THAILAND Law and Practice Contributed by: Jessada Sawatdipong, Sarunporn Chaianant, Supawich Nimmansomboon and Supawin Pongthananikorn, Chandler Mori Hamada
Novation Where the loan has not been fully disbursed, its assign- ment may not be a viable option since the assignment only transfers the rights of the original lender to the new lender, and not the obligations. In this situation, a novation should be executed to ensure that the new lender remains liable for any further disbursements of the loan. A transfer of rights and obligations of the existing lender to the new lender may be executed by way of novation, where a form of tripartite agreement is required to be entered into among the existing lender, the new lender and the borrower. Additionally, the par- ties may agree to transfer the security granted to the existing lender under the existing loan agreement to the new lender, provided that, if the security is pro- vided by a third party, consent from such third party is obtained. A loan participation, where the existing lender wholly or partially sell its interests in a loan to another lender, is also a viable option for a transfer of the loan, pro- vided that the commercial bank assigns the loan to a financial institution that meets the requirements set out by the BoT. 3.7 Debt Buyback Under Thai law, debt buybacks by the borrower result in the loan’s rights and obligations being vested in the same entity, and the loan will be extinguished. Even though the rights and obligations under the loan can be merged within the same entity, debt buyback arrangements are not commonly used in Thailand. Often, lenders and borrowers will enter into discus- sions to restructure and reduce the amount of debt to be repaid by the borrower should there be a situation where the borrower is unable to pay the debt in full. For a debt buyback by a third party (ie, a sponsor), there is no specific law or regulation explicitly pro- hibiting the sponsor from buying back the borrower’s debts. Sponsors are legally permitted to repay the loan to the lenders (or purchase debt or claim rights against the borrower) and then subrogate the lend- ers’ rights as creditors. However, loan agreements can specify that the transferee of the lender must appear
on an approved list of banks, thus making the debt buyback infeasible for the sponsor. 3.8 Public Acquisition Finance In public acquisition transactions, if an acquiror wish- es to acquire shares of a target company that reach certain thresholds as specified by law, the acquiror must make a tender offer for all the issued shares of the target company. The offeror is required to indicate the source of funding in its tender offer documents as a method of demonstrating its ability to fund the tender. If the source of funds includes funds secured by debt financing from a financial institution, a com- mitment letter issued by the financial institution must be submitted as a supporting document along with the tender offer documents, which are to be publicly filed with the SEC. There is no specific requirement for details or mini- mum particulars in the commitment letter; however, in practice, commitment amounts and an effective peri- od for such commitment are specified. Loan agree- ments for certain funds can be executed thereafter with certain condition precedent documents set forth by the lenders, which are sometimes subject to lend- ers’ satisfaction. 3.9 Recent Legal and Commercial Developments There have been no significant legal and commercial developments affecting financing documentation. However, some market developments in the banking and financial sector are worth noting. Virtual Bank The BoT issued a comprehensive regulatory frame- work for virtual banks in early 2024. This framework sets out eligibility, governance, capital adequacy and risk management requirements for applicants, reflect- ing the BoT’s focus on financial stability and consumer protection. In mid-2025, the Ministry of Finance, on the BoT’s recommendation, approved three appli- cants to establish Thailand’s first virtual banks. These institutions are expected to commence operations within 2026 and will initially operate under a restricted phase, during which they must demonstrate sound risk controls, robust IT systems and effective govern- ance before transitioning to full-scale operations. The
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