Framework for Corporate Debt Restructuring in Thailand
On 10 September 1998, representatives of the Board of Trade of Thailand,
the Federation of Thai Industries, the Thai Bankers’ Association, the
Association of Finance Companies and the Foreign Banks’ Association
signed a jointly prepared document entitled “Framework for Corporate Debt
Restructuring in Thailand”. The Bank of Thailand and these associations
subsequently arranged for a substantial number of the banks operating in
Thailand also to sign the document.
The Framework is non-binding and non-statutory and is an attempt to
codify, at least partially, good market practice for corporate workouts
involving multiple creditors in Thailand. The principles set out in the
Framework are largely reminiscent of the approach adopted in the United
Kingdom, known as the “London Approach”.
Objective and Principles
The objective of the Framework (also known as the “Bangkok Approach”) is
the efficient restructuring outside bankruptcy or court sanctioned
reorganisation proceedings of the corporate debt of viable entities to
benefit creditors, debtors, employees, shareholders and the Thai economy.
The Framework contains 19 principles, most of which are then elaborated
by one or more implementing policies. The principles can be broadly
divided into the categories set out below.
The Framework emphasises the following general concepts:
the focus should be on a business restructuring rather than merely a
financial restructuring and the restructuring should leave the debtor
as a commercially viable concern for the long term;
greater bank understanding towards debtors’ difficulties - banks are
encouraged not to take precipitous action once they become aware
that a debtor is in difficulty;
decisions being made on the basis of full and accurate information;
losses being apportioned legally and equitably; and
banks should maintain the right to exercise independent commercial
judgement, while also consid