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4 April 2000
REPORT ON ECONOMIC REFORM LEGISLATION
During
the Ordinary General Session of the National Assembly ending April 10, 1999,
51 bills were approved for enactment, and 3 bills were pending review by the
Constitutional Court.
Significant new legislation in 1999 included the following:
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Trade Competition Act, B.E.
2542 (effective April 30, 1999)
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Anti-Dumping and Anti-Subsidy of Foreign Goods Act,
B.E. 2542 (effective June 29, 1999)
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Anti-Money Laundering Act, B.E. 2542 (effective
August 19, 1999)
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Act Regarding Goods and Services Prices, B.E. 2542
(effective April 1, 1999)
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On
August 10, 1999, the government announced a new set of measures to encourage
private investment. This new set
of measures consists of four parts:
(1) tax and tariff measures;
(2) equity investment measures;
(3) measures to promote the recovery of the real estate sector; and
(4) measures to improve financing for small and medium enterprises.
The
latest Memorandum on Economic Policies of the Royal Thai Government is
attached to the 8th letter of intent from the Ministry of
Finance/Bank of Thailand to the IMF dated September 21, 1999. These quarterly letters of intent
have provided a good forecast of government law reform programs. It was recently decided not to sign
any additional letter of intent to the IMF and not to draw the remaining
balance of funds under the IMF assistance program.
In
addition to the 11 economic reform bills mentioned below, there are other
draft laws being prepared which will have importance for the business
community, including the following:
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Financial Institutions Law, and new prudential regulations, and requirements
for auditing, accounting and disclosure for all financial institutions,
consistent with international best practices
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Deposit Insurance Agency Law
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Derivatives Law
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Securities and Exchange Act Amendment
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Secured Lending Law, to provide for non-possessory
security interests in certain moveable property.
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In
1998, the Thai government identified 11 bills being considered by the
National Assembly as key “economic reform bills”. As of April 4, 2000, the status of the 11 economic reform
bills was as follows:
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1. |
Act
on Establishment of and Procedure for Bankruptcy Court, B.E. 2542 (1999)
This
Act established the Bankruptcy Court as a specialized court, and sets forth
rules governing its procedure. The new court opened on June 18, 1999. The new court has jurisdiction
over all bankruptcy cases, which were formerly heard by the Court of First
Instance. Appeals on
reorganization cases will be made directly to the Supreme Court (instead of
to the Court of Appeals).
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2. |
Bankruptcy
Act (No. 5), B.E. 2542 (1999)
This
Amendment Act includes 34 amendments to the Bankruptcy Act, the principal
amendments are as follows:
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Loans of “new money”: Section 94(2) was amended to allow a
creditor who advanced funds to an insolvent debtor for the purpose of
allowing the debtor to continue its business operations, to file a claim for
such funds in bankruptcy.
Previously, an unsecured creditor who had loaned funds to a debtor
with the knowledge of the debtor’s insolvency was not entitled to file a
claim in bankruptcy to recover such funds. |
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Creditor classes and voting: Certain amendments establish classes
of creditors, provide for equal treatment of creditors within each class, and
prescribe revised voting procedures in approving a reorganization plan. Each secured creditor with at least
15% of the total debt forms a separate class, all other secured creditors
form one class, unsecured creditors are grouped according to similar
interests at stake, and Article 130 creditors (e.g. those owed taxes or back wages) form one class. Previously, a “special resolution”
(i.e., a majority of creditors whose claims equal 75% of the total claims of
creditors present and voting on such a resolution) was required to approve a
reorganization plan. This
requirement has been amended. A
reorganization plan may now be approved by either (i) a special resolution of
each class of creditors, or (ii) a special resolution passed by at least one
class of creditors, and the total claims of all creditors who have approved
the plan constitute at least 50% of the total claims of the creditors present
and voting on such resolution at a meeting of all classes of creditors. Conditions are prescribed under which
a creditor is deemed to have automatically accepted a reorganization plan. |
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Preference periods: Generally, the preference period is three months in the
case of transactions between unrelated parties, and one year in the event
that the creditor is related to the debtor. (Formerly, there were two preference periods: three months
and three years, the latter of which applied unless the transferee could
prove good faith and consideration). |
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Court approval of reorganization plans: The criteria for court approval of a
reorganization plan were clarified. The court’s discretion in confirming or
rejecting reorganization plans has been replaced with objective rules for
court confirmation of such plans. Such rules must be approved by creditors,
with the proviso that no dissenting class of creditor, nor the debtor,
involuntarily receives less value under such plan than they would in a
liquidation. |
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Rejection of contracts: The plan preparer was given discretion
to refuse to accept a debtor’s assets or rights under agreements if such
assets or rights carry obligations greater than the benefits which may be
derived. |
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Currency conversion: The amendment clarifies that, in the case of determining
voting rights of creditors, the conversion of debt denominated in a foreign
currency is for voting purposes only. |
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Threshold debt amount to declare a debtor bankrupt: The minimum threshold amount to
qualify for a declaration of bankruptcy was increased to Baht 1,000,000 for
an individual debtor (formerly, Baht 50,000), and Baht 2,000,000 for a
juristic debtor (formerly, Baht 500,000). |
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Bankrupt Status: A bankrupt person will be released from bankrupt status
after three years (formerly 10 years). |
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3. |
Capital
of State Enterprise Act, B.E. 2542 (1999)
This
Act was approved by the National Assembly in March 1999, and was published on
December 16, 1999. The delay in
publication arose because it was submitted to the Constitutional Court for a
decision following a challenge to its Constitutionality.
This
Act is an enabling act which provides a regulatory framework for the
conversion of state enterprises to either private limited companies or public
limited companies, which will initially be 100% owned by the Ministry of Finance. It sets forth a process, but does not
prescribe which state enterprises will be privatized nor any timetables. The
bill establishes the State Enterprise Capital Policy Committee which will
conduct studies and propose for Cabinet approval the principles and
guidelines to corporatize part or all of specific state enterprises. For each such state enterprise, a
second committee, the Company Establishment Preparation Committee, will be
established to work out the details of the corporatization and to draft
ministerial regulations to deal with issues requiring legislative
solutions. Cabinet approval is
required before any state enterprise is corporatized.
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4. |
Act
Amending Civil Procedure Code (Petty Matters) (No. 17), B.E. 2542 (1999)
This
Amendment Act includes 15 amendments to the Civil Procedure Code. Certain amendments are intended to
facilitate the conciliation process in court. Most of the amendments facilitate the hearing of petty
matters and enforcement of judgments therein. However, Section 192 was amended to allow the court in
certain circumstances to try as a petty case a counter claim or ordinary case
which is not a petty case.
There
was no amendment to the definition of petty matters, which include claims not
exceeding Baht 40,000 in value.
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5. |
Act
Amending Civil Procedure Code (Execution of Judgments) (No. 18),
B.E. 2542 (1999)
This
Amendment Act includes 11 amendments to the Civil Procedure Code. Certain court orders and judgments
are now enforceable throughout the Kingdom. Certain appeals decided by the Appeals Court, and certain
orders of the Court of First Instance, are final. The rules governing the cancellation or amendment of court
orders and execution proceedings were revised to facilitate the execution
process.
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6. |
Act
Amending Land Code (Land Ownership by Foreigners) (No. 8), B.E. 2542 (1999)
This
Act provides that a foreign investor who invests a minimum of Baht 40 million
will be permitted to own up to one rai (1,600 sq.m.) of land for residential
purposes with the approval of the Minister of Interior.
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7. |
Condominium
Act (No. 3), B.E. 2542 (1999)
The
Amendment provides two main changes:
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the maximum foreign ownership of a registered
apartment building (condominium) was increased from 40 to 49 percent; and
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the 49 percent ceiling may be exceeded if the
condominium is located in Metropolitan Bangkok, municipalities or other local
administrative areas as prescribed in Ministerial Regulations, and the land
area of the condominium does not exceed five rai.
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8. |
Alien
Business Operation Act, B.E. 2542 (1999)
The
Act came to force on 4 March 2000, and
supersedes the Alien Business Law (N.E.C. 281) which was enacted in
1972.
The old alien business law (N.E.C.
No. 281) restricted foreign ownership in 63 businesses classified as Categories
A (12 businesses) (closed), B (37 businesses) (closed with limited
exceptions), and C (14 businesses) (permits are possible as a matter of
discretion). The Thai-US Treaty
of Amity and Economic Relations had been interpreted to provide to American
corporations and individuals an exemption from the alien business law for
most of the restricted businesses.
The new Act prescribes 42
restricted businesses in three schedules:
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Schedule 1:
9 businesses prohibited for special reasons. |
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Schedule 2:
13 businesses related to national safety or security or affecting
arts, culture, traditional customs, folk handicrafts, natural resources and
the environment. Licenses may be
issued by the Minister of Commerce with the approval of the Cabinet. |
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Schedule 3:
21 businesses in which Thai people are not yet ready to compete with
foreigners. Licenses may be
issued by the Director General with the consent of the Alien Business
Operation Committee. |
There
is a limited grandfather provision with respect to existing businesses. There is also the possibility of
exemption under certain treaties to which Thailand is a party, as well as for
businesses promoted by the BOI.
In the
case of a restricted business carried on by an alien, a minimum capital of
Baht three million or greater is prescribed, to be specified in a ministerial
regulation. In the case of
businesses under Schedule 2, at least 2/5 of the directors must be Thai and a
minimum of 40% of the shares must be owned by Thai persons (which may be
reduced to 25% with Cabinet approval).
Businesses under Schedules 2 or 3 may have conditions attached to
alien licenses such as: minimum
debt/equity ratio, number of alien directors resident in Thailand, amount and
period of investment, technology and assets, etc.
There
are additional provisions of importance in the Act, including, for example, a
minimum capital of Baht two million applicable to all alien business (not
only restricted business), and a requirement for existing restricted business
to obtain a certificate.
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9. |
Act
Amending Social Security Act (No. 3), B.E. 2542 (1999)
This
Amendment Act expands the rights of employees, provides for greater benefits,
and prescribes duties of employers to provide contribution for child welfare,
old-age and unemployment.
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10. |
Act
Governing Leasing of Immovable Property for Commercial and Industrial
Purposes, B.E. 2542 (1999)
This
Act provides the right to lease commercial or industrial property for a term
of 30 to 50 years, and introduces the right to use such leases as collateral
for debt performance by means of mortgaging, the right to transfer the lease,
and the right to sub-lease.
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11. |
Act
Amending Civil Procedure Code (Procedure in Case of Default) B.E. 2543 (2000)
This
Amending Act allows the court to use its discretion in rendering ex parte
judgments in cases where a party is in default to answer or in default of
appearance in order to protect plaintiffs against damages arising from delays
in deciding the cases.
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