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New rehabilitation options for small businesses in Thailand

New rehabilitation options for small businesses in Thailand

One way to measure business distress is the number of bankruptcy applications filed, which have risen sharply in 2021. Often seen as a last resort, this indicates that despite the continued support of the government and financial institutions, many businesses see filing bankruptcy as the best option for their businesses to survive.

Sunday 28 November 2021, 11:00AM

According to the Central Bankruptcy Court (Bankruptcy Court), 9,171 bankruptcy proceedings were filed in 2020 for a total value of B836.803 billion (compared to 5,415 cases in 2018 and 8,398 in 2019).

Although only a small portion of these filings were for rehabilitation, unlike liquidation (known as “free-fall bankruptcy”), the rehabilitation process gives a business time to reassess its long-term strategy and develop a viable plan for survival, which creditors can approve or reject.

Importantly, the SME process can be done quickly and for cheaper, yet still provides court protection against liquidation and lawsuits between the filing and the approval of the rehabilitation plan. Though this process is simpler, a skilled professional should assist an SME at this stage of the process.

The government on August 10, 2021, recognised that SMEs need additional help, and has proposed amendments to current bankruptcy laws. Aranya Thongnamtako, Director-General of the Legal Execution Department, stated in Thai media that the goal of amending the bankruptcy law for SMEs and entrepreneurs was so that they can enter the rehabilitation process easier than ever.

The recommendation also increases the debt ceiling for SME rehabilitation to B50 million, as the courts were reportedly seeing more SME businesses with a debt of the B30 million range. If businesses were forced to apply for business rehabilitation under the current large company rehabilitation law, they would need to set up a planner and designate an administrator, which is a costly, time consuming, and difficult process.

If the current proposals are implemented, then to qualify you simply need to be classified as an SME under the Ministerial Regulations on the Designation of the Characteristics of Small and Medium Enterprises Promotion Act B. E. 2562 (2019), as shown in the chart above.

A petition for business rehabilitation may be filed by an SME (called “debtor in possession”) if they meet two requirements: 1) are insolvent, and 2) meet a debt threshold which is dependent on the type of creditor involved (e.g., individual, limited partnership, private limited company, etc.) that ranges from B2 million to B50 million.

Under this proposal, the SME can submit a business rehabilitation petition to the court, without having to prepare a business rehabilitation plan. The debtor can then immediately apply for temporary protection from creditors and stop court proceedings even before the court formally considers the business rehabilitation. The debtor has three months to submit their plan and gain creditor support. Even if rejected, the debtor can submit a second request without conditions from six months after the court dismissed the first petition.

To get approval for a reorganisation plan it must be supported by creditors. The preparation of the rehabilitation plan and the private creditors’ meetings before court submission is like the voluntary arrangement process in Western jurisdictions, which is a negotiated semi-private arrangement that deals with debt and means the debtor’s assets will not be liquidated.


This former process had pitfalls as it presumed that if creditors didn’t turn up for a rehabilitation meeting, then they objected to the plan. This was an old negotiation tactic for savvy creditors seeking special treatment. The new amendments mean the two-thirds (⅔) approval need only be counted from those who turn up to a notified meeting.

The proposed plan must contain the reason for the insolvency, details of assets and liabilities including principles, procedures, and steps for rehabilitation of the business, withdrawal of security, solution for temporary liquidity during the rehabilitation process, and background of the plan administrator. The business reorganization must allow creditors to receive payment not less than if the debtor entered bankruptcy liquidation. Again, a trained professional should draft this plan, as the outcome must provide both the SME and creditors with a clear path forward.

There is now an opportunity to expedite the rehabilitation process. SMEs can submit a request to expedite the process by presenting an agreed rehabilitation plan together with evidence showing that the creditors have approved this pre-packaged plan. The courts may quickly ratify this plan and allow the SME to continue business without drawn-out legal processes.

The amendment also means that the debt “bound by the rehabilitation plan” will not form part of future creditor claims if the rehabilitation fails. The creditors can only claim debt incurred after the rehabilitation plan commenced.

The adage of “toss the keys and run” means as a company director, you could eventually be held criminally liable for your actions under a variety of Thai laws, which expressly provide for a director’s criminal liability for acts or omissions on behalf of the company. The proposed amendments give distressed companies options and gives entrepreneurs a way to turn around their businesses.

Engaging professionals at an early stage to help you through this process is important and gives you the ability to preserve your hard work, investments, and reputation. Knowing your rights and the benefits of these new SME regulations means you get relief from creditors and the time to rebuild your business.

By Dr Paul Crosio
Partner / Silk Advisory

Paul Crosio is a founding partner of Silk Advisory ( and a practising Australian lawyer with over two decades of corporate experience in turn-around management as well as international and Thai distressed assets and other special situations. Paul has post-graduate qualifications in finance (including Sharia finance) as well as advanced degrees in business and law.

Silk Advisory is international insolvency, M&A and management advisory practice affiliated with Silk Legal and based in Bangkok and the Eastern Seaboard. Our principals have years of experience in Thailand and internationally providing solutions that address the different requirements of your business’s lifecycle. The impact of COVID-19 has driven many organizations into financial stress, but our experienced team and our unique approach can bring valuable understanding and assistance to help you to stabilize, preserve value, and build a platform to successfully emerge from the current pandemic. For a no-obligation call or meeting to discuss your situation you can contact us 

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