Project Finance 2023 Comparisons

Last Updated November 02, 2023

Contributed By TTT & Partners

Law and Practice


TTT & Partners is a Bangkok-based law firm providing legal services to international and domestic clients. Founded in early 2023 by a group of internationally recognised practitioners and a hand-picked team, the firm comprises highly regarded legal experts specialised, amongst other things, in projects, finance and energy, regularly advising both public and private entities in high-value transactions. One of its members recently assisted in the drafting of Thailand’s energy and PPP legal frameworks. Uncompromisingly client-centric and efficient by design, the firm leverages modern tools, combining in-depth legal and strategic analysis rooted in local expertise, to swiftly deliver business-oriented solutions frequently exceeding expectations. This unique approach has established TTT & Partners as a go-to firm for numerous domestic and international corporations and has earned the trust of many of Thailand’s leading executives in many high-value transactions. Its key clients include major energy companies such as the PTT Group and Bangkok Mass Transit System.

The following typically act as sponsors and lenders:

  • sponsors – domestic and international companies interested in the project, whether as suppliers, offtakers, service providers and other investors; and
  • lenders – domestic and international commercial banks, multilateral and supranational banks and agencies such as IFC and ADB.

The public-private partnership in Thailand follows a number of stages.

1. The relevant government agency will issue a request for proposal (RfP) to request bids from private entities.

2. Private entities provide bids to the government agency, which the government agency will review for price competitiveness and the quality of the bid combined.

3. After the selection of the bidder, the relevant government agency and the private party will enter into negotiation to finalise the concession agreement.

4. After the concession agreement is signed, the parties will then satisfy their conditions precedent before the issuance of the NTP to proceed with the work construction prior to the commencement of commercial operations.

5. After construction completion, the private party will commercially operate the project until the end of the contractual term.

In stages 3–5, the parties will typically have to rely on contract management when any question or conflict arises. The typical issue encountered in practice is delay in construction. The delay may happen for several reasons, such as delay in the handover of the project land by the relevant government agency. This would delay the construction process and may result in a delayed commercial operation date and cost overrun. Lenders are typically concerned by these issues and will monitor the project documents carefully if these events arise.

Most public-private transactions operate on a build-transfer-operate (BTO) basis, so the project company does not have any significant assets to be provided as security. The lenders will need to consider the resulting risks.

Typically, the lenders will have a step-in right in project financing. They would generally request the security document package to include conditional assignments of rights and duties under the project documents to ensure a smooth stepping-in process.

For the risks during the construction and operation phase, the lenders will typically request sponsor support to cover both pre- and post-completion. The triggering events for the pre-completion and the post-completion support will differ. The key triggering event for the pre-completion support includes the cost overrun events and the premature termination of any project agreement. The post-completion support triggering event includes cash shortfall or other termination of the project financing.

Moreover, the lenders will typically negotiate an event of default clause to provide an exit in case of any project-specific risk. They would also generally consider using a material adverse change clause to pressure the borrower to provide additional security, sponsor support, or exit.

Loans, which may be bilateral or syndicated, are generally provided on a senior basis (secured if security is available). Multinational or supranational institutions may lend alongside the commercial lenders. Equity and sponsor support is provided by way of subordinated loan. Tiered financing involving mezzanine and other forms of non-senior debt from commercial lenders is very unusual in Thailand. Term and revolving facilities for working capital generally rank pari passu.

Railways, highways, roads, airports and ports will be active in the coming year as they are in the project pipeline of the government. The government places emphasis on the development of airports in the provinces on the Andaman side of the country, including the continuation of the U-Tapao International Airport development and the focus on the development of an airport in Phuket (as seen from the latest prime minister visit in late August 2023).

There is also a shift of focus to ports development, as seen in the project contemplation for the Landbridge Project which will link the Andaman Sea in the Chumphon Province to the gulf of Thailand in the Ranong Province. The project is currently being assessed by the related governmental agencies for feasibility and impacts on the environment and people.

The focus on land transportation will continue to be emphasised by building large highways connecting provinces.

There are three types of security over assets under Thai law: mortgages, pledges and business security. In addition, bank accounts and contractual rights may be subject to conditional assignment.

Mortgages can be created over immovable property (land and buildings), certain vessels and machinery which is registered under the Machinery Registration Act B.E. 2514 (1970). The mortgage is perfected by registration at the relevant government department (the Land office or Ministry of Commerce).

Pledges can be created over movable property, which is basically all property except immovable property. However, to perfect a pledge the property must be delivered to and held by the lender or its agent. Devices such as appointing the manager of a project as the agent of the lender to hold project assets on its behalf have not been enforced by the courts. Therefore, inventory, raw materials and bank accounts are practically incapable of pledge. In project finance, the assets most commonly subject to pledge are the shares in the project company. To perfect a pledge of shares, the pledge must be entered in the company’s shareholders register and the share certificates delivered to the lender or its agent. An analogous process is available to create security over listed shares, which may be dematerialised.

The Business Security Act B.E. 2558 (2015) (BSA), introduced in 2016 to provide the possibility of creating security over asset classes beyond the limited classes which might be subject to mortgage or pledge, can be created over inventory, raw materials, receivables, insurance policies, contractual rights, intellectual property, bank accounts, real estate held for development purposes and a whole business. The business security is perfected by registration at the Ministry of Commerce. Only domestic financial institutions (Thai or foreign acting through a Thai branch) or foreign financial institutions acting in a syndicate alongside domestic financial institutions can take business security. Updated lists of the assets subject to the business security may be required to be delivered to the Ministry from time to time.

Bank accounts and rights under contracts including leases may be subject to conditional assignment, which is strictly not a security interest under Thai law.

Thai lenders in project financing typically look for project-related assets, including the following:

  • assignment/business security over project accounts;
  • assignment/business security over receivables and rights under project documents;
  • business security over machinery;
  • mortgages of the project land; and
  • pledge of shares in the project company.

Thai law does not permit a floating charge but does permit a universal security by way of a whole business security. However, a whole business security is not typically provided as its practical use is open to challenge. The enforcement process under the BSA can be done without litigation proceedings. Once the security enforcement event under the BSA arises, the lender will notify the security enforcer, and the security enforcer will conduct a fact-finding inquiry to determine whether a security enforcement event has indeed occurred. If it has and the lender wishes to enforce the security, the security enforcer makes a decision for security enforcement. To appeal this decision, the objecting party must submit its claim to the court within 15 days from the date it receives the decision notice.

If there is no objection, the borrower must hand over the business to the security enforcer, including the bank accounts, seals, receivables and debts. The security enforcer will manage the business until it can be disposed of or sold. The security enforcer is empowered to value and determine the methods of sale of the business on its own. The sale proceeds will be applied in the following order:

  • enforcement fees;
  • the security enforcer’s remuneration and other expenses;
  • repayment of the debts of the secured lender; and
  • repayment of the debts of the other creditors.

Any remaining amount will be paid to the borrower.

This process means that the borrower will lose control of the business and will not have any influence over the valuation, method of sale or management of the business after the handover. The lack of control increases the borrower’s risk of its business being sold for less than market value.

The steps for the security enforcer to make a decision for security enforcement as opposed to directly going to court may also expose lenders to potential risks, such arguments relating to the malicious transfer of property from the business.

Costs associated with registering collateral security interests depend on the type of the security interest being created. Generally, the costs, excluding the legal fees, will include the governmental fees and stamp duties.

  • Pledges are subject to stamp duty of THB1 for every THB2,000 of the secured debt, but if stamp duty is paid on the loan secured by the pledge no duty will be payable on the pledge.
  • Mortgages are subject to a registration fee of 1% of the secured debt subject to a cap of THB200,000.

Registration fees for business security depend on the type of the property subject to the BSA.

The collateral will need to be identified in the security document complying with each legal perfection requirement under the law. A mortgage or pledge needs to specify the identity of the property mortgaged or pledged.

A business security can be created over a class of assets, but there is a requirement to deliver a list at the time that the business security is created. The list may be amended later. In such case, the security receiver, with written consent from the security provider, shall proceed with the amendment of the list within 14 days from the date of receiving such written consent.

A Thai company must have the power to grant security or guarantees in its objects in its Memorandum of Association. There may be restrictions in any agreement to be provided as collateral against security being created over it.

To be valid under Thai law, guarantees must specify:

  • the purpose of creation of the underlying debt;
  • the nature of the guaranteed obligation;
  • the maximum guaranteed amount; and
  • the period during which the guaranteed obligation may be incurred.

The Thai Civil and Commercial Code (CCC) also specifies certain matters relating to guarantees which benefit guarantors and cannot be excluded by contract.

This issue depends on the nature of the collateral. Mortgages and business security must be registered. Pledges cannot be registered but the pledged property must be delivered to the pledgee or its agent to create a valid pledge.

Release depends on the nature of the security. Registered security interests such as business security and mortgages must be de-registered. For pledges the pledged property is redelivered to the pledgor but it is customary to sign a memorandum confirming the discharge of the debt, and, in the case of pledged shares, notice of the release would be given to the issuing company to remove the entry from the share register.

A secured lender can enforce its collateral after the loan has been accelerated and remains unpaid or remains unpaid at maturity. The enforcement of collateral depends on the nature of the security created.

To enforce a mortgage (whether of land and buildings or machinery), after giving reasonable notice to the debtor of the enforcement (the length of reasonable notice will depend on the asset and status of the debtor but there is no Supreme Court precedent for a period of less than 30 days), the creditor needs to obtain a court judgment for the enforcement of the mortgage. It may take nine months to obtain a first instance decision, and the debtor can appeal to the Court of Appeal and the Supreme Court. After a court order is obtained, enforcement takes place by way of an auction sale conducted the Official Receiver’s Department of the Ministry of Justice (the Official Receiver).

Theoretically foreclosure is available but in practice it is not, as it requires interest to have been unpaid for five years.

A pledge can be enforced without a court order, but reasonable notice must be given to the provider of the security to perform its obligations. Enforcement is by way of public auction conducted by the creditor.

The enforcement of a business security does require a court order if the security provider refuses to give over possession of the secured property; the security receiver may file a petition to the court for enforcement. However, an auction process is involved, which is more streamlined than the auction process under the CCC applicable to mortgages.

A choice of foreign law will be upheld by the Thai courts if the foreign law is proved to the satisfaction of the court, which is within the discretion of the court. However, a Thai court will not enforce a foreign law if to do so would be contrary to the public order or good morals of the Thai people.

There are no Supreme Court precedents ruling on the validity of clauses providing for submission to the jurisdiction of foreign courts. However, this may be moot since Thailand does not enforce foreign judgments.

A judgment given by a foreign court will not be enforceable in Thailand without a retrial of the merits of the case. Foreign judgments may, though, be used as evidence in Thai proceedings.

Thailand is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Accordingly, a foreign arbitral award obtained in a jurisdiction of another signatory to the Convention will be enforceable in Thailand, subject to the conditions in the Arbitration Act B.E. 2545 (2002). This provides the following conditions for the enforcement of foreign arbitral awards.

  • A party to the dispute who seeks enforcement of the arbitral award shall file a motion with the competent court within three years from the date on which the award becomes enforceable.
  • Upon receipt of such motion, the court shall expeditiously conduct an inquiry and render judgment forthwith.
  • The applicant for enforcement of the arbitral award must supply the court with the following documents:
    1. the original award or a certified copy thereof;
    2. the original arbitration agreement or a certified copy thereof; and
    3. an official Thai translation of the award and of the arbitration agreement.

Foreign lenders are not prejudiced in enforcing their rights under loans or security documents (though foreign lenders cannot have the benefit of business security unless as part of a syndicate with Thai financial institutions). Proceedings will be conducted in Thai and generally all contractual and other documentation to be submitted to the court will need to be translated into Thai.

Foreign lenders are not restricted in any way from granting loans under Thai law. However, if they wish to lend from a presence in Thailand, they will need a licence under the Thai Foreign Business Act B.E. 2542 (1999) (FBA), or be licensed as a financial institution under the Thai Financial Institutions Business Act.

Granting of security or guarantees to foreign lenders is not restricted or impeded in any way under Thai laws, except that foreign lenders cannot have the benefit of business security unless as part of a syndicate with Thai financial institutions.

In brief, the FBA prohibits a number of activities for foreigners. Foreigners for these purposes includes Thai-incorporated companies where 50% or more of the capital is held by foreigners.

The activities are divided into three lists: activities in one list are completely prohibited to foreigners, and activities in the second and third lists may in theory be engaged in by foreigners with permission from the appropriate Thai government body. Permission is never in practice given for the activities on the second list, while permission for certain of the activities on the third list may be forthcoming from the Department of Business Development of the Ministry of Commerce.

For certain activities, promotion from the Thai Board of Investment (BOI) may be available. In such a case foreign majority-ownership may be possible.

Exceptions to the foreign ownership restrictions may also be available to companies ultimately owned by US citizens (with or without Thai nationals), under the US-Thai Treaty of Amity, and under certain ASEAN treaties.

Prior to remittance abroad of any amount payable, either by Thai or foreign investors, one must apply for foreign exchange approval from the Bank of Thailand or through its authorised agents (eg, commercial banks in Thailand holding a foreign exchange licence). Such approvals are routinely granted for all bona fide transactions provided that the relevant supporting documents are submitted, including evidence that the obligation to make payment has arisen under the foregoing agreements (such as judgment from a Thai court) to the satisfaction of the authorised agent.

Thai laws do not prohibit or set out any condition for any project company to maintain offshore foreign currency accounts. Note that the Bank of Thailand regulates only the opening of a bank account in Thailand. However, payment to the account from Thailand is subject to foreign exchange approvals and there may be obligations on a Thai recipient of foreign currency to repatriate it if it exceeds USD1 million.

Financing or project agreements do not need to be registered or filed with any government authority, but local formalities must be complied with (such as payment of stamp duties) for the agreement to be valid and enforceable.

Ownership of Land

Ownership of land does not require a licence. However, land may not be owned by foreigners or companies that are majority foreign-owned, unless the company has received a promotion from the BOI for the business or project to be carried on or operated by it.

Ownership of Natural Resources or Undertaking the Business Thereof

Thai law prohibits any person to own natural resources. Therefore, no one is allowed to operate or hold a licence in relation to owning natural resources since they are public property.

Undertaking Operations on Land or Natural Resources

For Thai entities, pursuant to the Land Development Act B.E. 2543 (2000), no person shall be engaged in land development except when a licence has been obtained from the Bangkok Land Development Board or the Provincial Land Development Board, as the case may be.

As natural resources are public property, pursuant to the relevant laws, prior to undertaking certain operations thereon, a licence or concession certificate or approval from the appropriate minister is required to be obtained from the government, eg, mining, groundwater, and logging.

Agency is recognised in Thailand but trusts only in specific situations (such as Real Estate Investment Trusts). Security may be held by a security agent but never a security trustee.

In the case of mortgages and business security, all lenders are registered as secured creditors.

It is possible for a security agent to hold pledged assets on behalf of the lenders, but it is normal for all the lenders to be parties to the relevant pledge agreement. Parallel covenants have been used in certain transactions to avoid issues with the security being held by an entity that is different to the lenders but the writers are unaware of the effectiveness of parallel covenants having been tested in the Supreme Court.

The priority of competing security interests is determined by the time of registration. As between different classes of lenders, priority can be varied by contract. Subordination arrangements between creditors may, as between the creditors, survive the insolvency of the borrower but will not be effective as against the borrower in its insolvency. It is possible under Section 130 of the Bankruptcy Act B.E. 2483 (1940) to create obligations which are subordinated to all unsecured creditors.

In theory, Thai local law does not require the project company be organised under the laws of Thailand. However, the effect of the FBA and the requirements for concessions etc to be granted to Thai entities, combined with the desire for limited liability on the part of project sponsors, mean that project companies are almost always limited liability Thai companies.

Business reorganisation/rehabilitation in Thailand in an insolvency involves the following key steps.

  • A petition is filed with the bankruptcy court that the borrower is insolvent or is unable to pay its debts as they fall due. The petition can be filed by a creditor, the debtor (borrower) or a regulator.
  • The court will issue an automatic stay to freeze legal action (litigation, enforcement of judgments or security or repossession of leased property) against the borrower, but the borrower is unable to enter into transactions or make payments other than in the ordinary course.
  • After the court determines that the borrower is to be reorganised, the directors and shareholders of the borrower cease to have any power to manage the borrower and an interim executive or planner takes over the management of the borrower. The planner prepares a restructuring plan.
  • All the creditors of the borrower are notified and must submit claims within one month after the appointment of the planner is published in the government gazette. The borrower, the planner and other creditors can dispute the amount of claims submitted.
  • Creditors are divided into classes according to any security held by them and their different interests and meetings are held to approve the plan. The reorganisation plan must be approved by a two-thirds majority of the creditors of at least one class and creditors attending and voting at all class meetings to whom a majority of the total claims are owed. It will then be considered by the court.
  • If the plan is approved by the court, it will be implemented by an administrator who will take over management of the borrower from the planner. After the proper implementation of the plan and the plan’s stated results have been achieved, the court will order the cancellation of the restructuring order. The borrower will be entitled to resume its business operations and the powers of management and shareholders will be restored.

The impact of the commencement of insolvency processes on a lender’s rights depends on whether the insolvency proceedings are bankruptcy or reorganisation/rehabilitation. The commencement of reorganisation/rehabilitation proceedings results in an automatic stay preventing the enforcement of judgments or security or the repossession of leased property. It does not prevent the acceleration of debt, the termination of contracts or the exercise of rights of set-off.

No stay applies on a bankruptcy petition and secured creditors are free to enforce their security.

In the case of a reorganisation, the order of payment is a matter decided by the restructuring plan proposed by the planner, as approved by the meeting of the creditors and the bankruptcy court.

In the case of a reorganisation, the automatic stay will apply preventing enforcement of security. A lender who did not initiate the reorganisation proceeding must submit a repayment request within one month after the appointment of the planner. The debtor, the planner and other creditors have the right to challenge the repayment request within 14 days after the one-month period has elapsed.

A creditor whose repayment request has been accepted will receive an allocation of voting rights to participate in the creditors’ meeting under the processes above.

It is therefore very important that the lender is mindful of the timeline for both claiming the repayment and challenging other creditors’ claims for repayment.

Transactions entered into shortly before the commencement of insolvency may be subject to being set aside as preferences or transactions prejudicing creditors. In addition, the lender of a loan is not able to recover it in subsequent insolvency proceedings if at the time the loan was made the lender knew the borrower was insolvent, subject to certain exceptions (Section 94 of the Bankruptcy Act B.E. 2483 (1940)).

Foreign lenders are not excluded from participating in insolvency proceedings.

Foreign insurance companies can apply for a licence to conduct their insurance business provided that they establish a branch in Thailand and comply with the procedures and conditions under the relevant ministerial regulations.

An insurance policy may be payable to a foreign creditor if the foreign creditor is named as loss payee or has the benefit of a business security in its favour of the insurance policy. The foreign creditor must be acting in a syndicate alongside Thai financial institutions to be able to have the benefit of business security over the policy.

Payments of principal are not subject to withholding tax. Payments of interest are not subject to withholding tax if made to a Thai lender but will be subject to withholding tax if paid to a foreign lender at the rate of 15%, which may be reduced to 10% pursuant to an applicable Double Tax Treaty. Other payments (fees) may or may not be subject to withholding tax depending on whether they are categorised as interest.

Stamp duties and registration fees are relevant, but the borrowers typically bear any associated costs.

Under the CCC, interest may not exceed 15% per annum. This limit does not apply to Thai financial institutions, which may charge interest at the rate announced publicly at the bank’s offices and/or on its website. For a foreign financial institution duly registered under foreign law, the maximum interest rate chargeable is 20%.

Thai law typically governs project agreements.

A domestic loan will be governed by Thai law. A cross-border loan may be governed by English, Hong Kong or Singapore law, as an alternative to Thai law.

In the case of a cross-border transaction using foreign law, securities documents for Thai-situated assets will still typically employ Thai law.

TTT & Partners

Unit DE, Tower B, 18th floor
Vanissa Building
29 Chit Lom Alley
Pathum Wan
Bangkok 10330

+66 20 805 699
Author Business Card

Law and Practice in Thailand


TTT & Partners is a Bangkok-based law firm providing legal services to international and domestic clients. Founded in early 2023 by a group of internationally recognised practitioners and a hand-picked team, the firm comprises highly regarded legal experts specialised, amongst other things, in projects, finance and energy, regularly advising both public and private entities in high-value transactions. One of its members recently assisted in the drafting of Thailand’s energy and PPP legal frameworks. Uncompromisingly client-centric and efficient by design, the firm leverages modern tools, combining in-depth legal and strategic analysis rooted in local expertise, to swiftly deliver business-oriented solutions frequently exceeding expectations. This unique approach has established TTT & Partners as a go-to firm for numerous domestic and international corporations and has earned the trust of many of Thailand’s leading executives in many high-value transactions. Its key clients include major energy companies such as the PTT Group and Bangkok Mass Transit System.