THAILAND Law and Practice Contributed by: Olaf Duensing, Jerrold Kippen and Weeraya Kippen, Duensing Kippen, Ltd.
Pledge A pledge is a possessory security where the lender takes possession of the security; it applies only to movable property such as machinery, whether registered or not, promissory notes, bills of exchange and, most commonly, shares of the borrower. A pledge is not registered but some types of pledged property may require additional steps to be legally valid, such as shares, which in addition to the share certificates being delivered to the creditor must have the pledge record in the share-issuing company’s share register book in order for the pledge to be enforceable. Business Collateral Under the Business Collateral Act, essentially all of a borrower’s business assets (eg, immovable property, movables, receivables and intellectual property) may be registered as security. Assignment A developer will also often assign its contractual rights, particularly those related to the project (eg, its contractual right to supply, construction, leasing, maintenance, insurance and bond). Guarantee Lenders typically also require a third-party guarantee which provides that if the borrower defaults, the guarantor will be obliged to satisfy the debt on behalf of the borrower. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security over real estate to foreign lenders. However, it is unclear whether a non-affiliated foreign lender would be considered to be conducting a service business under the Foreign Business Act. If this is the case, the lender would first need to apply for and receive a foreign business licence under the Act prior to entering the loan agreement.
There are no restrictions on repayments being made to a foreign lender. However, other require - ments, such as exchange controls, may be applicable. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Normally, the registration fee for a mortgage over immovable property is an amount equal to 1% of the loan, but not exceeding THB200,000. How - ever, see 2.10 Taxes Applicable to a Transac- tion for the current reduced rate. Mortgages over machinery attract a registration fee of 0.001% of the amount of the loan, but not exceeding THB120,000. The fee to register busi - ness collateral is an amount equal to 0.1% of the loan but not more than THB1,000 unless the collateral is immovable property, in which case, the fee is an amount equal to 1% of the loan. De minimis stamp duties apply to loan, mortgage, pledge and guarantee transactional documents. Enforcement fees may include court and execu - tion office fees, as well as fees in connection with the official auction and sale of any property, eg, mortgaged land or pledged assets. 3.5 Legal Requirements Before an Entity Can Give Valid Security Where the borrower is a Thai company limited, as long as the borrower has reason to believe that the authorised director is acting within the scope of their authority to provide security to the lender over the company’s property, there are no further legal rules or requirements, such as financial assistance or corporate benefit rules, that must be complied with before such an entity can give valid security over its assets. However, if the articles of association do not specifically provide for the right of the director to mortgage property, a shareholder resolution is required.
942 CHAMBERS.COM
Powered by FlippingBook