The Central Bankruptcy Court

Rationale

The devastating effects of the 1997 Asian financial crisis on many neighboring countries in Southeast Asia spurred Thailand into radically reviewing its banking and financial structures to cope with or parry the effects. A major response was the corporate restructuring of its laws after Chapter 11 Bankruptcy Law of 1998 of the United States. It was in the form of an additional section on Corporate Reorganization under Chapter 3, which became effective also in 1998. The provisions of the country’s bankruptcy laws undergo constant review and amendments to adjust to the demands of the times. This particular restructuring measure required proceedings that sought judges with special training and expertise in the field and the creation of procedures for the Bankruptcy Cases Act that became effective in 1999.

The present Central Bankruptcy Court handles all bankruptcy cases, civil and criminal cases involving bankruptcy. While the law provides for the establishment of regional bankruptcy courts, only the Central Bankruptcy Court exists to hear bankruptcy cases. Cases filed in the region must be transferred to it. This new law guarantees a faster and more efficient handling of bankruptcy cases for creditors and debtors.

Definition

This is an involuntary state wherein a debtor allows the distribution or confiscation of his assets by creditors. The latter may initiate bankruptcy proceedings against an insolvent individual debtor who owes more than one million baht or an insolvent corporate debtor that owes more than 2 million baht. Insolvency occurs when a debtor performs certain acts in avoiding payment of debts or informs his creditor or creditors about his inability to pay his debt.

Judges

The Act provides for one Director Judge and one Deputy Director Judge.  The Ministry of Justice may increase the number of deputy director judges through a decree but, in the beginning, there shall be 53 judges and 53 administrative clerks.

Procedures

Only a creditor can initiate these procedures and only under the conditions above mentioned.             

Moreover, the procedures can be filed and conducted only at the Court of First Instance of the Central Bankruptcy Court. They are to be added to and followed to existing laws and acts on bankruptcy.

This Act empowers or authorizes the Bankruptcy Court to compose its own procedures as it deems appropriate. This way, it bypasses normal legislative processes. These new rules or procedures shall, however, be subject to the approval of the President of the Supreme Court and must be published in the Government Gazette before they can be enforced.      

A case must be heard continuously, i.e., without postponement until finished and a decision is reached. When there is risk of loss or destruction of evidence, the affected litigant shall request for a speedier trial by the court and to receive the evidence or testimony at risk. The court will send a writ to the applicant-litigant, the opposite party or a third party as the court may require. In case of urgency, the court will promptly issue a writ and authorize the official to confiscate or impound a document or material witness as conditions specify.

The court may also authorize other courts or court officials to secure the testimony of certain witnesses. This may be performed in the courtroom or outside. The Act allows expert testimony by either party in presenting his or her testimony or to rebut that of the opponent. Regulations of the Ministry of Justice entitle expert witnesses to fees, travel expenses, accommodations. 

This Act allows either party to appoint a recipient of documents to be sent or on behalf of either party in the case. If either does not reside in the area under the jurisdiction of the bankruptcy court hearing the case, it will order the party to appoint a representative residing in the area that is within the jurisdiction of the Central Bankruptcy Court to receive the document. There is a fixed duration for compliance. If the party fails to comply, the court may order the preparation of a notice of any document and affixing the document in court. The parties are then notified of the location of the notice where the document will be affixed. The  notice becomes effective 15 days after the document is affixed. The transmission of documents will be as provided by the Civil and Commercial Code. This is by registered reply mail, which shall have the same effect as when sent by a court official.    

The claims of secured creditors are prioritized. Proceeds from the sale of securities will be treated separately and given to them first. Unsecured claims and expenses are categorized and dealt with in another way by law. If the bankruptcy estate does not satisfy all the claims of all the creditors within that category, the claims will be dealt with pari passu or equitably within every category.

An insolvent debtor may avoid figuring in a bankruptcy case by composition or an agreement with the creditor or creditors with the court sanction. Upon declaration of bankruptcy, the insolvent debtor may be released from bankruptcy by meeting certain conditions like paying a certain part of his debt and remaining honest.

Another way an insolvent debtor can avoid a bankruptcy case is through restructuring of his debt. This approach is supervised by the court. It prevents creditors from immediately confiscating and distributing the insolvent debtor’s assets. Doing so will lead to the liquidation of the assets if the debtor is a corporation. Restructuring enables a distressed company to continue operating so that its creditors may be paid back and the company recovering more than when it is liquidated.

Restructuring may be the recourse if:

  • The insolvent debtor owes more than 10 million baht or a government entity petitions for restructuring;
  • If the court approves the application for restructuring if the business shows promise of successful reorganization;
  • The creditors propose a rehabilitation plan;
  • The court approves and appoints the plan preparer;
  • The plan preparer submits the claims within a month;
  • Creditors shall submit their claims within a month;
  • The plan preparer composes the rehabilitation plan within three months. He is entitled to two extensions of one month each;
  • The creditors meet and discuss the plan. They can propose changes within three days before the meeting;
  • The creditors approve the rehabilitation plan through a special resolution;

Appeals

The rehabilitation of debtor cases and related civil cases may be appealed with the Supreme or Dika Court within a month from the date of the verdict/. The President of the Supreme Court will set up a Bankruptcy Division to review appeals from the Central Bankruptcy Court. An appeal is acceptable if the Supreme Court deems it lawful according to the current Bankruptcy Law. The President of the Supreme Court may order the General Assembly of the Supreme Court to review it.

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