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November 9, 2015

Thailand Enacts New Business Collateral Act

The Business Collateral Act B.E. 2558 (2015) (BCA) was passed into law on November 5, 2015. The majority of its provisions will come into effect on July 1, 2016, 240 days after publication in the Royal Thai Government Gazette.

The BCA aims to establish a robust legal system that allows borrowers in Thailand to use their assets as collateral to secure their loans. This system provides Thai borrowers with greater access to credit, which should promote investment in domestic ventures.

The key points under the BCA are the following:

  • Unless otherwise agreed by the parties, the borrower will retain the right to possess the collateral and to put the collateral to commercial use for the duration of the secured period.
  • The written agreement evidencing the secured transaction must be registered at the Department of Business Development, Ministry of Commerce.
  • If a borrower defaults, the creditor may take title of the collateral or sell it at public auction.
  • The BCA introduces out-of-court enforcement mechanisms, including the appointment of a receiver when the collateral is a business venture or a project.
  • Borrowers can be any natural or legal person, whereas creditors must have a license under the Financial Institution Businesses Act B.E. 2551 (2008).
  • Projects, businesses, accounts receivable, inventory, immovable assets used directly in development projects, intellectual property, and other assets prescribed by ministerial regulation can be used as collateral.

Prior to the enactment of the BCA, borrowers could not retain possession of movable assets pledged as collateral for the duration of the security period. Out-of-court enforcement options were also limited. The BCA removes these prohibitions and therefore provides borrowers with greater access to credit. These significant developments should improve Thailand’s system of secured transactions and increase investment in domestic ventures.

If you have any questions about the Business Collateral Act or other corporate and commercial matters in Thailand, please contact Cynthia M. Pornavalai at [email protected] or +66 2653 5559.

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