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On 9 March 2021, the Cabinet approved a Draft Amendment to the Thai Civil and Commercial Code (the “Draft Amendment”) which proposes changes in (i) an interest rate or default interest rate under the Thai Civil and Commercial Code where it is not expressedly determined in an agreement or in the laws and (ii) the method for default interest calculation.
Key proposed changes under the Draft Amendment are as follows:
- New Interest Rate – An interest rate in the case where an interest is payable but the rate is not expressedly determined in an agreement or specified by laws, will be changed from the current rate of 7.5% per annum to be 3% per annum or any rate to be further announced from time to time by a Royal Decree in order to align with the then-current economic situation.
- New Default Interest Rate – The default interest rate will be the new interest rate in paragraph 1 above plus 2% per annum (which shall be 5% per annum at the early stage) as opposed to the current default interest rate specified under the CCC which is at the rate of 7.5% per annum. The creditor may still charge at a higher rate where it has any lawful right to do so.
- Default Interest Calculation – In case of debt repayment in installments, the default interest rate may accrue only on the overdue principal amount (as opposed to the whole principal amount which remains outstanding but not yet due). Any agreement deviating from this provision will be null and void.
- Transitory Provision – The above amendments will apply to the interest which is due on the date this proposed Draft Amendment becomes effective. Whilst the amendments in paragraphs 1 and 2 will not impact the interest calculated prior thereto, the provision in any existing agreement which allows charging of a default interest rate on the entire principal amount (as opposed to the overdue principal amount), shall immediately become null and void.
The Draft Amendment will likely be further submitted for consideration of the parliament within this year which we will keep you updated if there is any progress on this.
Please feel free to contact the authors for further information about the Draft Amendment or any related legal matters.
This document is solely intended to provide an update on recent development in Thailand legislation and is not purported to provide a legal opinion, nor a legal advice to any person.