The Bank of Thailand has issued Financial Rehabilitation Measures to help Thai Entrepreneurs affected by the COVID-19 Pandemic

As we are all already aware, the COVID-19 pandemic has not only resulted in a public health crisis but also severely affected the overall economy of Thailand. Since early 2020 until present, a large number of people have suffered the consequences of the mitigation measures put in place by the Thai Government due to the COVID-19 pandemic. Some people have faced a reduction of their income or lost their employment, whilst some businesses had no choice but to  close their business, whether temporary or permanently which led many entrepreneurs, particularly small and medium sized entrepreneurs, have  suffered adversity from liquidity problems. In response to these situations, the Thai Government together with cooperation from the Bank of Thailand (“BOT”), issued some financial rehabilitation measures to help these entrepreneurs sustain and recover their operations by the announcement of the Emergency Decree on Assistance and Rehabilitation for Business Operators Affected by the COVID-19 Pandemic B.E. 2564 (2021) (“Emergency Decree”).

The Emergency Decree was enacted on 10 April 2021 with the purpose to provide Baht 350 billion of loans to financial institutions, with a two-year loan withdrawal period and a possible one-year extension in order to support liquidity of the business sector through two separate measures: 1) measure to promote the granting of credit to business operators; and 2) measure to promote acceptance of the transfer of property as security for the repayment of debt.

1. MEASURE TO PROMOTE THE GRANTING OF CREDIT TO BUSINESS OPERATORS (so-called “Soft Loan Facility for Businesses”)

This measure aims to offer an opportunity for business operators affected by the COVID-19 crisis to access low-cost funding from financial institutions in order to boost their liquidity and give financial support for business operation. In this regard, the BOT’s Notification No. SorGorSor1. 1/2564, which was issued as a supplement to the Emergency Decree, prescribes the specific conditions of a borrower who is eligible to apply for this measure; the credit line; period of loan; and interest rate, as per the table below:

2. MEASURE TO PROMOTE ACCEPTANCE OF THE TRANSFER OF PROPERTY AS SECURITY FOR THE REPAYMENT OF DEBT (so-called “Debt restructuring through Asset Warehousing”)

The purpose of this measure is to provide a debt restructuring programme, on a voluntary basis, to an existing debtor of a financial institution who is affected by COVID-19 and requires a prolonged recovery period. Under this scheme, the existing debtor (of each financial institution) may opt to request for suspension of debt repayment by transferring collateral assets to the financial institution, with a buy-back agreement within the period not exceeding five years as from the date upon which such transfer is made, at the price not higher than the agreed transfer price plus carrying cost (limited to 1% per annum), incurred maintenance cost and additional fee(s) as specified by the BOT. This measure also provides the opportunity to the debtor to continue using collateral assets for the sake of business operation, by allowing the debtor to lease such collateral assets from the financial institution; while the financial institution will deduct the repurchase price from any rent received.

In this regard, following are conclusion of debtor’s qualification, collateral asset as well as other conditions set out in BOT’s Notification No. SorNorSor.4/2564 which was issued in supplementary to the Emergency Decree.

Please note that there are additional financial rehabilitation measures issued by the BOT to tackle financial liquidity of either the business borrower or household debtor by means of debt restructuring. In such regard, we shall provide further details on these measures in our next newsletter.

This is intended merely to provide a regulatory overview and not to be comprehensive, nor to provide legal advice. Should you have any questions on this or on other areas of law, please do not hesitate to contact:

Nuttaros Tangprasitti
Partner

Kewalin Tiyajamorn
Attorney-at-Law

• ¹ NPL Debtor includes a debtor of assets that may be irrecoverable (including substandard asset, doubtful asset and doubtful of loss asset) and debtor of irrecoverable assets.
• ² Competent authorities are currently working towards the issuance of regulations that are relevant to reduction or exemption of tax duties and government fees, and they are expected to be launched very soon.