THAILAND Law and Practice Contributed by: Jessada Sawatdipong, Sarunporn Chaianant, Supawich Nimmansomboon and Supawin Pongthananikorn, Chandler Mori Hamada
If a transaction falls within such restricted purposes, specific approval from the BoT must be obtained. In any case, the remittance and payment made under a loan or guarantee, and any other associated interest or fees, are not categorised as restricted purposes; therefore, a specific approval from the BoT is not required. While the BoT’s approvals are granted on a case-by- case basis, such approvals have been routinely grant- ed for all bona fide transactions, provided that the relevant supporting documents/agreements to prove a legitimate commercial purpose are submitted to the BoT together with other supporting documents, as required by the BoT. 3.4 Restrictions on the Borrower’s Use of Proceeds There are no general laws imposing a restriction on the borrower’s use of proceeds from loans or any debt securities. Nevertheless, a borrower is prohibited from using proceeds connected with illegal activities. In most loan agreements, the purposes of the loan proceeds are specified, and any deviation from such purposes would constitute a default, giving the lender the right to terminate the loan agreement. 3.5 Agent and Trust Concepts Generally, the creation of a trust by a will or a juristic act is prohibited under Section 1686 of the Thai Civil and Commercial Code. However, a trust can be estab- lished for the purposes of securities, securitisation and capital market transactions under the Trust for Transaction in Capital Markets Act B.E. 2550 (2007). Accordingly, the concept of a trust established for general purposes is not recognised under Thai law, and the obligations of a person to hold anything in trust for any other person may not be enforceable, although analogous rights are recognised in certain transactions. However, such unenforceability would not in itself affect the recognition of the validity of the particular transaction to which the person acting as trustee was a party.
Notwithstanding the foregoing, the appointment of an agent is commonplace in financing transactions in Thailand, and the concept of the principal-agent relationship is recognised under Thai law. In a syndi- cated loan, lenders usually appoint a security agent among themselves to hold security for and on behalf of a lender. There is no specific licensing requirement for acting as a security agent. However, mortgage registration does not allow the concept of a security agent; thus, each lender must enter into a mortgage agreement as a mortgagee. 3.6 Loan Transfer Mechanisms Assignment A loan transfer by way of the assignment of rights is usually made when loan disbursements have already been made in full, and no commitments are available under the loan agreement. As a result, only the right to receive loan repayments will be transferred. An assignment of rights of the existing lender to the new lender must be made in writing. For an assign- ment to be valid against the borrower, a written notice must be given, or written consent must be obtained from the borrower. Following the assignment, the rights over the mortgage, pledge and business secu- rity agreement (BSA) existing on the loan, and the rights arising from a guarantee established for the loan, are automatically transferred to the new lender provided that the transfer of the mortgage and BSA is registered with the appropriate authorities. Neverthe- less, the security interest over an assignment of rights under the project agreements, insurances, etc, which are not considered preferential rights under the law, will not be automatically assigned upon the assign- ment of the loan. Therefore, such assignment must be executed between the new lender and the borrower to ensure validity. Although a guarantee or any security interests cre- ated by a third party will be automatically assigned to the new lender, it is advisable that the notice of assignment be delivered to the relevant guarantor and a third-party security provider to ensure that the assignment is duly acknowledged.
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