Escrow Act B.E. 2551 (2008)

(17/2008)

The Escrow Act of 2008 came into effect on 21 May, establishing laws governing the escrow business in Thailand.

In an agreement to purchase and to sell immovable property, or any such reciprocal contract, one party will have an obligation to transfer or deliver assets or documents to another party and the other party will be obligated to pay the first party. In order to ensure that the obligations of both parties are fulfilled, the parties may mutually agree to appoint an escrow agent. This involves a tri-party written agreement known as the escrow agreement.

The escrow agent has the duty to ensure that the parties fulfill their obligations under both the contract and the escrow agreement. The escrow agent will also be responsible for the safekeeping of any money, assets or documents deposited by the parties and for handing over the money or arranging the transfer of ownership or rights to the assets when required.

As well as providing general definitions and outlining the main features of an escrow agreement, the Act lists the conditions and requirements for engaging in the escrow business, the rights and duties of the parties to an escrow agreement and those of an escrow agent, and the powers of the Escrow Committee. It also prescribes penalties for non-compliance.One of the requirements is that companies wishing to engage in the escrow business must obtain a license from the Finance Ministry. The Act will not affect existing escrow agreements, but if existing escrow agents wish to continue to carry on their business under the new Act, they are required to apply for a license within 90 days of the Act taking effect.

The escrow business under the Act can only be operated by a juristic person. The term “escrow agent” is defined as a juristic person whose creditworthiness has been approved by the Escrow Committee, which acts as a middleman.

Only a financial institution, or other juristic persons as specified under a ministerial regulation, will be permitted to act as an escrow agent. Further, the escrow agent must have no conflicts of interest with either party to the contract and must obtain a license to conduct the escrow business from the Minister of Finance.

Escrow agents will be monitored by the Escrow Committee, which has the authority to order them to correct or stop prohibited activities if they are detected and to perform their duties in compliance with the Act. If an escrow agent does not comply with an order of the Committee or with certain sections of the Act, the Committee will have the authority to impose an administrative fine on the agent. The Act also prescribes criminal penalties for escrow agents committing fraud. The fines and penalties will also apply to the managing director or authorized representative of the escrow agent unless they can prove their innocence or demonstrate that they exercised sufficient duty of care.