Business Security Act for Companies in Thailand

What is the Business Security Act?

The Business Security Act (BSA) in Thailand, also known as the Business Collateral Act, was enacted to facilitate better access to financial resources for businesses. The Act allows companies to use their assets as collateral while maintaining possession and usage of these assets. This is especially beneficial for Small and Medium Sized Enterprises (SMEs) defined in Thailand as manufacturers with less than 200 employees and a revenue of less than THB 500,000,000, or service providers with fewer than 100 employees and a revenue of less than THB 300,000,000. The BSA provides a framework where businesses can use their property or entire business as security for loans. 

Key Parties Involved in the Business Security in Thailand

In a Business Security Agreement under the Business Security Act, there are three main parties:

• Security Provider : An individual or a juristic person who owns the assets or business.

• Security Receiver : Only a financial institution can receive the business security under the BSA. Examples include Thai banks, foreign banks with a branch in Thailand, insurance companies, security companies, mutual funds, asset management companies, and leasing businesses

• Security Enforcer : A licensed person or entity authorized to enforce the security under the BSA if a business is used as security. 

Types of Collateral under the Business Security Act

The Business Security Act in Thailand lets businesses use different assets as collateral to get financing. This flexibility is especially helpful for small and medium-sized businesses, allowing them to access needed funds without disrupting their operations. The types of collateral that can be used include:

1. Business Operations : Includes assets integral to the business, such as cars, trucks, office equipment, and databases. These assets can be used as security while still being utilized by the business.

2. Account Receivables : Rights to receive payments from customers or clients. This type of collateral excludes claims arising from financial instruments but includes outstanding invoices and receivables from the business’s regular operations.

3. Movable Property : Physical assets such as machinery, inventory, or raw materials that are used in the manufacturing process. These assets can be pledged as security while remaining in use by the business, which is a significant advantage over traditional pledging methods.

4. Immovable Property : Real estate assets like land, buildings, condominium units, and housing projects. These are typically used as collateral because of their high value and stability.

5. Intellectual Property : Intangible assets such as copyrights, patents, and trademarks. These valuable business assets can also be used to secure loans and other financial agreements.

6. Other Properties : Currently, the Act includes perennial plants as a category of other properties that can be used as collateral. This can include valuable agricultural assets that are crucial for certain businesses.

What are the rights and duties of the key parties?

The Business Security Act outlines specific rights and duties for the key parties involved in a Business Security Agreement to ensure clarity, fairness, and legal compliance. These roles and responsibilities are crucial for the effective implementation and enforcement of the agreement.

Security Provider :

• Rights: 
  • To possess, make use of, exchange, dispose of the secured property, and use it in the manufacturing process, but the assets cannot be pledged.
  • To examine the outstanding debt.
  • To redeem the secured property at any time.
• Duties: 
  • Inform the Security Receiver of any changes to the secured property after registration.
  • Request revocation of registration when the secured debt is paid off, with the consent of the Security Receiver.
  • Exercise care for the secured property as a reasonable person and be liable for any decrease in value.
  • Allow the Security Receiver to inspect the secured property.

Security Receiver :

• Rights:
  • To be compensated if the value of the secured property decreases.
  • To inspect the secured property.
  • To receive repayment of debt from the secured property before any ordinary creditor.
• Duties: 
  • Amend the registration in case of any change in the details of the secured property.
  • Revoke the registration if the secured property is disposed of.
  • Issue a confirmation on the amount of debt.
  • Issue a consent for the revocation of the registration.

Security Enforcement

The Business Security Act provides a structured approach to enforcing security interests, ensuring that both creditors and debtors are treated fairly and that the enforcement process is transparent and efficient. Here’s a detailed look at how enforcement is handled under the Act:

• Enforcement of Property : Upon a cause for enforcement, the Security Receiver must notify the debtor and the Security Provider to repay within 15 days. Enforcement can proceed by:
  • Foreclosing the secured property and obtaining ownership 
  • Selling the secured property through public auction, notified to stakeholders at least 7 days in advance.

• Enforcement of Business : The enforcement process involves a Security Enforcer who ensures the business continues to operate. The Security Enforcer conducts a fact-finding inquiry within 15 days, and if enforcement is justified, the business’s management rights transfer to the Security Enforcer immediately.

The Business Security Act offers significant benefits for businesses in Thailand, especially SMEs, by providing flexible financing options. Companies can leverage their assets while maintaining control, supporting growth and financial stability. For detailed information and expert advice, contact Benoit & Partners and our team of experienced professionals can help you navigate the complexities of this Act and optimize your financial strategies.