Thailand collection profile

 

Thailand
       

Thailand

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Complexity of collecting debt:

grading
Notable High Very High Severe


Executive summary

  • The payment behavior of Thai companies is fairly good but regulations are limited when it comes to late payments.
  • Although domestic courts are fairly independent, the rule of law perception has margin for improvement, procedural delays and costs may be an issue and enforcing court decisions can be challenging. Overall, use of the courts should be avoided and conducting orchestrated collection actions is advisable.
  • Collecting debt from insolvent debtors is often extremely difficult, especially when the debt is not secured.
 
General Information GENERAL INFORMATION arrow-transparent
 
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
 
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
 
General Information 

GENERAL INFORMATION

Days Sales Outstanding (DSO)

The payment behavior of Thai companies is fairly good. Most payments tend to be made within 30 days but delays of 10 to 20 days on average may appear when transactions have not been secured.

 

Late payment interest

Interest on late payments may be charged to the debtor and it may be fixed up to 15% in a contract. If no interest rate is fixed, the 7.5% legal rate will apply.

Some Thai businesses may charge additional collection costs on late payments, but this is not a common practice.

 
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collection practice 

COLLECTIONS PRACTICES

Orchestrated negotiation first

Although domestic courts are fairly independent, the rule of law perception has margin for improvement and time is an issue given the caseload handled by the courts. As such, amicable settlement opportunities should always be considered as a serious alternative to initiating a legal action. Before starting legal proceedings against a debtor, the debtor’s assets should be assessed as it allows estimation as to whether the recovery chances are at best. In addition, it is essential to be aware of the debtor’s solvency status: if bankruptcy proceedings have been initiated, creditors must apply for repayment of their debt in the bankruptcy proceedings (see below).

 
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Court Proceeding 

COURT PROCEEDINGS

Thailand has a codified system of law (civil law) which has been significantly influenced by common law. The Thai court system is complex and is composed of the Court of Justice system, the Administrative Court system, and the Constitutional Court of Thailand. Civil and criminal cases are handled by the Court of Justice (a three-tier system consisting of the Court of First Instance, the Court of Appeals and the Supreme Court, in which the courts at the district level can hear small claims up to Baht 300,000 whilst Provincial Courts would hear claims in excess of this amount). There are also specialized courts dealing with specific matters, e.g., the Juvenile and Family Court, the Central Labor Court, the Central Tax Court, and the Central Intellectual Property and International Trade Court, where cases may be appealed directly to the Supreme Court. Disputes with administrative bodies and public agencies are dealt by the Administrative Courts where cases can be further appealed to the Supreme Administrative Court.

Although there are no pre-action requirements, legal dunning ought to start with a registered Demand Letter recalling the debtor its obligation to pay the principal together with late payment interests (as contractually agreed or taking a legal rate as a reference) and possibly offering to enter negotiations. In practice, the courts usually encourage the parties to reach a mutually acceptable compromise and the majority of cases are settled through negotiation. Prior to commencing formal legal action proceedings, it is also worth considering the possibility of obtaining an arbitral award (see the ADR section) or a foreign decision which, even though it may be difficult to enforce could remain more efficient than merely going before domestic courts. Ordinary legal action would usually commence when amicable collection has failed. The creditor would file a claim with the court which, if deemed admissible, will directly be served to the debtor. The debtor is then given 15 days to bring a defence (a default judgment can be awarded in case the defendant fails to submit its answer or if either party fails to appear before the court on the first day of witness examination, but the losing party would be entitled to apply for reconsideration if it has proper excuses as accepted by the law). At the first hearing, the court will frame the issues to be tried and order which party has the burden of proof. However, the court will also ask the parties if they would like their dispute mediated. If mediation fails, the court will proceed with examination of witnesses. Thai courts normally award remedies in the form of damages, performance or forbearance, but punitive damages would only be awarded in very specific circumstances as prescribed by law.

 
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insolvency Proceeding 

INSOLVENCY PROCEEDINGS

Insolvency proceedings in Thailand are governed by the Bankruptcy Act BE 2483 (AD 1940, as amended), which provides for reorganization proceedings as well as bankruptcy proceedings. In practice, reorganization proceedings are fairly effective for viable businesses and a large number of Thai companies were successful in getting back on their feet after the 1997 Asian financial crisis. When it comes to bankruptcy, however, unsecured creditors would be unlikely to recover any debt.

 
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