Similar to many countries in the world, Thailand has suffered badly from the COVID-19 pandemic since the beginning of 2020. Most business sectors (including but not limited to trading, services, restaurants, etc.) have been massively impacted by the pandemic, whilst some industries on the other hand have benefitted significantly (for example, medical products, hospitals and rubber glove manufacturing businesses). A number of organizations have had to lay off their employees or reduce staff salaries in order to survive.

However, since the arrival of the five (5) main manufactured vaccines donated by the Thai Government, private organizations in addition to Thailand’s generous business partners, almost 60% of the Thai population have now been fully vaccinated, which has resulted in a significant reduction in the number of new cases and consequent deaths. The Thai Government has consequently announced the end of the previous strict lockdown and has re-opened the country since November 2021.

Having said this, that there are still a number of business operators in particular SMEs businesses that are finding it difficult to resume their business operations due to the negative financial situation in addition to the of manpower and funding.

This article aims to provide business operators with some ideas of exit strategies and alternative strategies as the pandemic becomes more under control and they are detailed as follows: -

1. Negotiation with your creditors

If your business contains a significant amount of debt and if your creditors are banks or other financial institutions, you may attempt to negotiate with them in order to suspend the installment repayments, reduce interest repayments, extend or reschedule the period of the repayments or effectively simply restructure debts. The Bank of Thailand has also issued several measures to support SMEs business operators who have suffered unduly from the pandemic.

2. Reduction of cost of operations by mergers and acquisitions

In the event that you have several companies in your group and wish to reduce the cost of operations among the group (e.g. accounting, tax, legal costs, etc.), you may consider merging some legal entities by way of entire business transfer or amalgamation which would be a possible cost reduction and tax effective strategy since these merger alternatives can provide exemptions on a number of taxes, e.g. corporate income tax, VAT, stamp duty, etc.

3. Sale of business or enter into a joint venture partnership arrangement

Another possible exit strategy for your business is to simply sell it (either by a share sale or alternatively a business and asset sale) to a potential purchaser/investor.

On the other hand, if you do not wish to sell your business in its entirety, you may wish to explore a joint venture arrangement option by seeking to identify am investor who may be interested in becoming your joint venture partner. Having said that, if you wish to go through any of these aforementioned options, it is likely to involve due diligence procedures (i.e. legal, tax and financial due diligences). Please therefore ensure that all of your corporate, accounting and tax records are properly prepared and filed in accordance with the applicable law. In addition, you will need to have prepare effective legal contracts which provide sufficient safeguards to both parties that are involved in the transaction.

4. Winding down your business

Another alternative that you may wish to consider is that of winding down your business by entering into the dissolution and liquidation process. A liquidator must be appointed in order to dispose the assets and settle the debts and liabilities of the company. All debts and liabilities must be paid off prior to the completion of the liquidation process. The liquidation process will automatically trigger a tax audit by the Thai Revenue Department which could delay the liquidation process (which normally takes between 6 months up to a few years or longer in some cases).

5. Bankruptcy or Business Rehabilitation

Should your business be at the stage where it cannot realistically be continued due to its weak financial status and high level of debts and liabilities, you may consider entering into the bankruptcy or restructuring process as a last resort and this is provided that the level of your company’s debts meet the criteria provided by law (i.e. debt of higher than THB 2 million for bankruptcy, and THB 10 million for restructuring). A bankruptcy claim may be made either on a voluntary basis by a liquidator of the company, or on an involuntary basis by creditors of the company, while a rehabilitation petition may be filed by debtors, creditors or government authorities.

The RSM Thailand legal services Bangkok are pleased to provide professional advice, assistance, and implementation of all of the aforementioned processes and not only the legal aspects but also from an accounting and tax point of view. If you require further advice on any of the above strategies, please feel free to contact us at [email protected] or [email protected] .