It is time to put dog tags on Planners.

Following Thailand’s economic downturn, a significantly large number of Thai businesses have been running deficit balance sheets. Some go bankrupt whilst some are trying to hang in there. Private sector businesses are the most vulnerable and most are still anticipating an upturn in their prospects.

In early 1999, the Cabinet passed new legislation, via amendments to the Bankruptcy Act, to facilitate the Business Reorganization of debtors. This legislation has played a significant role in helping to solve financial problems of debtors by allowing a new management, called Planner and Plan Administrator, to assume the control of the debtors’ business and property.

The Planner is responsible for writing the Plan and the Plan Administrator for implementing it. The legislation seemingly trusts that this new management can succeed in pushing debtors back from the brink of total financial collapse. “One cannot trust any one these days,” is an all too often heard expression. An example is Thai Ekarat Sugar PCl, undergoing a Rehabilitation Plan, has sued the South Sathorn Planner Ltd., its Planner, regarding alleged failure in the management of the business and for alleged overcharging for services. It is alleged that not only did the Planner bring the debtor’s business down hill, but also allegedly profited handsomely from its failure.

The new draft legislation has been sent to the Cabinet to solve a perceived problem of the lack of proper qualifications of Planners and Plan Administrators. This new legislation also puts a Committee in charge of supervising the Planners and the Plan Administrators and ensuring that Planners and Plan Administrators are registered and properly skilled.

The concepts behind the draft Ministerial Regulation are that Business Reorganization is a significant measure used to bail out debtors who are in financial difficulties. The Planner and the Plan Administrator, including persons delegated or selected from authorized organizations, must be qualified and experienced in legal, financial, accounting, company management, and general economic matters. This will, it is believed, ensure the successful implementation of Business Reorganization Plans.

The draft Regulation states that the Director – General of the Legal Execution Department will be a Chairman of the Committee, and the Director of the Business Reorganization Office will be a director and secretary of the Committee, together with 6 other directors.

The Committee is to be given the authority to deal with the registration, issuance or revocation of the license of Planners and Plan Adminsitrators. Seemingly, the Committee will supervise the Planner and the Plan Administrator’s performance.

There may be some concern that the Committee’s responsibilities may place to heavy a burden upon the Director of the Business Reorganization. This is because the Director’s responsibility already covers almost all aspects of Debtor Business Reorganization. The physical distance of the Director-General of the Legal Execution Department may mean that as a practicality the Business Reorganization Office must shoulder the majority of the responsibility for the Committee’s tasks.

The New Ministerial Regulation intends to mandate the qualifications required to a qualified the Planner and a Plan Administrator. Some may say that creditors should supervise the Plan Administrator themselves. The answer is simple that they do not have time. Accordingly, creditors should be able to rely upon an assigned committee other than the Committee that appoints Planners or Plan Administrators to supervise the performance of Planners and Plan Administrators.

The licensing requirements will include that the Planner and the Plan Administrator must be persons or juristic persons with required minimum capital, having experience in specified businesses within specified time. A Planner and a Plan Administrator must have previously participated in writing a Business Reorganization Plan or administration of a Plan, having suitable qualifications concerning Business Reorganization and have appropriate, age, educational background, and finally Thai nationality.

The need to register or apply for the License does not apply to cases having filed for Business Reorganization before the date the Regulation becomes effective, or cases submitting petition for Business Reorganization within 90 days from the effective date.

An order of approval of an application for a license, if not forthcoming within a specified time, will then be deemed approved. In the event of approval, the Committee will grant the license and register the Plan or the Plan Administrator. In the event that the Committee objects to an application, then the applicant can appeal the order to the Minister of the Ministry of Justice within 30 days. The Minister’s discretion shall be final.

Under the Regulation a Planner and/or Plan Administrator are required to provide security deposits to guarantee any damages that may result from the performance of their duties.

Regarding both generally and for each Rehabilitation case, a financial security or bond is required to deposit a guarantee of the Planner and the Plan Administrator’s performance. It is expected that a common practice will be instituted whereby the Planner and the Plan Administrator can transfer this to being a cost borne by the debtor.

By Paul Connelly and Tri Srithongchart of First Bangkok Law & Practice Ltd.