New Bills for Economic Reform

Appeals on reorganization cases will be made directly to the Supreme Court (instead of to the Court of Appeals).

Bankruptcy Act (No.5), B.E. 2542 (1999)
This Amendment Act includes 34 amendments to the Bankruptcy Act, the principle amendments are as follows:

• Loans of “new money”
  Section 94(2) was amended to allow a creditor who advanced funds to an insolvent debtor for the purpose of allowing the debtor to continue its business operations, to file a claim for such funds in bankruptcy. Previously, an unsecured creditor who had loaned funds to a debtor with the knowledge of the debtor’s insolvency was not entitled to file a claim in bankruptcy to recover such funds.

• Creditor classes and voting
  Certain amendments establish classes of creditors, provide for equal treatment of creditors within each class, and prescribe revised voting procedures in approving a reorganization plan. Each secured creditor with at least 15 percent of the total debt forms a separate class, all other secured creditors form one class, unsecured creditors are grouped according to similar interests at stake, and Article 130 creditors (e.g. those owed taxes or back wages) form one class. Previously, a “special resolution” (i.e., a majority of creditors whose claims equal 75 percent of the total claims of creditors present and voting on such a resolution) was required to approve a reorganization plan. This requirement has been amended. A reorganization plan may now be approved by either ( I ) a special resolution of each class of creditors, or ( ii ) a special resolution passed by at least one class of creditors, and the total claims of all creditors who have approved the plan constitute at least 50 percent of the total claims of the creditors present and voting on such resolution at a meeting of all classes of creditors. Conditions are prescribed under which a creditor is deemed to have automatically accepted a reorganization plan.

• Preference periods
  Generally, the preference period is three months in the case of transactions between unrelated parties, and one year in the event that the creditor is related to the debtor. (Formerly, there were two preference periods: three months and three years, the latter of which applied unless the transferee could prove good faith and consideration).

• Court approval of reorganization plans
  The criteria for court approval of a reorganization plan were clarified. The court’s discretion in confirming or rejecting reorganization plans has been replaced with objective rules for court confirmation of such plans. Such rules must be approved by creditors, with the proviso that no dissenting class of creditor, nor the debtor, involuntarily receives less value under such plan than they would in a liquidation.

• Rejection of contracts
  The plan preparer was given discretion to refuse to accept a debtor’s assets or rights under agreements if such assets or rights carry obligations greater than the benefits which may be derived.

• Currency conversion
  The amendment clarifies that, in the case of determining voting rights of creditors, the conversion of debt denominated in a foreign currency is for voting purposes only.

• Threshold debt amount to declare a debtor bankrupt
  The minimum threshold amount to qualify for a declaration of bankruptcy was increased to 1,000,000 Baht for an individual debtor (formerly 50,000 Baht), and 2,000,000 Baht for a juristic debtor (formerly 500,000 Baht).

• Bankruptcy Status
  A bankrupt person will be released from bankruptcy status after 3 years (formerly 10 years).

Capital of State Enterprise Act, B.E. 2542 (1999)
This Act was approved by the National Assembly in March 1999, and was published on December 16, 1999.

This Act is an enabling act which provides a regulatory framework for the conversion of state enterprises to either private limited companies or public limited companies, which will initially be 100 percent owned by the Ministry of Finance. It sets forth a process, but does not prescribe which state enterprises will be privatized nor any timetables. The bill establishes the State Enterprise Capital Policy Committee which will conduct studies and propose for cabinet approval the principles and guidelines to corporatize part or all of specific state enterprises. For each such state enterprise, a second committee, the Company Establishment Preparation Committee, will be establishes to work out the details of the corporatization and to draft ministerial regulations to deal with issues requiring legislative solutions. Cabinet approval is required before any state enterprise is corporetized.

Act Amending Civil Procedure Code (Petty Matters) (No.17), B.E. 2542 (1999)
This Amendment Act includes 15 amendments to the Civil Procedure Code. Certain amendments are intended to facilitate the conciliation process in court. Most of the amendments facilitate the hearing of petty matters and enforcement of judgements therein.

However, Section 192 was amended to allow the court in certain circumstances to try as a petty case a counter claim or ordinary case which is not a petty case. There was no amendment to the definition of petty matters, which include claims not exceeding 40,000 Baht in value.

Act Amendment Civil Procedure Code (Execution of Judgments) (No.18) B.E. 2542 (1999)
This Amendment Act includes 11 amendments to the Civil Procedure Code. Certain court orders and judgements are now enforceable throughout the Kingdom. Certain appeals decided by the Appeals Court and certain orders of the Court of First Instance are final. The rules governing the cancellation or amendment of court orders and execution proceeding were revised to facilitate the execution process.

Act Amending Land Code (Land Ownership by Foreigners) (No.8), B.E. 2542 (1999)
This Act provides that a foreign investor who invests a minimum of 40,000,000 Baht will be permitted to own up to 1 rai (1,600 sq.m.) of land for residential purposes with the approval of the Minister of Interior.

Alien Business Act, B.E. 2542 (1999)
The Alien Business Act, B.E. 2542 (1999) came in to force on March 4, 2000, and supersedes the Alien Business Act (N.E.C.281), which was enacted in 1972.

The Thai-US Treaty of Amity and Economic Relations had been interpreted to provide to American corporations and individuals an exemption from the alien business act for most of the restricted businesses.

The new Act prescribes 42 restricted businesses in 3 categories:

• Category A
  9 businesses prohibited for special reasons.

• Category B
  13 businesses related to national safety or security or affecting arts, culture, traditional customs, folk handicrafts, natural resources and the environment. Licenses may be issued by the Minister of Commerce with the approval of the Cabinet.

• Category C
  21 businesses in which Thai people are not yet ready to compete with foreigners. Licenses may be issued by the Director General with the consent of the Alien Business Operation Committee.

There is a limited 'grandfather provision' with respect to existing businesses. There is also the possibility of exemption under certain treaties to which Thailand is a party, as well as for businesses promoted by the BOI.

In th case of a restricted business carried on by an alien, a minimum capital of Baht three million or greater is prescribed, to be specified in a ministerial regulation. In the case of businesses under categorie B, at least 2/5 of the directors must be Thai and a minimum of 40 percent of the shares must be owned by Thai persons (which minimum may be reduced to 25 percent by Cabinet approval). Businesses under categories B or C may have conditions attached to alien licenses such as: Minimum debt/equity ratio, number of alien directors resident in Thailand, amount and period of investment, technology and assets, etc.

There are additional provisions of importance in the Act, including, for example, a minimum capital of Baht two million applicable to all alien business (not only restricted business), and a requirement for existing restricted business to obtain a certificate.

Condominium Act (No.3), B.E. 2542 (1999)
This Amendment provides two main changes:

• the maximum foreign ownership of a registered apartment building (condominium) was increased from 40 to 49 percent; and

• the 49 percent ceiling may be exceeded if the condominium is located in metropolitan Bangkok, municipalities of other local administrative areas as prescribed in the ministerial regulations, and the land area of the condominium does not exceed 5 rai (8,000 sq.m.).

Act Amending Social Security Act (No.3), B.E. 2542 (1999)
This Amendment Act expands the rights of employees, provides for greater benefits, and prescribes duties of employers to provide contribution for child welfare, old age and unemployment.

Act Governing Leasing of Immovable Property for Commercial and Industrial Purposes, B.E. 2542 (1999)
This Act provides the right to lease commercial or industrial property for a term of 30 - 50 years, and introduces the right to use such leases as collateral for debt performance by means of mortgaging, the right to transfer the lease, and the right to sub-lease.

Act Amending Civil Procedure Code (Procedure in Case of Default), B.E. 2543 (2000)
This Amendment Act allows the court to use its discretion in rendering ex parte judgments in cases where a party is in default to answer or in default of appearance in order to protect plaintiffs against damages arising from delays in deciding the cases.

Act of the Establishment of Courts of Intellectual Property and International Trade Law
This Act was enacted on October 16, 1996, and the Central IPIT Court opened on December 1, 1997. The new court has jurisdiction over all civil and criminal cases regarding intellectual property and international trade, including claims under foreign loans.

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