||Albert T Chandler
On July 4 2016, the Secured Transactions Act came into
force. Following this, the department of business development
(DBD) launched the online system for registering business
collateral agreements. The qualified security recipient must be
a financial institution regulated by the Bank of Thailand. A
draft of the ministerial regulation allowing additional types
of qualified persons to be security recipients is now going
through the legislation process.
The security interest available under the new legislation is
equivalent to a floating charge. Unlike a pledge of movable
property, physical delivery of the assets is not required for
the perfection of the security under the new Act. The parties
enter into a business collateral agreement and then register
the agreement online.
Almost every type of collateral available under the new
legislation would be commercially acceptable to Thai financial
institutions. This includes: accounts; raw materials;
machinery; equipment; vehicles; receivables; and claims. A
business can also qualify as collateral. Rights over accounts
are frequently registered as collateral. This is due to the
specific enforcement procedure through which a security
recipient is able to set off the amount in the account after
the occurrence of an event of enforcement.
The Act introduces a new enforcement procedure by the
so-called security enforcer. To register the businesses as
collateral under the Act, the parties must appoint the security
enforcer who will conduct enforcement actions, including
operating and selling the business after an event of
The security enforcer is neither an official enforcer
officer in the civil court case nor the official receiver. To
conduct an enforcement, their duties and powers must be
elaborated under the implementing regulations. Eligible persons
who are qualified to be registered security enforcers include
lawyers and appraisers. The DBD must also issue a notification
regarding the business evaluation standard guidelines for the
reference of appraisers to review the collateral upon an event
The concept of the security, registration of the agreement,
and the enforcement process are relatively new. No court case
precedent has yet become available.
The implementation of the legislation and the practice
thereof is being monitored by all of the concerned parties.
This includes: security providers; financial institutions;
legal advisors; and the law enforcer.
Foifa Tharaphan and Albert T Chandler