What should a Shareholder Loan Agreement include under Thai law?

1. Definitions and Interpretation
2. The Loan and its Purpose
3. Drawdown
4. Interest
5. Repayment and Prepayment
6. Payments, Receipts and Taxes
7. Approvals and Equal Treatment
8. Subordination
9. Company's Undertakings
10. Events of Default
11. Costs and Stamp Duty
12. Confidentiality and Personal Data
13. Notices
14. Governing Law and Disputes
15. General

• Pass a board resolution approving the Loan before the drawdown (Clause 7.1). Because the Lender is also a director, the Lender should not vote on the resolution, and the minutes should record that. Check the articles of association and any shareholders' agreement: many require shareholders' approval for borrowing above a limit or for contracts with a shareholder.
• Transfer the Loan into the Company's own bank account, never to a director's personal account, and have the Company issue a signed receipt (Clause 3.3). A loan of more than 2,000 THB can be enforced in court only if there is written evidence signed by the borrower (Civil and Commercial Code section 653).

• Interest, including default interest, may not exceed 15% per year (Civil and Commercial Code section 654). Charging more is void for the excess and may be a criminal offence. Clause 4.4 caps the total.
• Interest on unpaid interest is not charged (Clause 4.3). Thai law allows compound interest only in narrow cases.
• An interest-free loan is allowed between the Parties. If the Lender is a company, the Revenue Department may assess the Lender as if it had received interest at a market rate. Ask an accountant before choosing interest-free.

• A loan agreement carries stamp duty of 1 THB for every 2,000 THB, or part of 2,000 THB, of the loan, up to a maximum of 10,000 THB (Instrument 5). On the amount you entered, the duty is the amount the system calculates from the figures entered, and each counterpart carries the amount the system calculates from the figures entered.- A loan agreement carries stamp duty of 1 THB for every 2,000 THB, or part of 2,000 THB, of the loan, up to a maximum of 10,000 THB (Instrument 5). Convert the Loan into Thai Baht at the exchange rate on the date of signing to calculate the duty.
• By law the Lender is liable for the duty, but Clause 11.2 makes the Company pay it. If the Agreement is signed electronically, pay the duty through the Revenue Department's e-Stamp Duty system within the legal time limit.
• An unstamped loan agreement cannot be used as evidence in a Thai civil court until the duty and a surcharge are paid (Revenue Code section 118).

• The Company generally must withhold tax when it pays interest, and must give the Lender a withholding tax certificate (Clause 6.4). The rate depends on whether the Lender is an individual, a Thai company or a lender abroad, and a double tax treaty may reduce it for a foreign Lender. Confirm the rate with an accountant before the first interest payment.
• A company Lender that lends money may also have to pay specific business tax on the interest it receives. Ask an accountant.
• Record the Loan in the Company's accounts as a loan from a shareholder (Clause 9.1(c)). The auditor will disclose it as a related-party transaction.

• If the Lender is abroad, ask the Company's bank in advance which foreign exchange forms and documents it needs to receive the Loan and, later, to send repayments and interest out of Thailand (Clause 6.5). Keep the bank's records of both.

• The Lender must sign a receipt for every repayment (Clause 6.2). Without a signed receipt, a court may not accept that a loan made in writing was repaid.
• The Lender may demand repayment at any time on … days' notice (Clause 5.1). A shareholder who needs the Company to survive should demand repayment only when the Company can pay.
• Because the Loan is subordinated (Clause 8), the Lender is paid after the Company's other creditors if the Company becomes insolvent. How a Thai court or official receiver will apply a subordination clause in bankruptcy has not been settled in every case, so do not rely on it as the only protection for other creditors.
• If the Company later wants to turn the Loan into shares, that needs a capital increase and a separate agreement; it does not happen automatically.

• A Thai court works in Thai. A Party that relies on this Agreement must file a certified Thai translation. Budget for this cost.

Compiled from the notes that accompany the English contract templates on this site, published by Phuwara Krobtaku (ภูวรา ครอบตะคุ), Thai attorney-at-law, licence no. 477/2558. The short answer and summary at the top of this page are put together by the site from the template's clause headings and notes. Statutes are quoted only in the official Thai text: Thai is the only official language of Thai legislation, and an unofficial translation can mislead. Article registry OKC-2A7B6D. If you reuse this content, please credit the author and link to the original.