Thailand Amends its Bankruptcy Laws1
Written By George M. Kelakos
Heller Ehrman White & McAuliffe LLP (New York)
gkelakos@hewm.com

On June 2004, the Kingdom of Thailand enacted amendments to the Thai Bankruptcy Act2. The new amendments to the Act (the Amendments), which are codified in Bankruptcy Act (No. 7), B. E. 2547 (2004), came into effect on July 16, 2004—one day after publication in the Thai Government Gazette.

The Act was significantly revised in 1998 and 1999 to include a new Business Reorganization chapter (Chapter 3/1 of the Act) and to modernize Thailand’s bankruptcy laws in response to the fallout from the Asian Crisis of 1997. Over the past four years, a number of proposals for amending the Act have been considered and reviewed by the Thai government. The proposed amendments were to address perceived loopholes and gaps in the law. While these proposals may eventually result in further amendments to the Act, the Amendments principally focus on individual bankruptcies by streamlining and clarifying when and under what circumstances an individual may obtain a discharge in bankruptcy cases.

With respect to the discharge provisions, the Amendments provide that an individual who is adjudged to be a bankrupt shall receive a discharge within three years following his adjudication in bankruptcy, except under the following circumstances:

• Prior bankruptcy. If the individual debtor had been adjudicated a bankrupt within a period of five years from the current adjudication in bankruptcy, the period from the adjudication in bankruptcy to his discharge will be extended to five years.

• Dishonest bankrupt. If an individual is determined by court order to be a "dishonest bankrupt" within the meaning of Section 6 of the Act, the period is extended for 10 years, except that the period may be shortened under certain circumstances. However, if the person has committed an offense under the Thai Fraudulent Borrowings Act, the period is extended for 10 years.

• The period may be stayed under certain circumstances. If the official receiver (a government official appointed to oversee the debtor's case) determines that a debtor is not cooperating with the official receiver in identifying estate assets or in his examination of the debtor's assets and liabilities, the official receiver may file a motion with the Central Bankruptcy Court3 seeking a stay of the period until the debtor complies with the official receiver's requests.

The Amendments relating to the discharge of an individual are more "debtor friendly" than prior law. For instance, under the prior law, an individual debtor might not receive a discharge if he showed an "undue preference" to a creditor (similar to making a preferential transfer under the U.S. system) within three months from the date of adjudication in bankruptcy. In addition, under prior law, the burden was on the debtor to file a motion with the court and to establish that he was entitled to a discharge. The Amendments now make it clear that a discharge will be automatic, except under the circumstances highlighted above.
Other key changes to the prior law that are reflected in the Amendments are highlighted below:

• Defined terms. The definition of an "insider of the debtor" is amended to reflect that "insiders" include the spouse and minor children of an individual debtor and the definition of a "dishonest bankrupt" is now expanded to include parties who have been adjudged by the CBC to have committed an offense under the Thai Fraudulent Borrowings Act.

• Revisions to fee schedules in bankruptcy cases. The fees for filing petitions, pleadings, appeals or proofs of claim have been significantly increased; the "collection" fees (similar to the fees payable under Section 1930 of Title 28, U.S. Code) have been reduced to three percent of the net value of the assets collected.

• Repeal of a provision in the Act that provided limited rights of appeal from certain orders. Under the prior law, an appeal could be taken of an order of the Central Bankruptcy Court (i) dismissing a petition in bankruptcy (ii) disallowing a creditor in a reorganization proceeding from receiving a distribution (iii) placing the debtor under absolute receivership (similar to converting a case from chapter 11 to chapter 7) and "any order that the chief judge [of the CBC] deems appropriate in the interest of justice." These provisions (codified in Chapter 3/1, Section 90/79 of the Act) have been repealed.

• Redirection of mail and other communications. Under prior law, an Official Receiver could seek an order allowing mail or telegraph communications to the debtor to be redirected to the official receiver during and for a limited period of time. The Amendments provide that these powers of the official receiver may be extended to other forms of communication, such as electronic mail.

Over the last four years, there has been much speculation that the next amendments to the Act would include provisions either closing perceived loopholes in the reorganization provisions of Thai bankruptcy law or providing incentives to promote the use of the business reorganization chapter of the Act (such as adding provisions to provide a "super-priority" lien for lenders who provide financing to a debtor in a business reorganization case). However, as is apparent from the highlights of the Amendments set forth above, the Amendments focus on making Thailand’s bankruptcy laws more “debtor friendly” for individual debtors and, with the exception of the provision highlighted above relating to appeals of certain orders in business reorganizations, will have little impact on future business reorganization cases in Thailand.

8/23/04 1:08 PM ()

1 The author would like to thank Cynthia Pornavalai of the Bangkok-based law firm of Tilleke & Gibbins International, Ltd. for providing the author with an unofficial English translation of the recent amendments to the Thai Bankruptcy Act. This translation will be posted shortly on the http://www.globalinsolvency.com/ website. Back to text

2The Thai Bankruptcy Act (the “Act”), as amended, Bankruptcy Act B.E. 2483 (1940).Back to text

3The Central Bankruptcy Court (the “CBC”), which opened its doors in June 1999, is a specialized court with exclusive jurisdiction over all bankruptcy matters. There are currently 23 bankruptcy judges in the CBC.Back to text

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