Tag Archive: secure

  1. Using Trademarks As Collateral To Secure

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    The Business Collateral Act B.E. 2558 (2015) (BCA) was enacted to provide additional means for creditors to secure primary obligations, such as amounts due under loan agreements. Collateral is a specified asset which serves as a security for the lender in the event the borrower defaults on the loan repayment. According to the BCA, there are two types of assets that can be used as collateral, namely, tangible and intangible assets. Tangible assets are assets that have a finite monetary value and usually a physical form such as land, buildings, automobiles, and machinery. Intangible assets are non-physical assets like goodwill, patents, trademarks, and copyrights.

    In the past, intangible assets were not usually accepted as collateral for loans, due to the fact that it was quite difficult to interpret the value of these types of assets. However, with the enactment of the BCA, intangible assets, especially company trademarks, are now becoming a popular asset to be used as collateral due to the fact that their value is so high, and their opportunity for growth far exceeds those of tangible assets.

    A trademark is a type of intellectual property consisting of a recognizable sign, design, or expression which identifies a brand’s products or services. Trademark owners may need to borrow money from lenders, and lenders usually require security for loans so that if the borrower defaults on the repayment of such loan, the lender can seize the property pledged as collateral or security for the loan. The parties usually enter into a security agreement that specifies the particular trademarks being used as collateral. Trademarks, as well as other intellectual property rights, can be crucial to a borrower’s financial success and may represent a significant portion of the value of the borrower’s business.

    Section 8(5) of the BCA permits the use of intellectual property rights as collateral. However, it would seem that this section was added to the BCA as an afterthought. The reason for this is because this section contains phrases that are not suitable for intellectual property rights such as “loss” and “damage”. In addition to this, there exists no criteria of how to accurately calculate the value of a trademark. This is because the value of a trademark can rise and fall depending on a number of factors such as customer trust and loyalty, and brand image and reputation, as well as the revenues generated by the sale of the products covered by trademark rights. Additionally, there exists no criteria on how to enforce a trademark as collateral under Thai law.

    In conclusion, with the enactment of the BCA, trademarks are now being accepted as collateral to secure loans to reduce financial frictions in credit markets. With lenders demanding high yielding assets to secure their loans, and the value of trademarks rising continuously, it was only natural for lenders to accept intellectual property rights, including trademarks as collateral. However, it is hard to accurately assess the value of trademarks, and the BCA does not provide a specific criterion in which this is possible. The value of a trademark is usually determined by the trademark’s ability to generate income and future predictions of profits derived from such trademark. For the practice of using trademarks as collateral to be more effective, additional principles regarding the use, appraisal, and enforcement of intellectual property rights used as collateral should be added to the BCA.

    If you have any questions regarding Using Trademarks as collateral to secure loans, feel free to contact us at [email protected] or call us at +66 (0)2 117 9131-2.

  2. How to Secure the Purchase of Property?

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    The purchase or sale of a property is a legal transaction with a far-reaching legal and financial impact.

    To secure a prospective purchase or sale of property legally, both the buyer and the seller may enter into a so-called Memorandum of Understanding (MoU) on the intention to conclude a main contract later. The parties of such an MoU can sanction a breach of the intention to conclude the contract later, with legal consequences such as compensation of damages. If the MoU is worded correctly, it should not be possible to enforce the transfer of ownership of the property, or payment of the purchase price, on the basis of the MoU. However, it should strongly incentivize the parties to enter into the main contract, since a breach of the MoU would carry a contractual penalty, and compensation if the parties agreed on such legal consequences in the MoU. 

    Without such a specific MoU, a planned purchase or sale could otherwise be canceled without consequences, as there is no – at least no provable – agreement on the transfer of ownership until then.

    The Sap-Ing-Sith

    Therefore, a properly drafted MoU is the ideal basis for such a legal transaction. It should be made in written and cover the following issues:

    • Contracting Parties
    • Relevant Regulations by the Land Registry
    • Object of Purchase
    • Purchase Price
    • Payment Arrangements
    • Transfer Conditions
    • Costs and Taxes
    • Conveyance
    • Compensation of Damages
    • Final Provisions

    In addition, essential agreed terms should be included, particularly with respect to the registration by the competent official and the requirements of the individual case.

    The MoU is a good foundation and should be considered an essential element of the purchase and sale process of a property.