Thailand has two statutory routes to taking security over shares: the classic pledge — จำนำ — in Title XIII of Book III of the Civil and Commercial Code, sections 747 to 769, which is created by delivery of the property to the pledgee; and the non-possessory business security interest created by the Business Security Act B.E. 2558 (2015) and registered with the Department of Business Development. For a concentrated holding of SET- or mai-listed equity, the pledge is the route institutional lenders use, and the reason is structural rather than habitual.
Everywhere else on this site we describe the same mechanic: your shares stay in your own account, and the lender's security arises from its rights and control over that account rather than from any transfer of ownership. That is operationally accurate, but it leaves the obvious question unanswered — under what law? This note is the statutory layer beneath every other article here.
Key takeaways
- The pledge is possessory by definition. Section 747 creates a pledge by delivery of movable property to the pledgee; section 769 extinguishes it if the pledgee lets the property return into the pledgor's possession.
- Third-party custody is expressly permitted. Section 749 allows the parties to agree that the pledged property be kept by a third person — the provision behind every custodian and security-agent structure in the Thai market.
- Shares have their own section. Section 753 provides that a pledge of a named certificate for shares or debentures cannot be set up against the company or other third persons unless the creation of the pledge is entered in the company's register book.
- Forfeiture is invalid; auction is the route. Section 756 invalidates a pre-maturity agreement that the collateral becomes the lender's; sections 764 to 767 require written notice, sale by public auction, and the return of any surplus.
- The Business Security Act B.E. 2558 is a different animal. Non-possessory, registered at the Department of Business Development, built around the business collateral listed in section 8 — not around a founder's listed holding.
Two statutes, two ideas of security
The Civil and Commercial Code offers two principal consensual securities over property: the mortgage (จำนอง), non-possessory but confined to registrable property such as land, and the pledge (จำนำ), which reaches movable property generally but demands possession. Shares are movable property, which places them by default in the pledge box — and the pledge box comes with a possession requirement attached.
For most of the twentieth century that was the whole picture, and it was a real constraint on credit: a business could not readily borrow against its own inventory or receivables without surrendering them. The Business Security Act B.E. 2558 was enacted to solve that problem, creating for the first time a registered, non-possessory security interest over movable business assets — inventory, receivables, machinery — which the pledge could not reach without possession and the mortgage, registered and non-possessory though it is, could not reach at all. It is a significant statute, but it is aimed at a different transaction from the one a shareholder has in mind when pledging a listed position.
The pledge under Title XIII: delivery, and what it demands
The pledge title opens at section 747, which defines a pledge as a contract whereby a person, the pledgor, delivers to another person, the pledgee, a movable property as security for the performance of an obligation. Delivery is not a formality that follows the contract; it is part of the definition. Section 748 sets the reach of the security, which covers the obligation together with its accessories — among them interest, compensation for non-performance, the costs of enforcing the pledge, and the expenses of preserving the pledged property. What a pledge is not is a transfer: the pledgor stays the owner of the pledged property throughout and the pledgee holds a security interest over it — which is why section 756 has to invalidate, rather than merely discourage, an advance agreement that ownership pass to the pledgee on default.
Section 749 then supplies the provision that makes commercial pledging practical, by allowing the parties to agree that the pledged property be kept by a third person. That single sentence is the statutory root of the custodian and security-agent arrangements described in our note on TSD custody and perfecting a pledge. The pledgee need not hold the asset in its own hands; what matters is that the pledgor is not left free to deal with it.
Section 758 confirms the retention right — the pledgee may keep the pledged property until the obligation and its accessories are fully performed — and section 769 supplies the other side of the coin: a pledge is extinguished when the obligation is extinguished otherwise than by prescription, or when the pledgee allows the pledged property to return into the possession of the pledgor. Possession is continuous, not a single act at signing.
A Thai pledge is not a promise about an asset. It is a state of affairs that must persist: the pledgor must not be free to take the collateral back. Everything technical about pledging scripless shares follows from that one requirement.
Instruments and shares: sections 750 to 753
Shares are not ordinary movables — they are rights represented by an instrument. The Code deals with pledges of rights and instruments across three sections before reaching shares in a fourth. Section 750 covers a right represented by a written instrument: the pledge is void unless the instrument is delivered to the pledgee and the pledge is notified in writing to the debtor of the right. Section 751 covers an instrument to order, where the pledge cannot be set up against third persons unless its creation is endorsed on the instrument, no notice to the debtor being required. Section 752 covers an instrument issued to a named person and not transferable by endorsement: the pledge must be stated on the instrument and cannot be set up against the debtor or third persons unless notified to that debtor.
Then comes the provision that matters most here. Section 753 addresses the pledge of a named certificate for shares or debentures, and provides that such a pledge cannot be set up against the company or other third persons unless the creation of the pledge is entered in the company's register book, in accordance with the Code's Title XXII provisions on the transfer of shares and debentures. On that reading the Code sends a share pledge to the same place a share transfer goes: the register. One qualification belongs here, because the whole analysis rests on it. Section 753 is written by reference to Title XXII, which governs private limited companies (บริษัทจำกัด); a SET- or mai-listed issuer is a public limited company, so its register and transfer mechanics sit under the Public Limited Companies Act B.E. 2535 and the registrar arrangements made under it, and the section 753 principle is applied through those arrangements rather than by the section's own terms. That is one of the points to put to your own Thai counsel.
Possession, and the register, when there is nothing to hand over
Shares admitted to trading on the Stock Exchange of Thailand and the mai are overwhelmingly held in book-entry form through the Thailand Securities Depository (TSD), which also acts as securities registrar for most listed issuers. There is typically no paper certificate in existence. Nothing can be endorsed and handed over, because nothing physical exists to endorse.
The register entry that section 753 makes the condition of opposability is nevertheless entirely real, and it has a procedure. The TSD operates a securities pledge registration service in its registrar capacity, so where it is the registrar for the issuer the entry is made there; where an issuer has appointed a different registrar, that registrar's own requirements apply. In outline, registration of the pledge is requested on the registrar's prescribed form, executed and supported by the documents that form calls for, and a corresponding release is filed when the facility is repaid so that the entry is removed. Forms, filing parties and supporting documents are prescribed by the registrar and are revised from time to time — confirm the prevailing requirements with the registrar rather than relying on a description in a note like this one. The point behind the paperwork is that the entry and the account controls do not simply lapse because the borrower would like them to, which is what keeps the arrangement clear of section 769, under which a pledge is extinguished if the pledgee allows the collateral to return into the pledgor's possession.
The Code's possession requirement is addressed alongside that entry, functionally rather than physically — the holding sits in an account at a participant within the TSD system, with documented rights and control given to the lender so the shares cannot be moved out from under the facility, while you remain the account holder and beneficial owner throughout. The scripless regime itself sits under the Securities and Exchange Act B.E. 2535 (1992), administered by the Securities and Exchange Commission of Thailand, and that Act carries its own provisions on securities deposited with the depository and on how dealings in them take effect by book entry. How those depository provisions and section 753 fit together for a particular structure is not something a general note can settle, and whether a particular set of documents satisfies the Code is a legal conclusion for your own Thai counsel.
| What the Code addresses | Section | How it is dealt with for book-entry shares |
|---|---|---|
| Delivery to the pledgee | 747 | No certificate exists; the holding sits in an account at a designated custodian, with documented rights and control over it given to the pledgee |
| Custody by a third person permitted | 749 | The account is administered by a licensed custodian within the TSD system |
| Entry in the company's register book — the condition of opposability | 753 | Pledge entered through the securities registrar — the TSD for most listed issuers — on the form it prescribes |
| Retention until full performance | 758 | Account controls persist for the whole term and lift only on release |
| Pledge extinguished if the collateral returns to the pledgor | 769 | Release is a documented step at the registrar and in the custody arrangements, not something the borrower can unwind alone |
Enforcement: notice, public auction, and the ban on forfeiture
The Code is at its most protective at the point of default. Start with section 756: before the obligation is due, any agreement that the pledgee shall, in case of non-performance, become the owner of the pledged property, or shall dispose of it otherwise than in accordance with the provisions on enforcement of pledge, is invalid. On the face of the provision, a lender cannot contract in advance for your shares simply to become its own — a clause of that kind is not something the parties can agree their way around, though the effect of section 756 on any particular drafting is for Thai counsel to confirm.
What a pledgee must do instead begins at section 764: notify the debtor in writing to perform the obligation and its accessories within a reasonable time fixed in the notice, and, if the debtor does not comply, sell the pledged property by public auction, having notified the pledgor in writing of the time and place. Section 765 covers the case where notification is impracticable, permitting sale by public auction one month after the obligation became due. Section 767 closes the loop on the money: the net proceeds are appropriated to extinction of the obligation and its accessories, and the surplus must be returned to the pledgor or any person entitled to it.
Two things follow, and they should be kept apart. First, the "surplus returned" half of the description in our note on what happens on default is not a courtesy of the market — section 767 requires it. The mode of sale is a separate question and a more demanding one: section 764 prescribes public auction, and section 756 invalidates an advance agreement to dispose of the collateral otherwise than under the enforcement provisions, so how a realisation of listed shares is to be conducted, and how it is reconciled with those sections, is something to settle in the documentation with Thai counsel before a facility is signed rather than to assume from a general description. Second, whether a shortfall can be pursued against your other assets is a question of the recourse profile you negotiate.
The Business Security Act B.E. 2558, and why shares sit awkwardly in it
The Business Security Act B.E. 2558 was published in the Government Gazette on 5 November 2015 and came into force 240 days after publication, on 2 July 2016. Under it a security provider grants a security receiver a registered interest in defined business collateral while retaining possession of it and continuing to use it in the ordinary course of business. A factory can finance against its machinery without shipping the machinery to the bank.
Section 8 sets out the categories, and the list is specific: a business taken as a going concern; claims; movable property used in the operation of the business, such as machinery, stock and raw materials; immovable property where the security provider carries on an immovable-property business; intellectual property; and such other property as may be prescribed by ministerial regulation. The security agreement must be made in writing and registered with the Business Security Registration Office at the Department of Business Development (DBD), Ministry of Commerce: it takes effect from the moment of registration, which also fixes its priority. The Act also restricts who may act as a security receiver to financial institutions and other persons prescribed by ministerial regulation, and introduces the security enforcer (ผู้บังคับหลักประกัน) — a licensed, independent person who conducts enforcement where the collateral is a business taken as a going concern.
Read the section 8 list again with a founder's SET-listed holding in mind and the mismatch is immediate: a personal or family investment in a listed company is not a business taken as a going concern, not machinery or stock used in operations, not immovable property, and not intellectual property. And a DBD registration is a filing in a companies-registry system; it is not the entry in the company's register book that section 753 makes the condition of opposability, and it is not connected to the registrar and participant records at the TSD where a listed shareholding actually lives.
| Pledge — CCC Title XIII, sections 747 to 769 | Business security — BSA B.E. 2558 | |
|---|---|---|
| Provider keeps possession | No — delivery to the pledgee or an agreed third person | Yes — the provider keeps and uses the collateral |
| Where it is recorded | The company's own register book for shares (section 753), via the TSD as registrar | The Business Security Registration Office at the DBD |
| Who may take the security | Not restricted by the pledge provisions themselves; other Thai law may still bear on who lends | Financial institutions and persons prescribed by ministerial regulation |
| Collateral reached | Movable property generally, including shares | The section 8 list: business as a going concern, claims, business movables, some immovables, IP |
| Enforcement route | Written notice, then public auction (sections 764 to 765); surplus returned (section 767) | The Act's own procedure, with a licensed security enforcer for a going-concern business |
| Forfeiture agreed in advance | Invalid under section 756 | Governed by the Act's enforcement provisions rather than the pledge rules |
Which route a lender uses, and how it meets the custody chain
Financing secured on SET- or mai-listed equity is documented as a pledge under the Civil and Commercial Code. The pledge regime is mature, its enforcement path is defined by statute, the pledge provisions themselves impose no eligibility restriction on the secured party — which is not the same as saying Thai law is indifferent to who lends, a separate question for counsel on both sides — and the Code gives shares a purpose-built recording provision in section 753 that the depository already operates a service for.
That is where the statute meets the custody chain. The TSD holds the position in book-entry form and, where it is the issuer's registrar, maintains the registrar records for the listed company; the pledge is registered against the holding on the registrar's prescribed form, which is the perfection step; a licensed custodian administers the account as the third person contemplated by section 749; and on repayment the release is filed, the controls lift, and the account reverts to your unencumbered hands with nothing to unwind. The Form 246-2 disclosure regime runs on a separate track, keyed to ownership rather than to security.
None of this is a substitute for advice. The glossary defines the terms used here, our note on the word จำนำ disentangles the vocabulary, and what a Thailand stock loan is sets out the instrument as a whole. The statutory analysis for your own position belongs with qualified Thai counsel. We act as arranger and introducer, and we do not advise on Thai law.
Frequently asked questions
01Which Thai law governs a share pledge?
02Does a Thai pledge require the lender to take possession of the shares?
03How is a pledge over scripless SET shares recorded?
04Can the lender simply keep my shares if I default?
05What is the Business Security Act B.E. 2558, and does it cover listed shares?
06Which route do lenders actually use for SET-listed shares?
This article is general information about the Thai law of pledge and business security as it bears on share-backed financing, and is not legal, tax, or financial advice. Statutory provisions are described in outline and are subject to amendment, ministerial regulation, and judicial interpretation; their application to any particular holding, agreement, or enforcement depends on the specific facts. Obtain advice from qualified Thai counsel and a financial adviser before acting.