1) Section 95 of the Bankruptcy Act
In principle, if a bankruptcy court issues an absolute receivership order against a debtor, any creditor who wishes to claim for assets of the debtor is required to submit his claim against the debtor to an official receiver within two months following the date of publication of the absolute receivership order. If the creditor is not domiciled in Thailand, the official receiver may extend this period. This principle is not applicable to secured creditors because Section 95 of the Bankruptcy Act states that the secured creditor has rights over the assets given to him by the debtor prior to a date of receivership.
A secured creditor must file a petition requesting the receiver to put the secured assets on sale in a public auction so that the net proceeds from the public auction can then be distributed to the secured creditor.
Alternatively, a secured creditor can request the receiver to sell the secured assets to him directly if the value of the secured assets exceeds the debt amount. In this case, consent from the creditor committee is needed. If the creditor committee does not agree with the request, the receiver would not be permitted to sell the secured assets directly to the secured creditor.
In practice, only a secured creditor who has already taken legal action against the debtor and has been awarded a judgment by the court would be able to effectively exercise its rights under Section 95 of the Bankruptcy Act. This is because before proceeding with the creditor’s request under Section 95, the official receiver would need to consider the creditor’s request, particularly on the amount of debt owed to the secured creditor. In doing so, the official receiver may take longer than the two month deadline a creditor has to submit his claim. As a result, if the official receiver ultimately denies the request after the deadline has passed, the creditor would not be able to submit his claim.
2) Section 96 of the Bankruptcy Act
Apart from Section 95 of the Bankruptcy Act, the secured creditor may exercise its right by filing his claim to the official receiver under Section 96 by proceeding with one of the following options:
(1) When the secured creditor agrees to surrender the assets afforded as security for the benefit of all creditors, he may claim for the full amount of the debt.
(2) After the secured creditor has already enforced his claim against the assets given as security, he can claim for the balance of the debt remaining unpaid.
“Secured Creditor” means the creditors holding rights over the assets of the debtor in a mortgage, pledge or a right of retention, or creditors possessing preferential rights in the nature of a pledge.
(3) When the secured creditor has asked the official receiver to sell the debtors assets given to him as security by public auction, he can claim for the balance of the debt remaining unpaid.
(4) When the secured creditor has appraised the assets given as security, he can claim for the balance remaining unpaid. In such case, the official receiver is authorized to redeem the assets at such valuation. If the secured creditor considers the valuation incorrect, the official receiver is authorized to sell the assets by such method as the official receiver and the creditor may agree upon. However, if no agreement is reached, such assets may be sold by public auction but shall not be done at a loss to the creditor; and the creditor or the official receiver is authorized to bid at such auction. The net proceeds of the sale shall be deemed to be the valuation made by the creditor in his claim.
Given there are 4 options available, the secured creditor should fully consider which option is most suitable for him. Our suggestions on the options are as follows:
Option 1 – No secured creditor would exercise his right through this condition because the creditor would have to surrender his right over the secured assets;
Option 2 – The secured creditor must enforce his claim against the secured assets by itself and submit the remaining debt amount to the official receiver afterward. Therefore, it would be only the secured assets in a form of a pledge because the secured creditor would be able to enforce it by itself.
Option 3 – The secured creditor may request the receiver to put the secured assets on public auction. The net proceeds from the public auction would then be distributed to the secured creditor and his claim amount in the Claim would be reduced accordingly; and
Option 4 – The official receiver is unlikely to proceed with this option because normally the receiver would put the secured assets on public auction rather than agree with the secured creditor’s appraisement of the secured assets.