The Business Security Act – Personal Property Security Interests

On 7 August 2015 the National Legislative Assembly (NLA) approved new legislation called the Business Security Act (BSA), which will come into force on 1 July 2016.

The BSA is intended to provide Thailand with a form of personal property security interest and improve access to credit for the country’s 2.8 million small and medium-sized enterprises (SMEs). The BSA is somewhat similar to what is known as an “Article 9” security interest in the U.S., where it is estimated that about 60% of SMEs use Article 9 financing to fund their operations.

Security Interests under Current Law

Before the BSA, the only assets that could be mortgaged were immovables, such as land registered machinery, floating houses, motor cars, beasts of burden and vessels of five tons or more. Significantly, lenders could not obtain security interests over inventory, accounts receivables, businesses and intellectual property.

Under the BSA, the types of assets that can be subject to a security interest have been broadened considerably to include businesses, claims, movable property used by security providers in business operations (such as machinery, inventory or raw materials used in the production of goods), real estate (if the security provider is in the real estate business), intellectual property and any other property prescribed in ministerial regulations.

The BSA creates a new type of contract called a business security contract, which provides that a person (either natural or juristic), known as the “security provider”, grants a security interest over property to another party, typically a financial institution (but it could be some other person as prescribed by ministerial regulations) known as the “security receiver”, as security for the performance (either by the security provider itself or by any other party) of an obligation without the need to deliver the property to the security receiver.  Typically, the obligation is the obligation to re-pay a loan provided by the security receiver.

The security provider has the right to hold, use and dispose of the property over which security is granted, and interest accrued on such property will belong to the security provider, unless agreed otherwise under the business security contract. The security provider is not entitled to grant additional security interests in the property.

Security receivers are required to register under the BSA in order to be treated as secured creditors under the Thai Bankruptcy Act, and as such will have priority over unsecured creditors in the event of bankruptcy.  This could have significant changes on how providers of moveable property (say, parties that supply raw materials) are treated in Thai bankruptcy reorganization proceeds.  Business security contracts must be in writing and registered in accordance with the terms of the BSA.


The BSA establishes an entirely new office under the auspices of the Department of Business Development (DBD), Ministry of Commerce, called the Business Security Registration Office (Security Registration Office).  The Security Registration Office will be empowered to accept registrations of business security contracts, as well as amending particulars of registration and cancelling registrations.  The Security Registration Office will also be responsible for making searchable details of business security interests available to the public, including third parties.  This means that, for the first time, a central database of security interests will be available in Thailand which should enable the quick and efficient checking of whether and which property has been used as security.  There is no such database available now for property or machinery mortgages.


The BSA provides new procedures for enforcement, foreclosure and repayment ranking which are different from the current requirements under the CCC and the Civil Procedure Code (CPC). In addition, the BSA creates the new role of “security enforcer” which is required for enforcement where the security is a business. The security enforcer must meet certain criteria under the BSA (such as not being bankrupt or a government officer and being a qualified professional) and be registered with the Security Registration Office.