After a long wait, the Secured Transaction Act B.E. 2558 (2015) has finally come into full force on 2 July 2016. The Act introduces a new form of security interest over assets to the Thai legal system, which previously recognised only (i) mortgage (available for immovable property and certain specific types of movable property); and (ii) pledge (available for movable property and requires the delivery of the pledged property). Thanks to the new legislation, the old limitations were overcome and a legal security can now be created over a broader range of assets of economic value (e.g. business, rights of claim, machinery, inventory, raw materials, immovable property (only if the security provider directly engages in a real estate business), intellectual property, and etc.) without the need for delivery of the secured asset. Particularly, the security provider retains the right under the Act to possess, use, exchange, dispose of, transfer and mortgage the secured asset during the secured period, as well as to use it as a security to secure other performances except by way of pledge in which case the pledge will be void.

The Act also sets out registration requirement of the secured transaction agreement, upon which the security receiver (i.e. a financial institution or other person to be prescribed by ministerial regulation) shall have preferential rights over the secured assets and in priority to the unsecured creditors. Moreover, specific procedures for the enforcement of security created under the Act have been established with an aim at promoting a more efficient and less time-consuming out-of-court enforcement.

In light of this significant development, small and medium enterprises or even large-scale businesses would benefit from gaining more flexibility and greater access to the needed finance. 
 

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.