Entrepreneurs regularly review and restructure their businesses in response to the ever changing commercial and economic landscape. Reasons for restructuring can range from broad aims such as increasing profitability or reducing costs, to more focused objectives such as listing a company on the stock market or complying with particular legal requirements.
There are a number of stakeholders involved in any restructuring, banks being one such group, and usually a powerful one at that. A bank will be concerned that they retain their ability to recover any monies owed (e.g. through mortgages, pledges or guarantees) and will often set out strict recommendations and conditions to which businesses must adhere. Failure to comply with a bank’s recommendations or conditions could mean that a bank vetoes the restructuring.
But a recent Thai case serves as a warning that management needs to properly consider all stakeholders when undergoing a restructuring. Relying solely on the fact that it followed a bank’s recommendation will not be enough to protect a business from falling foul of Thai criminal and civil law, and failure to consider other stakeholders could lead to litigation and serious penalties.