Liquidation Process in ThailandLeave a Comment
Liquidation is the process of extracting a company’s assets and using the liquidated assets to pay off any remaining debts. A dissolved company is required to conduct a formal liquidation process according to the Thai Civil and Commercial Code (“CCC”). For a bankrupt company, the liquidation shall be done in accordance with the provisions of the Bankruptcy Act (“BA”).
It should be noted that, under Section 1249 of the CCC, a company is deemed to continue after its dissolution, but the purpose changes to liquidation. Therefore, it is only upon the completion of the liquidation process that the company will cease to exist.
- Appointment of Liquidator(s)
As prescribed under Section 1251 of the CCC, the managing director(s) shall become liquidator(s) unless otherwise provided by the bylaws of the company. If there are internal conflicts between directors, the Court may appoint a liquidator(s) as well. A general shareholders’ meeting should be summoned to confirm the director(s) as liquidator(s) or to appoint a new liquidator under Section 1256.
Regarding the Court-appointed liquidator, according to Supreme Court decision number 220/2526, the Court may appoint an enforcement officer as a liquidator for the company.
2. Process and Duties of Liquidator(s)
Within fourteen days after the dissolution, the liquidator(s) must publish at least once in a local newspaper to notify the public and creditors that the company has ceased its business operations. He must also send a notice by registered mail to all creditors whose names appear in the company’s books, per Section 1253 of the CCC.
A balance sheet should be made and examined, as well as certified by the auditor(s), and a general shareholders’ meeting should be summoned by the liquidator(s) to approve the balance sheet. If the liquidation process takes longer than one year, the liquidator(s) must call a general shareholders’ meeting at the end of each year to report on the progress of the liquidation process. Additionally, every three months, the liquidator(s) must submit a similar report to the Registration Office. This report is publicly available to shareholders and creditors.
The next step for the liquidator is to settle outstanding claims by the company’s creditor(s) and make all the necessary payments to complete the liquidation process, including paying the remaining capital back to the shareholders, if they are no longer required to perform other obligations of the company. Another general shareholders’ meeting will then be summoned to approve the liquidation, show how the liquidation was conducted, and where the company’s assets have been distributed according to the requirements under Section 1270 of the CCC. After the approval, the liquidation should be registered to complete the process within fourteen days of the meeting.
After the liquidation registration is complete, the books, accounts, and documents of the liquidated company shall be deposited at Registrar’s Office within fourteen days. The documents will be kept for ten years after the completion of the liquidation.
3. Authorities of Liquidator(s)
Section 1259 of the CCC states that the liquidator(s) has the power to 1) bring or defend any legal proceedings and to make compromises on behalf of the company, 2) carry on the business of the company for as long as necessary for the beneficial settlement of affairs, 3) to sell the property of the company, and 4) do all acts required to complete the liquidation.
4. Liabilities of Liquidator(s)
The liquidator will make numerous decisions while he/she is completing his/her task, involving conflicting interests of various parties. His actions are highly regulated, and sanctions are outlined in Sections 32 to 34 of the Determining Offences Relating to the Registered Partnership, Limited Partnership, Limited Company, Association, and Foundation Act BE 2499 (1956) (“the Act”). If the liquidator(s) fails to perform his duties, he may even be held criminally liable, resulting in fines of between THB 10,000 to THB 80,000.
Furthermore, there may be tax liabilities imposed on the liquidator(s) personally. For example, if the liquidator(s) distributes the company’s property to shareholders without paying taxes, the Revenue Department may take legal action against the liquidator(s) himself. This is because the liquidator(s) would be violating Section 1269 CCC, which states that the property of the company may be divided amongst shareholders when there are no existing obligations to perform.
Another example is when the liquidator(s) is aware that there are still debts remaining but decided to distribute the property to the shareholders anyway. If this is the case, it can be deemed that the liquidator(s) is intentionally acting in contradiction with the law because he/she hasn’t made payment to the creditors, nor did he/she deposit the amount due to an unclaimed creditor, under Sections 1250 and 1264. In this case, the liquidator(s) becomes personally liable towards the remaining debt.
It must be noted that the liquidator(s), in general, has no personal liability on any action that was legally done on behalf of the company unless it was done without authority or beyond the scope of the liquidator(s) ‘s authority.
Section 34 of the Act states that if the liquidator failed to comply with Section 1266 of the CCC, applying to the Court to adjudge the company bankrupt, he/she could be liable for a maximum fine of THB 50,000. The Act imposes a fine on the liquidator if he/she does not perform his/her duties according to the law.
5. Duties of the Company
The duties of the company as a juristic entity are as follows.
After the dissolution has been registered, the company must return the company’s taxpayer card to the Revenue Department within 60 days. If it is a VAT registrant, the VAT certificate should also be returned within 15 days of the dissolution.
After the registration of the dissolution, the company must file the form notifying the Social Security Office for the cessation of the business operations within the 15th date of the month following the dissolution registration.
The dissolution of the company means that the business ceases to operate. Therefore, it can be considered a termination of employment. Employees then have to be compensated according to the Labor Protection Act BE 2541.
6. Costs of Liquidation and Timeline
There are several costs, charges, and expenses that must be kept in mind with regard to the process of liquidation. According to Section 1263 CCC, all costs, charges, and expenses incurred during the liquidation process must be paid before other debts. These expenses may include auditing fees, lawyer fees, amount of money paid in advance by the liquidator, transfer of assets fees, etc. If the company is a creditor and there are unpaid debts, the liquidator may file a case against the debtor if the debtor refuses to make a payment.
Regarding the timeline, voluntary dissolution is time-consuming and protracted, which makes it difficult to give estimates on the period required until completion. The liquidation process depends on factors such as conditions of the books and the company’s operation period.
7. Liabilities of Shareholders (Parent Company)
According to the law, the shareholders’ liability is limited to the amount unpaid on the shares respectively held by them. The shareholders may be called upon in respect of unpaid capital, that is all money being due on their shares, during the liquidation process if the company’s assets are insufficient to meet the liabilities.
Further, the shareholders are bound to pay the interest if such a call payable in respect of the shares is not paid on the day fixed for payment thereof.
8. Director(s) ‘s Duty
Under Section 1172 of the CCC, the director must summon general meetings of shareholders as soon as possible when the company has lost half the amount of its capital to inform the shareholders. This would give the shareholders a chance to suggest solutions for the problem or suggest the company’s dissolution.
According to Section 27 of the Act, if the director fails to summon the meeting, he incurs a fine of not more than THB 20,000. According to Section 1169 of the CCC, if the director fails to summon the meeting, and such failure damages the company, the director may be liable for the compensation due to the damages. The company or shareholders can raise a claim if the company refuses to act. Creditors may also raise a claim against the director if their claims against the company are unsatisfactory.
If you have any questions regarding the Liquidation Process in Thailand, feel free to contact us at [email protected] or call us at +66 (0)2 117 9131-2.