In Thailand, many laws and regulations surrounding debts and guarantees are based on section 680, 698, 700 and 701 of commercial and civil laws. This section outlines that any third party guarantor will be liable for the mortgage if the borrower fails to meet his obligations. If you are not familiar with this terminology, a mortgagor and a guarantor are instruments that financial institutions use to make sure there are some sort of warranty that loans are paid back to them one way or another. It is quite common in thailand that when you go to a bank to apply for a loan, they will ask you to provide a guarantee before you are granted the loan. A few years ago the Thai government amended some laws with regards to guarantees and third party involvements in the mentioned section of law.
According to the study our lawyers at Ratchada Law Firm conducted, this new amendment is safeguarding the individual guarantors and mortgages who are found liable when the borrower fails to meet the obligations outlined in the contracts with the banks. This sounds good but there is a downside to this new amendment. It seems nowadays banks are looking for stronger collaterals in order to extend the loans which would negatively affect the international business sector. Unlike how it was in the past, now if the borrower defaults on the debt, the bank needs to try their best to make settlement with the borrower until they can take any action against the guarantor which would make the process more complicated for the banks. Also, if there are any sort of amendment with regards to the terms and conditions of the debt, the borrower is required to have the consent of the guarantor other with the guarantor is no longer liable.
There are a lot of details and complexities when it comes to the laws surrounding guarantees. If you are seeking to become a guarantor for a loan whether individual or cooperate, we highly recommend that you receive proper legal advice from competent business attorneys in Thailand, before you sign any contracts or documents.
At Ratchada Law Firm our team of expert bilingual business attorneys can walk you through all the legal process and details to make sure you the best business decisions are made when it comes to loans and guarantees. Get in touch with us today and make sure you always safeguard your business interests and dealings.