A new amendment to laws affecting guarantees, suretyships and third-party mortgages was passed by the Thai government, reports the Bangkok Post.
According to the Bangkok Post the amendment, which will take effect on February 11, aims to protect the rights of individual guarantors and mortgagors. Some of the new stipulations under the amendment include:
- The guarantee must specify the guarantor’s obligation including the duration and amount.
- The guarantee contract will be void if the guarantor is jointly liable with the borrower.
- Banks are required to notify the guarantor within 60 days if the borrower is in default.
- Banks are required to pursue borrowers of defaulted loans before pursuing guarantors.
- Lenders are required to notify the guarantor in the event of debt restructuring; the guarantor will not be obliged by the guarantee without consent.
Analysts and bankers have expressed concern, though, that the new regulations could discourage financial institutions from extending loans and could have adverse effects on exports and international borrowing in Thailand’s business sector.
The senior business attorneys at Chaninat and Leeds are experts on Thailand company registration for Thai companies and foreign businesses.
“Since the guarantor’s obligation will be limited and reduced, financial transactions including export credit guarantees and international borrowing could be affected as guarantors’ credibility may not meet international financial institution’s requirements,” explained Boontuck Wungcharoen, chairman of the Thai Bankers’ Association (TBA), as quoted by the Bangkok Post.
Kitipong Urapeepatanapong, chairman and head of the tax practice group at Baker & McKenzie, said it would be more conducive for the new laws to be applicable on individual loans and guarantees while enforcing corporate finance and guarantees under the previously existing laws.
The Bangkok Post reports that the TBA is planning to submit a counter-proposal suggesting changes to the amendment for the government to consider applying before it goes into effect.
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This is all very well, but will the change in law help those mortgage guarantors who are already in court prior to the new amendment being inacted.
It is scandalous, that where the principle defaults on a loan, and other creditors of the principle place a lien on the property; then delay the auction for years, while also charging interest at 12% on the propoerty, the loan guarantor has to pay.
This delay in auction can be spread out to up to 10 years, while the guarator is powerless to do anything to force the auction.
How can this be legally correct? What can be done about this?
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