Paralee Techajongjintana
Partner

Paralee Techajongjintana is a partner in the Dispute Resolution Practice Group at Baker McKenzie Bangkok, where she coheads the Restructuring and Insolvency practice. With more than 20 years of experience, she advises multinational and domestic companies on complex financial disputes, corporate restructuring, and insolvency matters. Her practice includes several of Thailand’s most significant restructuring mandates, including largescale business reorganizations in the aviation and other regulated sectors.

Paralee is frequently invited to speak on restructuring and insolvency topics at industry conferences, professional organizations, and client training programs. She also teaches restructuring and insolvency subjects at Thailand’s leading law schools. Alongside her client practice, she is actively involved in leadership roles within the firm, with a particular focus on pro bono work and inclusion, diversity, and equity initiatives in Bangkok.

Paralee holds a Master of Laws degree from Columbia University and a Bachelor of Laws degree from Thammasat University.

Karnsuda Oue-Amornrat
Senior Associate

Karnsuda Oue-Amornrat is a senior associate in the Dispute Resolution Practice Group at Baker McKenzie Bangkok. She advises on financial restructuring and courtsupervised business reorganization matters and has extensive experience acting on complex insolvency proceedings across sectors including energy, manufacturing, and financial services. Her work regularly involves representing debtors, plan preparers, plan administrators, and creditors in rehabilitation proceedings and distressed transactions.

Alongside her client work, Karnsuda plays an active role in the development of restructuring and insolvency practice in Thailand. She lectures on restructuring and insolvency topics at professional and academic institutions and publishes on Thai business reorganization, contributing to broader thought leadership in this area.

Karnsuda holds a Master of Laws degree from Cornell Law School and a Bachelor of Laws degree from Thammasat University.

THAILAND’S IN-COURT BUSINESS REORGANIZATION: EXCLUSIVE BY DESIGN, EFFECTIVE IN EXECUTION

1. Introduction: Evolution of Thailand’s Insolvency and Restructuring Framework

Thailand’s insolvency and restructuring framework is rooted in the Bankruptcy Act B.E. 2483 (1940), which originally provided only for liquidation-based insolvency and offered no statutory mechanism for rehabilitating viable businesses. This position changed fundamentally in the aftermath of the Asian Financial Crisis of 1997, commonly referred to as the “Tom Yam Koong” crisis, when widespread corporate distress exposed the limitations of a liquidation-only regime and underscored the need for a rehabilitation framework.

In response, the legislature introduced Chapter 3/1 of the Bankruptcy Act, establishing court-supervised business reorganization as a central tool for rescuing large and complex enterprises whose failure could have systemic economic consequences. Inspired in part by U.S. Chapter 11, the Thai regime incorporated automatic stay protection, court oversight, and plan-based restructuring, while remaining adapted to domestic legal culture and institutional realities.

Further reforms followed in 2016, extending access to in-court reorganization to small and medium-sized enterprises (SMEs), and introducing a pre-packaged plan mechanism. In principle, SMEs could negotiate a plan with creditors in advance and submit it together with their petition. In practice, however, SME rehabilitation has remained rare. Many SMEs¹The revised provisions of the Bankruptcy Act are published by the Office of the Secretariat of the House of Representatives (available in Thai at https://www.parliament.go.th/section77/ manage/files/file_20231005174711_3_312.pdf). lack the financial documentation, creditor coordination, and professional advisory support necessary to prepare a credible pre-pack, preventing the mechanism from gaining meaningful traction.

Thailand is currently considering further amendments aimed at making pre-packaged reorganization available to both large corporations and SMEs, with the intention of streamlining proceedings and reducing procedural delays where creditor support already exists. In parallel, policymakers have proposed a separate debt-relief mechanism, referred to as the “Rehabilitation of an Individual’s Status,” designed to address the needs of micro-entrepreneurs and individuals with relatively low debt but high aggregate case volume. Legislative consideration of this mechanism was suspended following the dissolution of Parliament in December 2025, but has recently resumed after approval by the new cabinet on 5 May 2026.

2. Pandemic and Post-Pandemic Trends: Reorganization Versus Bankruptcy

Both liquidation-based insolvency and court-supervised business reorganization continue to play a central role in Thailand’s debt-restructuring landscape. Their relevance became particularly pronounced during the COVID-19 pandemic, when large segments of the economy were forced to halt operations. The aviation sector was among the hardest hit, with carriers such as Thai Airways International Public Company Limited (“THAI”), Nok Air, and others entering in-court reorganization to address acute liquidity crises.

Central Bankruptcy Court statistics²Central Bankruptcy Court statistical data on bankruptcy and business reorganization cases for 2021–2025 (available in Thai at https://cbc.coj.go.th/th/content/article/index/id/9480). for 2021 to 2025 (B.E. 2564 to 2568) reveal a persistent divergence between bankruptcy filings and business reorganization petitions. During the COVID-19 years, bankruptcy filings were already substantial, with 9,235 cases in 2021, representing reported debt of THB 221.78 billion, and 8,223 cases in 2022, with reported debt of THB 446.10 billion. In the same period, reorganization petitions remained limited to 19 cases in 2021 and 25 cases in 2022, notwithstanding severe liquidity stress across most industries.

In the post-pandemic period, overall distress intensified. Bankruptcy filings rose to 9,484 cases in 2023, with reported debt of THB 373.69 billion, before surging sharply to 14,622 cases in 2024, with reported debt of THB 244.07 billion, and remaining elevated at 13,826 cases in 2025, when reported debt value spiked to THB 1.31 trillion, driven in part by exceptionally large filings recorded in April alone. By contrast, business reorganization petitions never exceeded two digits. There were 34 cases in 2023, declining to 20 cases in 2024 and 21 cases in 2025, with corresponding debt values far lower than those observed in bankruptcy proceedings.

This numerical contrast, measured in thousands of bankruptcy filings versus only dozens of reorganization petitions, demonstrates that business reorganization in Thailand is used selectively. In practice, it is pursued primarily by debtors able to demonstrate operational viability and satisfy strict statutory entry requirements, typically with the support of major creditors.

A key factor behind this divergence is the increasingly strict scrutiny applied by the Central Bankruptcy Court at the petition-acceptance stage, which triggers the automatic stay and restricts creditor enforcement. The court has become markedly conservative in assessing whether petitions meet statutory prerequisites and has shown a readiness to dismiss defective filings swiftly. Where petitions lack clarity, completeness, credible financial information, or a plausible prospect of rehabilitation, early dismissal is increasingly likely.

The court also places strong emphasis on good faith and procedural preparedness. Where a debtor appears unprepared, such as by failing to submit evidence or witness statements in advance, while creditors actively oppose the petition, the court may regard the filing as an attempt to abuse the automatic stay and dismiss it outright. This approach is reflected in Supreme Court Decision No. 1088/2566 (2023), where repeated filings and withdrawals over several years, together with the absence of meaningful new evidence or a credible plan, led to dismissal without acceptance to prevent misuse of the process.

Overall, the data confirm that while business reorganization remains an important statutory mechanism, it is used infrequently and only in cases that meet strict viability, evidentiary, preparation, and good-faith standards. At the same time, reorganization remains a highly effective tool for large operations with substantial debt exposure, particularly when supported by experienced legal and financial advisors capable of navigating creditor dynamics and executing the process with discipline and strategic clarity.

3. Structural Pain Points in Thailand’s Reorganization Regime

Thailand’s reorganization framework reflects a cautious adaptation of U.S. Chapter 11 principles to local legal culture. While this approach successfully introduced rehabilitation as an alternative to liquidation, several structural differences continue to shape the regime’s operation and, at times, constrain it.

(i) Absence of an Absolute Priority Rule

Unlike U.S. Chapter 11, Thailand’s business reorganization regime does not adopt a formal absolute priority rule. Under Chapter 11, senior creditors must be paid in full before junior creditors or equity holders receive any distribution, unless the senior class consents otherwise. This rule places creditors firmly at the top of the value hierarchy, giving them strong negotiating leverage and ensuring predictability in the allocation of enterprise value.

In Thailand, the Bankruptcy Act adopts a more flexible allocation framework. Secured creditors remain protected up to the value of their collateral, and statutory priority unsecured claims, such as employee wages, taxes, and certain public debts under section 130 of the Bankruptcy Act, must still be satisfied in accordance with prescribed priorities. Beyond these safeguards, and in the absence of a statutory absolute priority rule, equity interests are not automatically extinguished, even where creditors do not receive full repayment. Provided that the reorganization plan is approved by the requisite creditor classes and confirmed by the court, existing shareholders may retain some or all of their ownership interests.

This design reflects a conscious departure from creditor-centric restructuring models. On the one hand, allowing shareholders to remain invested can support business continuity, preserve institutional knowledge, and facilitate consensual solutions in industries where ownership stability, technical expertise, or long-term relationships are critical to rehabilitation. On the other hand, from a creditor’s perspective, the absence of an absolute priority rule may be perceived as a dilution of economic priority, particularly where shareholders retain value while creditors accept write-downs.

Viewed in the context of Thailand’s economic landscape, which is characterized by family-owned businesses, concentrated shareholding structures, and relationship-based financing, this flexibility serves an important functional purpose. By prioritizing enterprise preservation over rigid liquidation hierarchies, the regime can help stabilize viable businesses, maximize going-concern value, and, in many cases, deliver better recoveries to creditors than liquidation would provide.

(ii) Timing of Onerous Contract Termination

A second, highly practical, pain point in Thailand’s business reorganization regime concerns the timing and treatment of onerous contracts, particularly executory agreements such as aircraft leases, real estate leases, and long-term supply or service contracts.

Under U.S. Chapter 11, a debtor-in-possession may reject executory contracts relatively early in the process, allowing counterparties to file claims promptly and participate in creditor voting. This integrates contractual counterparties into the restructuring from the outset.

By contrast, under Thai law, the power to terminate onerous contracts generally arises only after plan approval and must typically be exercised within two months thereafter³Section 90/41 bis of the Bankruptcy Act.. Until that point, counterparties remain contractually bound, even though the contract may later be terminated under the plan. While counterparties may submit claims for damages once termination occurs and receive repayment under the plan, they do not have voting rights at the plan-approval stage, as their claims crystallize only after termination.

In practice, this statutory sequencing makes pre-approval negotiation with contractual counterparties critical. If a counterparty elects to terminate the contract before the plan is approved, where termination rights exist, the resulting claim often falls outside the scope of the reorganization plan. Such claims cannot be restructured or compromised under the plan and instead remain enforceable after the debtor exits the proceedings. These claims are commonly referred to as “hanging debts,” meaning obligations that survive rehabilitation and resurface post-exit, potentially undermining the very purpose of the restructuring.

While the Thai approach is intended to maintain stability during plan formulation, it consequently shifts substantial execution risk onto the debtor, making professional handling indispensable. Effective business reorganization in Thailand therefore requires advisors who not only understand the legal mechanics of contract termination but also possess the commercial sophistication to manage counterparties, structure interim arrangements, and prevent the creation of hanging debts. As illustrated in the THAI case, navigating this limitation successfully demands disciplined early-stage negotiation and close coordination between legal strategy and commercial realities.

(iii) Absence of a DIP Financing Framework

A further structural pain point in Thailand’s business reorganization regime is the absence of a debtor-in-possession (DIP) financing framework, a mechanism that plays a central role in U.S. Chapter 11 proceedings. Under Chapter 11, DIP financing allows distressed companies to access new liquidity during the restructuring process, often on a super-priority basis, enabling them to fund ongoing operations, preserve going-concern value, and stabilize the business while negotiations continue.

In Thailand, by contrast, the Bankruptcy Act provides no comparable statutory mechanism for interim financing during the reorganization process. New money is therefore typically introduced only through the reorganization plan itself, for example through plan-based loans, capital increases, or equity participation that takes effect upon or after plan approval. This limitation is compounded by the automatic stay, which is backed by criminal sanctions, making lenders and investors particularly cautious about providing interim funding outside a court-approved framework.

As a result, liquidity management during the pre-plan approval period becomes decisive. Debtors must rely on negotiated arrangements with existing stakeholders, such as standstill agreements or temporary support arrangements, that comply strictly with stay restrictions. This interim phase is often the most fragile. Operating cash flow is constrained, fixed costs continue to accrue, and unresolved creditor objections can delay plan approval and intensify liquidity pressure. In practice, prolonged delays in the absence of interim funding can be fatal, causing otherwise viable businesses to deteriorate before the plan takes effect. Successfully navigating this phase therefore requires disciplined execution and experienced professional advisors capable of aligning legal constraints with commercial realities and maintaining sufficient liquidity until plan implementation.

4. Case Study: Thai Airways International (THAI) — Law, Commercial Reality, and Execution

THAI represents the most significant and instructive example of Thailand’s in-court business reorganization regime in practice. The case involved substantial debt exposure and highly complex stakeholder and cross-border structures.

Among several first-of-its-kind features, THAI was the first Thai debtor to actively seek recognition of its reorganization proceedings in multiple jurisdictions. This reflected its global operations, aircraft leases governed by foreign law, international creditor base, and overseas assets. Although Thailand has not adopted the UNCITRAL Model Law and applies a territorial approach to insolvency, the case demonstrated how effective cross-border coordination can nonetheless be achieved through pragmatic court engagement and targeted recognition efforts.

In the absence of a DIP financing framework, liquidity during the early stages of THAI’s reorganization presented a critical challenge, particularly as the airline generated minimal operating income during the pandemic due to global travel restrictions. With limited options for interim funding, THAI pursued an unusual court application to dispose of non-core assets prior to plan approval, a remedy that Thai courts have rarely granted.

To address judicial concerns, the application was supported by detailed evidence demonstrating acute liquidity needs, confirming the non-core nature of the assets, specifying the limited use of sale proceeds, and proposing safeguards to protect creditor interests. These safeguards included placing the proceeds in a segregated account, maintaining transparent audit trails, and reporting all transactions under the supervision of the Official Receiver, together with corresponding disclosures to creditors.

On this basis, the court approved the asset sales, providing essential pre-plan liquidity and illustrating how careful legal structuring and transparency can bridge the survival gap in a system without formal DIP financing.

Commercially, the reorganization unfolded under extraordinary conditions. During the COVID-19 pandemic, the aviation industry came to a near-complete standstill, and aircraft leasing markets were under severe strain. While this environment was devastating to revenues, it altered negotiating dynamics. THAI undertook extensive negotiations with aircraft lessors and critical suppliers, many of whom faced systemic risk if major carriers collapsed. In this context, comprehensive lease termination was often commercially unattractive, and the court-supervised process provided a structured framework for renegotiation.

The court-approved plan enabled THAI to address onerous contracts comprehensively and, critically, without leaving any hanging debts. This included long-term aircraft leases that were no longer sustainable. Entire aircraft types, notably the A380 and certain A330 aircraft, were removed from the fleet due to structural inefficiencies in fuel consumption, maintenance, and post-pandemic demand. This rationalization reduced fixed costs and aligned capacity with realistic market conditions.

Capital restructuring formed another cornerstone of the process. After transitioning from state-owned to private status prior to the commencement of court-supervised rehabilitation, THAI implemented a large-scale debt-to-equity conversion involving the Ministry of Finance, financial institutions, and bondholders. This was complemented by a public offering and an employee stock option program, marking the first use of such equity-strengthening tools within a Thai reorganization. The result was a structural recapitalization aimed at long-term sustainability rather than short-term relief.

THAI exited court supervision after satisfying all statutory requirements under its plan and subsequently met the regulatory and listing criteria imposed by the Stock Exchange of Thailand and the Securities and Exchange Commission, enabling the resumption of trading. The case underscores a clear lesson: successful reorganization depends not only on statutory tools, but on execution. When supported by experienced legal and financial advisors capable of balancing legal discipline with commercial realities, Thailand’s reorganization regime can operate as a holistic, value-preserving mechanism for large and complex enterprises.

5. Conclusion

Thailand’s in-court business reorganization framework has evolved significantly since its introduction following the 1997 Asian Financial Crisis. While legislative reforms have expanded access and introduced greater flexibility, Central Bankruptcy Court data demonstrate that rehabilitation remains a selective process, reserved for cases capable of meeting stringent viability, evidentiary, and good-faith standards. This selectivity has become more pronounced in the post-COVID period, where widespread distress has translated overwhelmingly into rising bankruptcy filings rather than a corresponding increase in reorganization petitions.

Structural characteristics, such as the absence of a strict absolute priority rule and the timing of onerous-contract termination, continue to influence creditor behavior and shape outcomes. These features may deter rehabilitation in marginal cases, but they do not undermine the regime’s effectiveness where it is properly deployed.

As the THAI case illustrates, when applied to large and complex enterprises and supported by disciplined planning and professional execution, Thailand’s business reorganization regime can deliver comprehensive restructuring, preserve enterprise value, and facilitate a credible return to the market. The regime’s future lies not in volume, but in the quality of execution, serving as a targeted yet powerful restructuring tool within Thailand’s broader insolvency landscape.

Future legislative refinement, particularly in relation to pre-packaged proceedings and SME accessibility, may further calibrate this balance. Nevertheless, the core integrity of Thailand’s reorganization regime is already well established.