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March 7, 2018

Thailand: New Categories of Security Receivers under the Business Security Act

On February 16, 2018, the Ministry of Finance adopted Ministerial Regulation (No. 2) B.E. 2561 (2018) pursuant to its authority under section 7 of the Business Security Act B.E. 2558 (2015). The Ministerial Regulation prescribes the following four new categories of entities that are now eligible to act as security receivers under the Business Security Act:

  • The Office of the Permanent Secretary for Industry, specifically in the case of SME Development Fund under Civil State Guidelines;
  • Foreign banks, specifically in the case of granting loans jointly with Thai financial institutions;
  • Juristic persons whose company objectives include operating hire-purchasing and leasing business;
  • Juristic persons whose objectives include operating a loan-granting business.

The category which presents the biggest change in the implementation of the Business Security Act is that of foreign banks that lend jointly with a Thai financial institution (as defined in the Financial Institution Business Act 2551 (2008)). This will presumably permit a foreign bank to act as the security agent in a syndicated loan structure where at least one other lender is a financial institution in Thailand. It is not clear whether this will provide any significant practical benefits to foreign banks, however, since a Thai financial institution will still apparently be needed as an additional lender. Thai financial institutions were already able to act as the security agent in order to secure loans issued jointly with non-Thai financial institutions. However, the change may be a precursor to permitting foreign banks to act as a security receiver without a Thai financial institution being included in the syndicate of lenders.

It is also a welcome development that juristic persons whose objectives include operating a hire-purchase and leasing business and/or a loan-granting business are now eligible to act as security receivers. This will allow lenders and extenders of credit that are not financial institutions to take advantage of the Business Security Act.

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