and 90/4
- Bankruptcy Act B.E. 2483 (1940), section 90/6
- Bankruptcy Act B.E. 2483 (1940), section 90/92
- Bankruptcy Act B.E. 2483 (1940), section 90/95
ENQUIRIES
