Overview of Rehabilitation Proceedings

The primary goal of business rehabilitation proceedings is to provide debtors who are facing insolvency with various mechanisms to address their financial difficulties. This includes restructuring their liabilities and assets while also ensuring that creditors receive repayment equal to or greater than the amount they would have received if the debtor had been declared bankrupt by the court.

Rehabilitation proceedings are governed by the Act on the Establishment of and Procedure for Bankruptcy Court B. E. 2542 and the Bankruptcy Act B.E. 2483. The Civil Procedure Code regulates any matters not governed by these two laws.

In the eyes of the Thai judiciary, rehabilitation proceedings are classified as a type of bankruptcy action—thus, the country's bankruptcy courts have jurisdiction over rehabilitation matters. Theoretically, there are two types of bankruptcy courts: the Central Bankruptcy Court and the Regional Bankruptcy Court. However, the Regional Bankruptcy Court has not yet been formally established, so the Central Bankruptcy Court is authorized to adjudicate bankruptcy cases throughout Thailand for the time being.

Appeals against judgments and orders of the Central Bankruptcy Court are made with the Bankruptcy Case Division of the Court of Appeals for Specialized Cases, with petitions for further appeal addressed to the Supreme Court.

Filing a Petition for Rehabilitation

Person Entitled to File a Petition. To initiate rehabilitation proceedings, a debtor, one or more creditors, or a relevant government authority may file a petition for rehabilitation with the court.

A creditor or group creditors entitled to file the petition must be owed a definite amount of debts of at least THB 10 million.

A debtor entitled to file a petition must be either a limited company, a public company, or another type of juristic person specified in ministerial regulations. An individual, an ordinary partnership, or a limited partnership cannot file a petition for rehabilitation according to the Bankruptcy Act B.E. 2483.

If the debtor is a bank, securities company, insurance company, or other juristic person under the supervision of the Bank of Thailand, the Office of the Securities and Exchange Commission, or the Department of Insurance, the respective authorities are authorized to file the petition for the debtor's business rehabilitation when the debtor owes at least THB 10 million to one or more creditors.

Filing Conditions. All the following conditions must be satisfied to file a petition to initiate the process of business rehabilitation:

  • It must be proven that the debtor is insolvent or unable to pay the debts due for payment (cash-flow insolvency).
  • The debtor is indebted to one or more creditors for a total of at least THB 10 million, irrespective of whether it is due for payment immediately or in the future.
  • There must be reasonable grounds and prospects for the successful rehabilitation of the debtor's business.

Specifics of the Petition. The petition for business reorganization must clearly set out:

  • The debtor's insolvency or inability to pay its debt as scheduled;
  • The list and addresses of all creditors to whom the debtor is indebted alone or all together for an amount of at least THB 10 million;
  • Reasonable grounds for and prospects of rehabilitating the business;
  • The name and qualifications of the planner to be responsible for creating and preparing a rehabilitation plan; and
  • A letter of consent from the planner.

Limitation on Initiating Rehabilitation. Business rehabilitation cannot be initiated if any of the following events have occurred:

  • The court has already issued an absolute receivership order against the debtor.
  • The debtor, which is a juristic person, has been dissolved or its registration has been revoked by the court, the registrar's order, or on other grounds.
  • In the six months prior to the submission of the petition for rehabilitation, the court has previously dismissed a rehabilitation petition or canceled a rehabilitation order or rehabilitation proceedings in relation to the debtor's business.

If a temporary receivership order has been issued against the debtor's assets, or if the debtor is facing a filed bankruptcy action but has not yet been judged bankrupt by the court, a petition to initiate rehabilitation of the debtor's business can still be filed.

Court Acceptance of the Petition. The Central Bankruptcy Court holds jurisdiction over the rehabilitation proceedings. However, the petition for rehabilitation can be submitted either to the Central Bankruptcy Court or the Provincial Court that holds jurisdiction over the debtor's domicile or the place where the debtor's business is operated. In the latter case, the Provincial Court is then responsible for forwarding the petition for rehabilitation to the Central Bankruptcy Court for consideration of whether to accept the petition.

Court Order to Dismiss the Case. If the petitioner abandons its petition, misses an appointment, or has its request to withdraw the rehabilitation petition approved by the court, the court will notify both the creditor and debtor through a daily newspaper for at least seven days. If no one submits a crossclaim to act as a replacement for the party, the court may dismiss the case.

Acceptance of a Rehabilitation Petition

Rehabilitation Hearing. Up until three days before the date of the first hearing, the debtor or any creditor may challenge the petition for rehabilitation on the grounds of nonfulfillment of the filing conditions (mentioned above) or unsuitability of the proposed planner. Both the petitioner and the challenger are obliged to be present at the court hearing, after which the Central Bankruptcy Court may either dismiss or approve the petition.

When considering whether to accept the rehabilitation petition, the court may dismiss the petition if the filing conditions under the Bankruptcy Act have not been fulfilled or the petition has been filed illicitly.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.