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Escrow Accounts in Thailand. An escrow arrangement places funds, documents or other assets with a neutral third party — the escrow agent — to be held and released only when clearly defined conditions are met. In Thailand escrow is an established, regulated legal mechanism used most often in real-estate deals, large commercial contracts, M&A and project finance to reduce counterparty risk and increase transactional certainty. What follows is a practical, legally grounded walkthrough of how escrow works in Thailand, the legal framework and typical contractual protections you should insist on.
The modern framework for escrow in Thailand stems from legislation enacted in the late 2000s (often referenced as the Escrow Act and related instruments) and supervisory rules issued by the Bank of Thailand (BOT). The BOT has issued notifications that set out how commercial banks may operate escrow agent services and the supervisory expectations applicable to licensed escrow providers. In practice this means commercial banks and other licensed custodians operate under a licensing regime and must comply with both the Escrow law and BOT rules.
Key practical consequences:
Licensed provider requirement: an entity acting as an escrow agent (holding third-party funds) must have the statutory authority / license to operate as an escrow custodian; BOT guidance clarifies the scope of permitted activities and governance expectations for banks that offer escrow services.
Escrow accounts are primarily used to:
Hold purchaser deposits and progressive payments in property transactions (especially in off-plan sales and developer projects).
Protect sellers and buyers in cross-border M&A and share purchases by staggering consideration release based on completion mechanics and warranties.
Custody performance guarantees, retention monies and milestone payments in construction and project finance agreements.
These use-cases are common in Thailand because escrow—when properly structured—prevents either side from having unfettered access to funds before contractual preconditions (title transfer, inspection, corporate approvals) are satisfied.
Escrow agreement (contractual foundation).
The parties draft a detailed escrow agreement (or escrow provisions within the main contract). The agreement identifies: the escrow agent, the precise release conditions, required documentation for release, dispute resolution procedure, fees, duration, permitted investments of idle funds and termination consequences.
Selection and licensing of the escrow agent.
Parties usually select a licensed commercial bank or licensed escrow operator. Confirm the provider’s regulatory status and scope of license (BOT notifications require banks offering escrow services to satisfy additional rules).
Opening the account and KYC.
The buyer (or payer) remits the funds to the escrow account; escrow agent performs KYC/AML checks and issues confirmation of deposit to the parties. Account mandates describe who may give instructions and how joint or unilateral releases are handled.
Verification and conditional release.
The escrow agent verifies that contractual conditions are met (document checks, certificates, proof of registration/title transfer) and releases funds only on documentary compliance or upon joint instructions as specified in the agreement.
Accounting, records and fees.
The escrow agent maintains separate accounting for trust funds, charges agreed fees, and provides periodic statements to the parties. The agreement should specify audit rights or inspection of the escrow agent’s records if the parties require that level of assurance.
Dispute mechanics and fallback.
Where conditions are disputed, funds typically remain in escrow pending resolution via the contract’s dispute resolution clause (negotiation, expert determination, arbitration or court). The escrow agreement should include a “dispute hold” clause preventing unilateral releases.
To maximize the protection escrow offers, include the following, in clear, unambiguous language:
Precise release triggers: define documentary and factual conditions (e.g., certified copy of title, official transfer receipt, registration stamp, certificate of completion). Ambiguity is the single largest cause of escrow disputes.
Explicit agent duties and limited liability: set the agent’s standard of care, liability cap (if any), and indemnities for negligent conduct. Require the escrow agent to follow written instructions from named signatories only.
Segregation and insolvency protection: require the agent to hold funds in a segregated trust/escrow account (not commingled with operating funds) and identify how funds will be treated in the event of agent insolvency. BOT rules require appropriate governance; nevertheless, contractual clarity is essential.
Audit/right to inspect: allow periodic reconciliation reports and a right to inspect escrow records (or appoint an independent auditor in sensitive transactions).
Currency and conversion mechanics: specify the account currency, who bears FX risk and the exchange mechanism for cross-currency transactions.
Fees and payment mechanics: set the fee schedule (e.g., fixed, tiered or transaction value percentage), who pays which fees and when.
Agent non-compliance or insolvency: even licensed providers can face regulatory action; parties should confirm the provider’s compliance history and regulatory standing. BOT notifications emphasize governance and market-conduct controls for banks providing escrow. BOT
Ambiguous release conditions: vague triggers invite competing claims. If a trigger can be interpreted multiple ways, an adversary can attempt to force early release or block payment.
Cross-border enforcement: if one party or asset is overseas, enforceability of escrow releases or recovery actions may require cross-jurisdictional legal steps—plan dispute resolution and governing law accordingly.
Currency controls and tax considerations: hold discussions with tax and treasury advisers early; treatment of escrowed funds for VAT, withholding tax or stamp duty depends on transaction nature and timing.
Confirm the agent’s license or regulatory authority to operate escrow services (Bank of Thailand notices and the Escrow Act regime).
Ask for a standard escrow services agreement and sample statements.
Verify KYC/AML capacity and turnaround times for deposit confirmations and document verification.
Request references for transactions of similar size/complexity.
Confirm how idle funds will be managed and whether the escrow account will bear interest (and who receives it).
Escrow is an effective risk-mitigation tool in Thailand where parties want neutral custody of funds or documents pending contractual conditions. The arrangement’s protective power is a function of two things: (1) the legal/ regulatory status and governance of the escrow agent; and (2) the clarity and completeness of the escrow agreement. For complex or high-value transactions engage counsel early to draft balanced escrow terms, confirm the agent’s regulatory standing and ensure dispute mechanics, insolvency treatment and release triggers are unambiguous. When done correctly, escrow materially lowers transactional risk and adds predictability to closing mechanics.
