Thai Bankruptcy Rehabilitation Proceedings – Claims by Foreign Creditors

Foreign companies dealing with Thai companies that are having financial problems should be alert to notices that the Thai company is the subject of an Order for Reorganization under the Thai Bankruptcy Act. This is particularly true if the Thai party owes money to the foreign company. Once such a notice is issued, the foreign party will need to take action to file a claim in the Thai proceedings to recover amounts owed by the Thai party. For an overview of Thai Bankruptcy Reorganization proceedings, click here.

When an application to place a Thai company into reorganization proceedings is filed – either by the debtor itself or creditors – the Thai bankruptcy court will hold hearings to determine if an order for bankruptcy reorganization of the Thai party should be issued. A notice is supposed to be issued to all creditors along with the application for reorganization. Foreign creditors should receive a notice in English. Occasionally, foreign creditors may receive such notices late in the proceedings so foreign creditors should monitor Thai companies if there appears to be a risk that it will be the subject of bankruptcy reorganization proceedings. Foreign parties will often have much less information about a Thai party than local Thai creditors.

After the Thai Bankruptcy Court approves the reorganization, the court may appoint a plan preparer. Within one month after publication of appointment of the plan preparer in the Royal Thai Gazette, the foreign creditor must file a notice of its claim with the official receiver. The form is not particularly difficult to complete (although more detailed than a “Proof of Claim” in a U.S. bankruptcy proceeding). If there is no objection the claim is accepted. But in practice an objection is filed against all claims even when they are obviously bona fide, so a creditor should not be surprised if an objection is lodged against its claim.

Evidence to support the claim must be both notarized and legalized, a process that can be time consuming and expensive. A foreign creditor should therefore be prepared to move quickly to support its claim when (the typically inevitable) objection is filed. Further, claims based on lost profits or expectation damages are treated with more scepticism by Thai court than their counterparts in the U.S. A foreign party hoping to recover all or some of such damages should be prepared to collect as much hard evidence in support of such a claim as possible.

The supporting evidence will be submitted to an officer of the Official Receiver’s office. That officer may ask creditors to submit additional evidence in support of the claim, particularly if the debtor files an objection. Further, the Official Receiver may take considerable time to rule on whether to accept, partially accept or reject a creditor’s claim. Indeed, in some cases a plan of reorganization is approved before there is a ruling on all claims.

They key point is to monitor Thai parties that seem to have financial problems carefully. Notices can arrive late and foreign parties often have limited time to file a claim and assemble the evidence necessary to support a claim in a Thai bankruptcy reorganization proceeding.