THAILAND Law and Practice Contributed by: Jessada Sawatdipong, Sarunporn Chaianant, Supawich Nimmansomboon and Supawin Pongthananikorn, Chandler Mori Hamada
World Bank, International Finance Corporation (IFC) and Asian Development Bank (ADB), are not subject to withholding tax liabilities on interest, other fees, expenses, charges, penalties and other payments. This is provided that, in such particular transactions, the relevant international financial organisations do not operate in a commercial setting or with the pur- pose of seeking benefit in Thailand.
The Business Security Act allows the creation of secu- rity for movable property without the physical delivery of such assets to the security receiver. A BSA must be made in writing and registered via an online system with the Secured Transactions Registry Division. Due to this special feature of no actual delivery require- ment, the use of the BSA over property prevails over the use of pledge of property in corporate loans. Under the Business Security Act, the security receiver must be a financial institution, or any other person as prescribed under relevant Ministerial Regulations, including a foreign commercial bank that provides facilities in syndication with a financial institution as defined in the Financial Institutions Businesses Act B.E. 2551 (2008) – eg, Thai commercial banks. Under the Business Security Act, a foreign commercial bank that intends to be a security receiver must serve writ- ten notice of its intention thereof to the Department of Business Development, Ministry of Commerce with supporting documents proving that it is a commercial bank under the relevant laws in the jurisdiction of its registration/incorporation. Shares Shares are considered rights represented in an instru- ment and can be secured as collateral by way of a pledge. When pledging shares in a company, in addi- tion to the physical delivery of the share certificates to the pledgee, a record of the pledge along with the name and address of the pledgee must be registered in the share register book of the company to ensure the pledge is valid against the company and third party. Claims and Other Assets Certain claims, such as deposits in bank accounts, rights to receive proceeds, rights under agreements and intellectual property, can be provided as collateral under a BSA. In a project finance transaction, it is also common practice for a borrower to agree in advance to con- ditionally assign its rights under project-related con- tracts, rights to receive proceeds under insurance policies, etc, for the purpose of providing collateral to secure loan obligations in favour of a lender. However,
5. Guarantees and Security 5.1 Assets and Forms of Security
In Thailand, assets that can be provided as collateral are generally real estate, movable property, shares and claims. Security executed not in accordance with the formalities and perfection requirements may be considered invalid, void or unenforceable, as the case may be. Real Estate A typical form of security interest over land and/or buildings is a mortgage. A mortgage agreement must be registered with the competent official at the rele- vant land offices where such land/building is situated; otherwise, the mortgage is invalid. As mentioned in 3.5 Agent and Trust Concepts , since Thai law does not recognise the concept of trust, the mortgage agree- ment must be entered into between the mortgagor and the lenders or secured parties as mortgagees, and not by a security trustee, to ensure each lender’s preferential rights. It is important to note that Thai law prohibits a third- party mortgagor from being liable for the remaining balance of a secured obligation when the mortgage is enforced, should the proceeds from enforcement not cover the amount due. Additionally, Thai law also prohibits a third-party mortgagor from acting as a guarantor while also acting as a mortgagor for the same underlying obligation. Movable Properties Pledges and BSAs over property are the most com- mon forms of security over movable property. Pledges require the actual delivery of the pledged property to the pledgee; if the property is returned to the pledgor for any reason, the pledge is legally extinguished.
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