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Cynthia
Pornavalai of Tilleke & Gibbins,an
international firm, gives an overview of Thailand's bankruptcy law from a foreign
legal perspective. This is the second part of the two-part series. II.
As Debtor
The law defines debtors as limited
companies, public limited companies or other juristic persons provided in the
ministerial regulation. Foreigners can be shareholders, directors or employees.
A. As a shareholder
"Shareholders of the debtor" include other persons having interests in a juristic
person who is the debtor in the same manner as a shareholder (for example a partner
in a partnership).
Its role and liabilities
are limited under the reorganisation procedures. From the time the court issues
the reorganisation order, all legal rights of the debtor's shareholders are suspended
except the right to receive dividend.
The plan
administrator may request the court to permit the establishment of new Articles
of Association of the debtor. With the possibility of an amendment of the Articles
and Association of the company, it is possible for a foreign shareholder with
controlling power (eg preferential votes) to be severely restricted.
It is a general practice in Thailand for major shareholders to offer personal
guarantees for the company debts. It is unfortunate that the new law does not
offer enough protection to the guarantors. Under the provision on automatic stay,
only the assets of the debtor used as collateral are protected. There is no mention
of a stay of guarantee enforcement. Consequently, it is conceivable that a creditor
may enforce its claim against the guarantor.
B.
As director/executive of the Debtor company
Their role is broad and consequently liabilities
are far-reaching.
For principal duties under
the restructuring procedure, the directors must:
(1) Deliver assets,
seal accounting ledgers and documents relating to the assets, liabilities and
business of the debtor to the interim manager or receiver as soon as possible.
(2) Submit an explanation on the business and assets of the company to the
planner within seven days of the court appointment of the planner.
(3)
Possibly meet with the planner or the plan administrator for questioning.
(4) Be forced out of power after the court orders business reorganisation.
The powers are vested on the receiver until the planner is appointed.
(5)
If the court orders the cancellation of the reorganisation
order, the responsibility for managing the business operations and assets of the
debtor once again devolves to the debtor's director. |
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With
regard to the director's liabilities, the new law clearly stipulates that a director
is liable to a fine not exceeding Bt200,000, or imprisonment up to two years,
or both if he commits any of these acts:
(1) Failure to provide material
information regarding the business operation or assets of the debtor to the court,
receiver, planner, plan administrator in the meeting of creditors, unless he can
prove that he had no fraudulent intent.
(2) Failure to notify the receiver
within 15 days after learning that someone has used a bogus debt in order to select
a planner or file an application for repayment of debt under the plan.
(3)
Submitting a materially false list of total assets, liabilities, the names of
debtors and creditors. III.
As a Planner, Plan Administrator, Consultant to the Creditor or Debtor
The roles are very broad and powerful. The planner does not need to have any special
qualifications. It is subject to regulations which may be promulgated in the future.
The planner can be a company or a committee. As there is no professional practice
in Thailand such as a specialist insolvency practitioner as in other jurisdictions,
the planner can practically be any person, company or committee nominated by the
debtor or creditor and approved by the court.
For a foreign insolvency practitioner, this particular gap in the law can be a
source of vast opportunities. Most professional activities here by foreigners
are limited by the Alien Business Law. Accountancy and law are for instance two
of those service professions
from which foreigners are barred.
It
is thus possible for an insolvency practitioner, who does not fit into the definition
of one offering legal or accountancy services, to practice in Thailand. There
are, however, concerns in various circles that the restructuring proceedings will
be flooded by foreign consultants and insolvency practitioners charging exorbitant
fees thereby making the restructuring exercise extremely costly. A system of licensing
of planners is apparently being considered.
In conclusion, Thailand's
new restructuring law is far from perfect. Though, this is a step in the right
direction, and that further legislation and development of the law and practice
should refine the rough edges and make this law an effective tool to improve the
system. Note:
The first part was carried yesterday.
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