Proposed amendments to the Bankruptcy Act for greater SME protection
At present, the effects of the COVID-19 pandemic have severely disrupted the economy of many countries, including Thailand. Business operation in various sectors are at risk of being suspended or liquidated due to loss of income and lack of financial liquidity. To avoid this, some had to lay off employees or enter debt restructuring process leading to economic recession.
One of the essential keys to prolong business continuation is the business rehabilitation process, provided in the Bankruptcy Act B.E. 2483 (1940) (the “Bankruptcy Act”). Business rehabilitation is the process for qualified debtors to relieve their financial obligations with the cooperative effort by the debtor, creditors, and bankruptcy court.
In response to the effects of the COVID-19 pandemic, more efficient business rehabilitation process is needed to help business operators and ensure their business continuity, especially those affected Small Medium Enterprises (“SMEs”).
On 10 August 2021, the Thai government has approved in principle the draft amendments to the Bankruptcy Act (the “Draft Amendment”) to facilitate business rehabilitation process to be more efficient, faster and less complicated.
The key changes under the Draft Amendment are as follows:
|Qualifying debt amount for non-SMEs rehabilitation||Increase of debt amount owed to one or more creditors from a total of not less than THB 10 million to a total of not less than THB 50 million, taking into account the current economic conditions.|
|SMEs registration requirement||The requirement that only SMEs registered with the Office of SMEs Promotion or other government organisations may file a petition for business rehabilitation will be removed. This will directly cause greater impact and efficiency on access to business rehabilitation process for SMEs operators which has been proved difficult in the past.|
|Submission of a prepackaged plan|
|A qualified debtor may file a petition for business rehabilitation without submitting a prepackaged plan approved by creditors together with such petition. Again, this will create ease of access to rehabilitation process, especially for SMEs operators.|
|Acceleration in rehabilitation process||A qualified debtor may alternatively file a petition for business rehabilitation together with a prepackaged plan to the bankruptcy Court. The court shall consider the petition instantly prior to approving the plan.|
The proposed amendments to the Bankruptcy Act is great news for Thailand’s economy and business operators, especially for SMEs. The Draft Amendment will still have to be considered by the relevant authorities and approved by parliament. In this regards, there could possibly be further amendments or developments.
The table above provides only a summary of the Draft Amendments. If you have any questions or require any additional information, please contact Threenuch Bunruangthaworn or Archaree Suppakrucha of ZICO Law Thailand or the partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.