THAILAND Law and Practice Contributed by: Jessada Sawatdipong, Sarunporn Chaianant, Supawich Nimmansomboon and Supawin Pongthananikorn, Chandler Mori Hamada
debt shall be payable after all other unsecured debts are repaid in full. 5.8 Priming Liens There is no concept of priming liens in Thailand. In general, security interest duly created in favour of a lender will give such lender preferential rights over other creditors that cannot be primed by any other lenders. Where the security is created in favour of mul- tiple lenders, the security interest would rank accord- ing to the time of registration, as mentioned in 5.7 Rules Governing the Priority of Competing Security Interests . However, rights to enforce the security of a secured creditor may be subject to the right of retention of other creditors. A right of retention allows a person who possesses another’s property to retain it until an obligation relating to the property is performed. The right may be exercised against the whole of the prop- erty until the obligation is completely fulfilled. Certain conditions must be satisfied for the right to arise: • there must be an obligation owed to the possessor, by the borrower or the property owner, which has become due; • in the case of insolvency of the borrower or the property owner, the right may be exercised even if the debt has not become due; • the obligation must arise in relation to the property itself; and • the possession must have commenced lawfully. As a result, a person who has the right of retention is legally entitled to withhold the secured property, and may not be required to deliver such property to the secured creditor until the obligations owed to them by the borrower or the property owner are duly per- formed. In any case, a person who has the right of retention is not entitled to enforce the property and apply the proceeds towards the performance of the borrower’s – or the property owner’s – obligation in the same manner that a mortgagee, a pledgee or secured creditors may have. Further, in respect of real property, where a debtor owes any of the following duly registered obligations,
a creditor of such obligations shall have preferential rights over the mortgagee: • preservation of real property; or • hire of work in relation to property situated on real property. In other words, a creditor of debt obligations in rela- tion to the aforementioned transactions owed by the landowner shall have priority over a mortgagee of the same land. In addition, in rehabilitation proceedings, a lender who has provided financial support to the borrower, during the period when the borrower was undergoing reha- bilitation proceedings, is not required to submit an application for debt repayment under the rehabilitation proceedings and shall not be subject to the repayment terms under the rehabilitation plan (not subject to any debt haircut). Instead, such lender may enforce its loan in accordance with relevant terms in the financ- ing documents, subject to automatic stay or mora- torium. Although new lenders may have priority over other unsecured creditors who have applied for debt repayment, the security interest provided in favour of existing creditors cannot be prejudiced in any manner. 6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders Normally, collateral enforcement is triggered by an event of default under the relevant loan agreement. Security enforcement typically involves the following methods: • public auction through legal procedures with a court order; • out-of-court public auction; and • foreclosure. When enforcing a mortgage or BSA, public auctions through legal procedures with a court order are usually required, except when the mortgagor or the security provider consents to the enforcement of the secured
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