On the 25th of November 2015, the Business Collateral Act (BCA) was passed by the Thai National Legislative Assembly. The BCA came into force on the 1st of July 2016.
Previously, the field of secured transactions law was governed by the Thai Civil and Commercial Code (CCC). The new BCA expands both the range of security interests that can be taken, and the enforcement powers enjoyed by secured creditors.
Previously under the CCC, only mortgages and pledges could be created by parties. Industry participants nonetheless entered into a range of security arrangements, such as assignments of accounts, but these arrangements were sometimes affected by uncertainty. This limited regime was viewed as an impediment to financing in Thailand: a problem that was to be addressed by the BCA.
The BCA creates a new type of contract: a Business Collateral Contract. Under a Business Collateral Contract, the security provider—which can be a legal entity or a private individual—is permitted to grant non-possessory security to the security receiver, which must be a financial institution or an approved body).
The BCA specifies a list of different categories of assets which can form part of a Business Collateral Contract: see BCA, ss 8-9
In order to be valid, a Business Collateral Contract must be in writing, and must be registered with the Business Collateral Registration Office.
The security receiver then enjoys a right of recourse to the asset in preference to unsecured creditors, and is treated as a secured creditor for the purposes of the Thai Bankruptcy Act.
The security provider retains the right to alienate, dispose of, or otherwise make use of the asset, among other rights.
The BCA further provides for enforcement methods for specific categories of assets, and for third party rights in certain transactions
It is envisioned that the BCA will enhance the provision of credit and improve the ease of entering into secured transactions in Thailand.