Informal arrangements and voluntary restructuring are possible and common in Thailand; however they require the debtors’ and creditors’ cooperation in negotiating and agreeing any restructuring plan and legal agreements. They are also not binding on all creditors unless the creditors are parties to the process. Dissenting creditor(s) can either enforce their security rights or start civil proceedings (or bankruptcy proceedings). In practice a corporate debtor will often agree the terms of a restructuring with its principal secured and unsecured creditors first and then enter into separate arrangements with other unsecured creditors, such as trade creditors.
In most restructuring cases, unless small scale, reaching a consensus between the corporate debtor and creditors may prove difficult, especially where creditors have varying security rights. Given these limitations, informal voluntary restructuring is normally only applied in cases involving a small number of creditors.
The commencement of an informal debt rescheduling or corporate rescue does not initiate a moratorium or automatic stay of proceedings. This would only be possible where all the parties can agree a standstill where a moratorium is one of the agreed terms.
The company’s existing management is not normally affected by the initiation of an informal corporate rescue process, unless the creditors ask for a change in management. It is more common that a financial adviser is appointed to monitor the company’s cash flow and report to a steering committee of the creditors.
Following the 1997 Asian financial crisis, the Corporate Debt Restructuring Advisory Committee (“CDRAC”) was introduced by the Bank of Thailand. The CDRAC process was established as a mechanism to speed up debt restructuring to solve Thailand’s 1997 financial crisis. CDRAC is however no longer available.