The Bankruptcy Act has been amended to help small and medium size entities (SMEs) enter into the rehabilitation process in Bankruptcy Act No. 9 B.E. 2559 (2016) (“the amendment”), which became effective on 25 May 2016.
Debtor
Various types of debtor are mentioned in the amendment. The following types of debtor can enter into the rehabilitation process for SMEs;
- An individual;
- A group of person;
- A non-registered partnership;
- A registered partnership;
- A limited partnership;
- A private limited company; or
- Any other juristic person specified in the Ministerial Regulation.
These debtors must conduct a Small or Medium Enterprise business (as defined in the amendment) and be registered with the Office of Small and Medium Enterprises Promotion (OSMEP) or another government agencies. Small Enterprises and Medium Enterprise are defined in the SMEs Act as follows;
| Business Sector | Small Enterprise | Medium Enterprise |
| Manufacturing |
Up to 50 employees or up to THB 50 million in fixed assets |
51-200 employees or fixed assets of more than THB 50 million but less than THB 200 million |
| Services |
Up to 50 employees or up to THB 50 million in fixed assets |
51-200 employees or fixed assets of more than THB 50 million but less than THB 200 million |
| Wholesale |
Up to 25 employees or up to THB 50 million in fixed assets |
26-50 employees or fixed assets of more than THB 50 million but less than THB 100 million |
| Retail |
Up to 15 employees or up to THB 30 million in fixed assets |
16-30 employees or fixed assets of more than THB 30 million but less than THB 60 million |
Rehabilitation Process
The rehabilitation process for SMEs begins with the filling of a petition by any creditor or debtor together with a proposed plan for rehabilitation. The petition for business rehabilitation must clearly specify the following details:
- The insolvency of the debtor;
- List and address of all creditors to whom the debtor is indebted alone or altogether for the following amount;
- Not less than THB 2 million if the debtor is an individual;
- Not less than THB 3 million if the debtor is a limited partnership, a registered partnership, a non-registered partnership, a group of persons or other juristic person specified in the Ministerial Regulation; or
- Not less than THB 3 million but not more than THB 10 million if the debtor is a private company.
- Reasonable grounds and prospects to rehabilitate the debtor.
- The proposed rehabilitation plan together with the evidence indicated that creditors owning not less than 2/3 of all debts approved such proposed plan.
What makes the rehabilitation process for SMEs different from the regular rehabilitation process is that the filling of a petition for rehabilitation of SMEs is required to include a proposed rehabilitation plan which contains details such as the reasons for rehabilitation, details of assets, procedures and step for rehabilitation, withdrawal of security, appointment of the plan administrator, etc. The proposed plan is used for a 3 year period.
Automatic Stay and Termination
Once the court accepts the petition and the proposed rehabilitation plan, the plan administrator will be responsible to proceed with the proposed plan and a Thai style “automatic stay” comes into effect. The creditors cannot take legal action against the debtor for failing to repay their loans. The debtor can also continue to seek additional loans to keep the business afloat. The automatic stay will continue until the rehabilitation plan expires or is completely implemented, or the rehabilitation process is cancelled by the court.
If the rehabilitation process and the rehabilitation plan have been cancelled by the court, all obligations between the creditor and the debtor under the rehabilitation plan shall no longer remain. Moreover, all rights and liabilities of the debtor and their shareholders are reinstated. On the other hand, in case where the court cancels only the order of rehabilitation (not the rehabilitation plan), all obligations of creditors and debtor shall remain the same under the rehabilitation plan.