On 21 December 2007, the National Legislative Assembly of Thailand approved the draft Escrow Business Act (the “EBA”), which will govern and regulate “escrow business” by setting up a licensing regime for escrow business operators and prescribing duties and liabilities of escrow agents. The EBA also prescribes provisions which must be included in an escrow agreement.
What will the EBA do:
- Regulate escrow service providers i.e., persons who provide escrow services in the ordinary course of their business and for consideration.
- Prescribe general duties of an escrow agent.
- Establish minimum provisions which an escrow agreement must contain.
- Regulate escrow agency fees and transactions that may be undertaken by an escrow agent.
- Prescribe administrative and governance requirements which an escrow agent must follow.
- Establish the Escrow Commission whose function is to monitor and regulate the “escrow business” operations going forward.
Impose criminal and administrative penalties for non-compliance by an escrow agent. When:
The EBA is currently waiting to receive Royal Assent. After which it will come into effect 90 days after its publication in the Thai government gazette.
Summary of Key Features
Duties of escrow agent
The EBA prescribes general duties of an escrow agent to ensure that each party will fulfil its obligations under the escrow agreement and provide a safe keeping for property, documents and/or money (“Escrow Property”) that the parties have deposited with the escrow agent and effect the transfer of the Escrow Property once the obligations of the parties under the escrow agreement are fulfilled.
Escrow business licence
Under the EBA, only a “financial institution” as defined by the EBA (this includes commercial banks, branch of foreign commercial banks and finance companies) can apply for an escrow business licence (“Licence”). The Licence is to be granted by the Minister of Finance on recommendation from the Escrow Commission. The Ministry of Finance has the authority under the EBA to allow non-financial institutions to apply for a Licence by enacting a Ministerial Regulation to that effect.
Existing escrow service providers
Commercial banks or finance companies who are already providing escrow services prior to the enactment of the EBA and who wish to continue to carry on escrow business must apply for a Licence within 90 days after the EBA takes effect.
Prohibition for escrow agent with conflict of interest
An escrow agent is prohibited from providing escrow services to parties in which it has a direct or indirect interest. The definition of interest will be established by the Escrow Commission.
Escrow agent fee
The escrow agent fee will be regulated by the Escrow Commission. Fees cannot be paid out of, or deducted from, the money in an escrow account.
Escrow arrangement involving land
Where an escrow arrangement involves rights over land, the escrow agent is required to notify the Department of Land that such land is subject to obligations under an escrow agreement. Any transfer of such rights cannot be registered without the notice from the escrow agent.
Protection of assets under supervision of escrow agent
Escrow Property deposited with the escrow agent under the escrow agreement will not be subject to seizure if the escrow agent becomes a judgement debtor or is under receivership or similar procedures.
Involvement with the Foreign Business Act
An escrow agent which is foreign under the current Foreign Business Act B.E. 2542 (the “FBA”) must, in addition to the Licence, seek a foreign business licence under the FBA in order to conduct escrow business.
Penalties of escrow agent
The EBA prescribes both fines and imprisonments for an escrow agent who fails to comply with the provisions of the EBA. The Escrow Commission also has the authority to order an escrow agent to pay administrative fines.